Novan reports fourth-quarter loss, details steps toward FDA approval of drugs
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Durham, N.C. — Novan Inc., a clinical-stage dermatology drug developer, reported a fourth-quarter loss that was better than analysts expected but reported higher drug development expenses, according to a Form 8-K filed Monday with the Securities and Exchange Commission Monday.
The Durham-based company reported a loss of $13.1 million, or 82 cents per share, in the fourth quarter. Analysts were expecting a loss of $1.14 per share.
NC Biz News reported in January that Novan’s shares plunged 75 percent after the company reported mixed trial results for its acne drug.
Novan disclosed that costs related to the Phase 3 program for the drug, SB204, and Phase 2 trials for its other drug, SB208, drove a $29.9 million increase in research and development expenses, a 180 percent increase from 2015.
A $4.1 million year-over-year increase in general and administrative expenses, or a 44 percent increase, was due to increased costs associated with operating as a public company and increased commercial market research activities.
Novan closed in September 2016 its initial public offering of 4.7 million shares at $11 per share, including the exercise in full by the underwriters of the option to purchase an additional 615,000 shares. Net proceeds to Novan totaled $44.6 million.
Shares have sunk more than 75 percent over the last three months, compared with a 7.1 percent rise in the NASDAQ pharmaceutical index over the same time frame. Novan shareholders have seen substantial losses since the company’s IPO at the end of September.
“We are pleased to announce the results of Novan’s first year-end as a public company,” said Nathan Stasko, Ph.D., president and chief executive officer. “This past year we were able to complete our IPO in extremely challenging market conditions and meaningfully increased our drug development infrastructure.”
As of Dec. 31, 2016, Novan’s cash and cash equivalents totaled $34.6 million, not including the upfront payment of $10.8 million in January 2017 from Sato Pharmaceutical Co., Ltd., or Sato, related to the license agreement for exclusive rights to develop and commercialize SB204 in Japan.
Novan said the cash on hand is sufficient to fund operations at least through the end of 2017. The company said it is currently evaluating a number of financing options to support the development of SB204 through the FDA process, including the cost of an additional trial as well as the cost to fund two Phase 3 clinical trials for its genital warts drug.
These financing options include financing that does not require the sale of Novan’s shares at the expense of existing shareholders, as well as traditional private and public equity raises.
“As we look ahead into 2017, we are eager to expand upon the budding knowledge of nitric oxide’s role in dermatological diseases and to provide new evidence to support advancing each of our pipeline candidates,” Stasko said.
Acne affects about 40 million to 50 million Americans each year, according to Novan’s website. The company’s SB204 drug for acne is in Phase 3 trials, and its other two drugs are in Phase 2 trials — SB206 for genital warts and SB208 for nail fungus.
The company said it expects to hold an end-of-Phase 2 meeting for its genital warts drug with the U.S. Food and Drug Administration in the second quarter of 2017. The company said it also expects to release results from its SB208 anti-fungal Phase 2 trial and to submit a new drug application for SB414 as a treatment for a red, scaly skin condition called psoriasis.
The company said it also expects a pre-submission meeting with the FDA for SB204, bringing the company one step closer to developing and launching the first new chemical approved for the treatment of acne in over 20 years.
Shares of Novan were down around 4 percent at $6.30 in Monday morning trading after opening at $6.60.
Note: This story is from the North Carolina Business News Wire, a service of UNC-Chapel Hill’s School of Media and Journalism
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