Unassociated Document
GENTIUM S.p.A.
 
PIAZZA XX SETTEMBRE 2
22079 VILLA GUARDIA (COMO)
ITALY
+39 031 385111

 

 
424B3
 
Filed on 08/15/2006
File Number 333-130796



Filed pursuant to Rule No. 424(b)(3)
File Number: 333-130796



GENTIUM S.P.A.

PROSPECTUS SUPPLEMENT NO. 5
DATED AUGUST 15, 2006

TO PROSPECTUS DATED
JANUARY 30, 2006

This Prospectus Supplement No. 5 supplements information contained in our prospectus dated January 30, 2006, as amended and supplemented from time to time (the “Gentium Prospectus”). The information in this Supplement No. 5 supplements, modifies and supersedes some of the information contained in the Gentium Prospectus.

The primary purpose of this Prospectus Supplement No. 5 is to update certain financial information of Gentium S.p.A. to June 30, 2006.

You should read this Prospectus Supplement No. 5 in conjunction with the Gentium Prospectus. This Prospectus Supplement No. 5 is not complete without, and may not be delivered or utilized except in connection with, the Gentium Prospectus including any amendments or supplements thereto.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.




GENTIUM S.p.A.
Financial Statements
For the Second Quarter of 2006



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GENTIUM S.p.A.
Financial Statements
For the Second Quarter of 2006


Index to Financial Statements

   
Page
  
       
Balance Sheets As of December 31, 2005 and June 30, 2006
    
3
  
         
Statements of Operations For the Six Month Periods Ended June 30, 2005 and 2006
    
4
  
         
Statements of Cash Flows For the Six Months Ended June 30, 2005 and 2006
    
5
  
         
Operating Highlights
    
6
  
         
Financial Highlights
    
7
  
         
Operating Results and Trends
    
7
  




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GENTIUM S.p.A.
Balance Sheets
(in thousands, except share data)


   
As of
December 31,
2005
  
As of
June 30,
2006
(Unaudited)
  
 
          
ASSETS
          
Cash and cash equivalents
    €
12,785
   €
24,819
  
Receivables
   
8
    
178
  
Receivables from related parties
   
1,867
    
1,972
  
Inventories
   
1,628
    
1,867
  
Prepaid expenses and other current assets
   
918
    
1,180
  
Total Current Assets
   
17,206
    
30,016
  
               
Property, manufacturing facility and equipment, at cost
   
17,456
    
18,552
  
Less: Accumulated depreciation
   
8,825
    
9,203
  
Property, manufacturing facility and equipment, net
   
8,631
    
9,349
  
               
Intangible assets, net of amortization
   
267
    
536
  
Marketable securities
    
-
    
519
  
Other non-current assets
   
9
    
12
  
Total Assets
   €
26,113
   €
40,432
  
               
LIABILITIES AND SHAREHOLDERS’ EQUITY
             
Accounts payable
   
2,644
    
4,096
  
Payables to related parties
   
542
    
378
  
Accrued expenses and other current liabilities
   
1,063
    
954
  
Current maturities of long-term debt
   
916
    
261
  
Current portion of capital lease
    
-
    
50
  
Deferred income
   
283
    
213
  
Total Current Liabilities
   
5,448
    
5,952
  
               
Long-term debt, net of current maturities
   
2,485
    
5,321
  
Capital lease obligation
    
-
    
100
  
Termination indemnities
   
706
    
723
  
Total Liabilities
   
8,639
    
12,096
  
               
Share capital (par value: €1.00; 12,690,321 and 15, 100, 292 shares authorized at December 31, 2005 and June 30, 2006, respectively; 9,610,630 and 11,666,013 shares issued at December 31, 2005 and June 30, 2006, respectively)
              
               
     
9,611
    
11,666
  
Additional paid in capital
    
33,090
    
48,247
  
Other comprehensive loss
    
-
    
(11
)
Accumulated deficit
   
(25,227
)
  
(31,566
)
Total Shareholders’ Equity
   
17,474
    
28,336
  
Total Liabilities and Shareholders’ Equity
   € 
26,113
   €
40,432
  



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GENTIUM S.p.A.
Statements of Operations
(Unaudited, in thousands, except per share data)

 
   
Three Months Ended June 30, 
  
Six Months Ended June 30,
 
 
2005
  
2006
  
2005
  
2006
Revenues:
 
 
 
 
 
  
 
