Capnia Reports Fourth Quarter and Full Year 2016 Financial Results

REDWOOD CITY, Calif., March 15, 2017 (GLOBE NEWSWIRE) — Capnia, Inc. (NASDAQ:CAPN), focused on the development and commercialization of novel therapeutics for the treatment of rare diseases, today announced financial results for the fourth quarter and twelve months ended December 31, 2016.

“During the fourth quarter, we embarked on a bold new strategic direction for our Company by signing a definitive agreement to merge with Essentialis, creating a dynamic new organization dedicated to developing therapies for rare diseases where there is significant unmet need,” said Anish Bhatnagar, M.D., Chief Executive Officer of Capnia. “With the merger now complete, we look forward to advancing our lead asset, diazoxide choline controlled-release (DCCR) into Phase II/III clinical development for the treatment of Prader-Willi Syndrome (PWS), a rare and often fatal metabolic condition.  DCCR is a once-daily oral tablet that has shown great potential in addressing the hallmark symptoms of PWS, most notably hyperphagia.  We are eager to initiate this development program as we work to become a leader in the rare disease space.”

Fourth Quarter 2016 and Recent Highlights

Completed Merger with Essentialis to Create a Rare Disease Therapeutics Company

  • Advancing Lead Clinical Development Asset DCCR for PWS. Through the merger with Essentialis, Capnia acquired DCCR, currently in clinical development for the treatment of PWS.  In a Phase II clinical study, DCCR demonstrated a significant reduction of hyperphagia, a symptom of critical concern to the PWS patient community.  Coupled with a well-established safety profile, DCCR is a promising late-stage asset on track for a Phase II/III trial initiation later this year.
     
  • Strengthened Balance Sheet.  Concurrent with the closing of the merger in early March, Capnia raised $10.0 million through an offering of Capnia common stock to prior investors in Essentialis, as well as new investors, which will be sufficient to fund development of DCCR through key milestones.

Legacy Neonatal and Therapeutic Products and Product Candidates

  • Initiated Review of Strategic Alternatives for Legacy Businesses.  Following the merger announcement, Capnia initiated a comprehensive review of strategic alternatives for its legacy products and product candidates, including Serenz® Allergy Relief, CoSense® ETCO Monitor, and its portfolio of innovative pulmonary resuscitation solutions for the neonatal market.

Fourth Quarter 2016 Financial Results

Total revenue recognized in the three months ended December 31, 2016 was $0.3 million, compared to $0.2 million for the same period in 2015.

Research and development expenses in the fourth quarter of 2016 were $1.0 million, compared to $1.3 million for the same period in 2015.  The decrease was primarily due to a decrease in compensation expense, as a result of a reduction in personnel.

Sales and marketing expenses in the fourth quarter of 2016 were $0.2 million, compared to $0.5 million for the same period in 2015. The decrease was primarily due to a decrease of direct sales personnel.

General and administrative expenses in the fourth quarter of 2016 were $1.5 million, compared to $1.7 million for the same period in 2015. The decrease was primarily due to a decrease in compensation expense, as a result of a reduction in personnel.

The change in fair value of warrants income for the three months ended December 31, 2016 was $0.3 million, which represents a decrease in the fair value of the Series A and Series C Warrants compared to the value of the warrants at September 30, 2016. The change in fair value of warrants income in the fourth quarter of 2015 was $0.7 million, which represented a decrease in the fair value of the Series A, Series B and Series C Warrants.

Net loss for the fourth quarter of 2016 was $2.6 million, or a loss of $0.16 per share, compared to a net loss of $2.8 million, or a loss of $0.29 per share, for the fourth quarter of 2015.

Full Year 2016 Financial Results

Total revenue recognized for the year ended December 31, 2016 was $1.5 million, compared to $0.6 million for the same period in 2015.

Research and development expenses for the year ended December 31, 2016 increased 14% to $5.2 million, compared to $4.5 million for the same period in 2015. The increase was primarily due to increases of compensation expense of $0.5 million and consulting expense of $0.1 million.