 
Sales to affiliates
€
1,096
€
941
€
1,596
€
1,853
Third party product sales
  
2
  
107
  
95
  
110
Total product sales
 
1,098
  
1,048
  
1,691
  
1,963
Royalties
  
-
  
7
  
-
  
7
Other income and revenues
 
70
  
97
  
140
  
132
Total Revenues
 
1,168
  
1,152
  
1,831
  
2,102
 
 
              
Operating costs and expenses:
 
              
Cost of goods sold
 
998
  
853
  
1,500
  
1,616
Research and development
 
1,084
  
1,979
  
1,728
  
3,602
Charges from affiliates
 
310
  
166
  
581
  
381
General and administrative
 
482
  
1,353
  
894
  
2,649
Depreciation and amortization
 
20
  
61
  
43
  
103
 
 
2,894
  
4,412
  
4,746
  
8,351
Operating loss
 
(1,726)
  
(3,260)
  
(2,915)
  
(6,249)
 
 
              
Foreign currency exchange loss, net
 
(465)
  
(62)
  
(520)
  
(230)
Interest income (expense), net
 
(2,097)
  
88
  
(4,245)
  
140
 
 
              
Pre-tax loss
 
(4,288)
  
(3,234)
  
(7,680)
  
(6,339)
Income tax expense:
 
              
Current
  
-
  
-
  
-
  
-
Deferred
 
(16)
  
-
  
(32)
  
-
Net loss
€
(4,304)
€
(3,234)
€
(7,712)
€
(6,339)
 
 
              
Weighted average share:
                
Basic
  
5,303,242
  
10,244,414
  
5,152,459
  
9,929,273
Diluted
  
5,363,242
  
10,625,886
  
5,212,459
  
10,330,788
                 
Net loss per share:
 
              
Basic net loss per share
€
(0.81)
€
(0.32)
€
(1.50)
€
(0.64)
                 
Diluted net loss per share
  
(0.81)
  
(0.32)
  
(1.50)
  
(0.64)







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GENTIUM S.p.A.
Statements of Cash Flows
(Unaudited, in thousands)
 

 
 
For the Six Months Ended June 30,
   
2005
  
2006
Cash Flows From Operating Activities:
        
Net loss
€
(7,712)
  
(6,339)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
       
Unrealized foreign exchange loss
  
569
  
224
Depreciation and amortization
  
733
  
458
Non cash interest expense
  
3,837
  
-
Inventory write off
  
50
  
182
Stock based compensation
  
106
  
423
Gain on asset disposal
  
-
  
(23)
Changes in operating assets and liabilities:
        
Accounts receivable
  
(485)
  
(275)
Inventories
  
(548)
  
(421)
Prepaid expenses and other current assets
  
334
  
(228)
Accounts payable and accrued expenses
  
(343)
  
1,180
Deferred income
  
(143)
  
(70)
Termination indemnities
  
79
  
17
Net cash used in operating activities
  
(3,523)
  
(4,872)
         
Cash Flows From Investing Activities:
        
Capital expenditures
  
(478)
  
(922)
Intangible expenditures
  
(52)
  
(352)
Proceeds on sale of asset
  
-
  
11
Investment in marketable securities
  
-
  
(530)
Net cash used in investing activities
  
(530)
  
(1,793)
         
Cash Flows From Financing Activities:
        
Proceeds from warrants exercise
  
-
  
884
Proceeds from long term debt, net
  
-
  
4,563
Capital contribution
  
3,900
  
-
Repayments of long-term debt
  
(307)
  
(551)
Proceeds (repayment) from Series A convertible Notes
  
(1,929)
  
-
Early extinguishment of long term debt
  
-
  
(1,868)
Proceeds (repayment) of affiliate’s loan
  
(1,200)
  
-
Proceeds (repayment) from bank overdrafts and short term borrowings
  
(2,790)
  
-
Proceeds from initial public offering and private placement, net of offering expenses
  
14,584
  
15,896
Net cash provided by financing activities
  
12,258
  
18,924
         
Effect of foreign exchange rate
  
-
  
(225)
Increase in cash and cash equivalents 
  
8,205
  
12,034
         
Cash and cash equivalents, beginning of period
  
2,461
  
12,785
Cash and cash equivalents, end of period
€
10,666
  
24,819




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Operating Highlights

Operating highlights of the second quarter of 2006 and recent weeks include:

 
·
Raised $22.1 million (gross proceeds) in a follow-on equity offering led by ThinkEquity Partners, LLC;