Sales and marketing expenses for the year ended December 31, 2016 decreased 6% to $1.6 million versus $1.7 million for the same period in 2015. The decrease was primarily due to a decrease of direct sales personnel concurrent with implementation of a distributor agreement.

General and administrative expenses for the year ended December 31, 2016 increased 10% to $6.7 million, compared to $6.1 million for the same period in 2015.  The increase was primarily due to an increase of legal and related expenses of $0.5 million and $0.1 million of compensation expense.

The change in fair value of warrants for the year ended December 31, 2016 was income of $1.7 million, which represents a decrease in the fair value of the Series A, Series B and Series C warrants compared to the value of the warrants at December 31, 2015. For the year ended December 31, 2015 the change in fair value of warrants was an expense of $0.5 million.

Net loss for the twelve months ended December 31, 2016 was $12.1 million, or a loss of $1.01 per share, compared with a net loss of $15.9 million, or a loss of $1.69 per share, for the same period in 2015.

Cash and cash equivalents at December 31, 2016 totaled $2.7 million, compared to $5.5 million at December 31, 2015.

About PWS

PWS is a rare and complex genetic disorder affecting appetite, growth, metabolism, cognitive function and behavior.  In both the US, it is estimated that one in 12,000 to 15,000 people has PWS and there are currently no approved therapies to treat the appetite, metabolic, cognitive function, or behavioral aspects of the disorder.  This disorder is typically characterized by low muscle tone, short stature (when not treated with growth hormone), the accumulation of excess body fat, developmental delays, incomplete sexual development, cognitive disabilities, behavioral problems and hyperphagia, a chronic feeling of insatiable hunger.  Hyperphagia, in the absence of effective limitations to access to food, can lead to morbid obesity.  In a global survey conducted by the Foundation for Prader-Willi Research, 96.5% of respondents (parent and caregivers) rated hyperphagia as the most important or a very important symptom to be relieved by a new medicine. DCCR has received Orphan Drug Designation from the US FDA for the treatment of PWS.

About Diazoxide Choline Controlled-Release Tablet

Diazoxide choline controlled-release tablet is a novel, proprietary controlled-release, crystalline salt formulation of diazoxide, which is administered once-daily.  The parent molecule, diazoxide, as an oral suspension, has been used for decades in thousands of patients in a range of diseases in neonates, children and/or adults.  DCCR offers a significant advantage over the 2-3 times a day dosing paradigm, which is not suitable for patients with PWS.  The DCCR development program is supported by positive data from two completed Phase II clinical studies and six completed Phase I clinical studies in various metabolic indications, as well as a pilot study in PWS patients.  In the PWS pilot study, DCCR showed promise in addressing the hallmark symptoms of PWS, most notably hyperphagia, which is the unrelenting hunger that severely diminishes the quality of life for patients and their families.

About Capnia

Capnia is focused on the development and commercialization of novel therapeutics for the treatment of rare diseases.  The Company is currently advancing its lead candidate, DCCR, a once-daily oral tablet for the treatment of Prader-Willi Syndrome (PWS), into Phase II/III clinical development during 2017.  Capnia also markets innovative medical devices, including the CoSense® End-Tidal Carbon Monoxide (ETCO) monitor, which measures ETCO and is used by hospitals to detect hemolysis in newborns, and the NeoForce portfolio of neonatal pulmonary resuscitation solutions.  For more information, please visit www.capnia.com.

Capnia’s Forward-Looking Statements

This press release contains forward-looking statements that are subject to many risks and uncertainties. Forward-looking statements include statements regarding our intentions, beliefs, projections, outlook, analyses or current expectations concerning, among other things, our ability to initiate the Phase II/III trial in the second half of 2017.

We may use terms such as “believes,” “estimates,” “anticipates,” “expects,” “plans,” “intends,” “may,” “could,” “might,” “will,” “should,” “approximately” or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained herein, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this presentation. As a result of these factors, we cannot assure you that the forward-looking statements in this presentation will prove to be accurate. Additional factors that could materially affect actual results can be found in Capnia’s Form 10-K filed with the Securities and Exchange Commission on March 15, 2017, including under the caption titled “Risk Factors.” Capnia expressly disclaims any intent or obligation to update these forward-looking statements, except as required by law.

Capnia, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except shares and per share amounts)
               
          As of December 31,   As of December 31,
          2016   2015
Assets              
  Current Assets              
  Cash & Cash Equivalents     $ 2,726     $ 5,495  
  Restricted Cash       35       35  
  Accounts Receivable       133       156  
  Inventory       660       551  
  Prepaid expenses and other current assets       247       167  
  Total Current Assets       3,801       6,404  
  Long-term Assets        
  Property & Equipment, net       103       86  
  Goodwill       718       718  
  Other Assets       126       76  
  Other Intangible Assets, net       817       917  
  Total Assets     $ 5,565     $ 8,201  
             
Liabilities and stockholders’ equity      
  Current Liabilities      
  Accounts Payable     $ 538     $ 695  
  Accrued Compensation and other current liabilities       1,169       1,633  
  Series B Warrant Liability             865  
  Total Current Liabilities       1,707       3,193  
  Long-Term Liabilities        
    Series A Warrant Liability     194       1,213  
  Series C Warrant Liability       86       462  
  Other Liabilities       143       109  
  Total Long-Term Liabilities       423       1,784  
    Total Liabilities       2,130       4,977  
  Stockholders’ equity        
  Preferred Stock, $.001 par value, 10,000,000 shares authorized:        
    Series A convertible preferred stock, 10,000 shares designated      
    zero and 4,555 shares issued and outstanding at        
    December 31, 2016 and December 31, 2015, respectively            
    Series B convertible preferred stock, 13,780 shares designated      
    12,780 and zero shares issued and outstanding at        
    December 31, 2016 and December 31, 2015, respectively            
  Common stock, $0.001 par value, 100,000,000 shares        
  authorized, 16,786,952 and 14,017,909 shares issued and          
  outstanding at December 31, 2016 and          
  December 31, 2015, respectively       17       14  
  Additional paid-in-capital     101,730       89,457  
  Accumulated deficit     (98,312 )     (86,247 )
  Total stockholders’ equity       3,435       3,224  
  Total liabilities and stockholders’ equity     $ 5,565     $ 8,201  
     

Capnia, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except shares and per share amounts)
                   
      Three months ended   Year Ended
      December 31,
  December 31,
      2016   2015   2016   2015
                   
Product revenue   $ 284     $ 242     $ 1,451     $ 388  
Government grant revenue                       220  
Total Revenue     284       242       1,451       608  
Cost of product revenue     222       257       1,509       353  
  Gross Profit     62       (15 )     (58 )     255  
Expenses                
  Research and Development     954       1,284       5,185       4,536  
  Sales and Marketing     174       498       1,631       1,737  
  General and Administrative     1,890       1,709       6,736       6,141  
                   
  Total expenses     3,018       3,491       13,552       12,414  
                   
  Operating loss     (2,956 )     (3,506 )     (13,610 )     (12,159 )
                   
Interest and other income (expense)                
  Other income (expense)     20             (7 )     (184 )
  Cease-use expense               (94 )      
  Change in fair value of warrant liabilities   344       661       1,667       (516 )
  Inducement charge for Series C warrants                     (3,049 )
Loss before provision for income taxes   $ (2,592 )   $ (2,845 )   $ (12,044 )   $ (15,908 )
Provision for deferred taxes   $ 21         $ 21        
Net loss   $ (2,613 )   $ (2,845 )     (12,065 )     (15,908 )
Loss on extinguishment of convertible preferred stock               3,651        
Net loss applicable to common stockholders $ (2,613 )   $ (2,845 )   $ (15,716 )   $ (15,908 )
                   
Net loss per common share                
basis and diluted net loss per common share $ (0.16 )   $ (0.22 )   $ (1.00 )   $ (1.69 )
                   
Weighted-average common shares                
outstanding used to calculate                
basic and diluted net loss per common share   15,935,865       13,112,612       15,507,484       9,425,880  
                   
CONTACT: Investor Relations Contact:
Michelle Carroll
Argot Partners
(212) 600-1902
michelle@argotpartners.com

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