 
·
Listed the Company’s American Depository Shares (ADS) on the NASDAQ National Market System (now the NASDAQ Global Market);

 
·
Highlighted Defibrotide at a Symposium at the XXII World Congress of the International Union of Angiology;

·
Publication of two independent pediatric studies of Defibrotide;

·
Strengthened U.S. presence with appointment of New York-based CFO, Gary Gemignani;

·
Phase III clinical trial in the U.S. for treatment of Veno-Occlusive Disease (VOD) with Multiple Organ Failure (Severe VOD): commenced enrollment; expected to be conducted at approximately 30 clinical centers; Institutional Review Board (IRB) approval has been received from 10 centers and four are open for patient enrollment;;

·
Phase II/III clinical trials in Europe for the prevention of VOD in children: 30 centers have IRB approval and 20 centers are open for patient enrollment; 30 patients have been enrolled;

·
Independent Phase I/II study of Defibrotide to treat advanced and refractory Multiple Myeloma patients: 4 centers have IRB approval; 14 patients have been enrolled;

·
Phase II/III clinical trials in Europe for the prevention of VOD in adults: investigator’s meeting was held in Hamburg (Germany) on March 22, 2006; anticipate initiation of these studies by the fourth quarter of 2006; and

 
·
In August Axcan Pharmaceuticals Inc (“Axcan”) announced it was not filing for regulatory approval for mesalazine in the U.S. and Canadian markets, the rights of which the Company sold to Axcan in 2002; under the terms of the agreement the Company would have been entitled to receive future milestone payments and a royalty stream; Axcan’s decision had no impact on the Company’s current period financial statements and the Company does not believe that this will have a material effect on its future operating results.
 

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Financial Highlights

The Company reports its financial condition and operating results using U.S. Generally Accepted Accounting Principles (GAAP). The Company’s financial statements are prepared using the Euro as its functional currency. On June 30, 2006, €1.00 = $1.27.

For the second quarter ended June 30, 2006 compared with the prior-year’s second quarter:

 
·
Total revenues were €1.15 million, compared with €1.17 million
 
·
Operating costs and expenses were €4.41 million, compared with €2.89 million
 
·
Research and development expenses, which are included in operating costs and expenses, were €1.98 million, compared with €1.08 million
 
·
Operating loss was €3.26 million, compared with €1.73 million
 
·
Interest income (expense), net, was €0.09 million, compared with (€2.1) million
 
·
Pre-tax loss was €3.23 million, compared with €4.29 million
 
·
Net loss was €3.23 million, compared with €4.30 million
 
·
Basic and diluted net loss per share was €0.32 compared with €0.81 per share

For the six months ended June 30, 2006 compared with the comparable prior-year period:

 
·
Total revenues were €2.10 million, compared with €1.83 million
 
·
Operating costs and expenses were €8.35 million, compared with €4.75 million
 
·
Research and development expenses, which are included in operating costs and expenses, were €3.60 million, compared with €1.73 million
 
·
Operating loss was €6.25 million, compared with €2.92 million
 
·
Interest income (expense), net, was €0.14 million, compared with (€4.25) million
 
·
Pre-tax loss was €6.34 million, compared with €7.68 million
 
·
Net loss was €6.34 million, compared with €7.71 million
 
·
Basic and diluted net loss per share was €0.64 compared with €1.50 per share
 
·
Cash used in operating activities was €4.87 million, compared with €3.52 million
 
·
Cash and cash equivalents amounted to €24.82 million as of June 30, 2006


Operating Results and Trends

The fluctuation in total product sales for the three- and six-month periods compared with the prior year is primarily the result of changes in demand by our principal customer, Sirton, and by increased demand for sulglicotide by our Korean customer. Total product sales for the six-month period ended June 30, 2006 increased by €0.27 million, or 16%, compared with the same period in 2005.
 
Cost of goods sold was €1.62 million for the six-month period ended June 30, 2006, which included a €152 thousand inventory reserve attributable to slow-moving inventory, compared with cost of goods sold of €1.50 million for the comparable period in 2005. Cost of goods sold as a percent of product sales decreased from 89% to 82%. The decrease is primarily due to a revision in the estimated useful life of certain manufacturing equipment resulting in a reduction in depreciation expense, offset to some extent by increased quality control costs.

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Research and development spending increased during the three- and six- month periods in 2006 compared with 2005, primarily due to the costs associated with the Company’s Phase III trial in the U.S. for the treatment of Severe VOD, the Company’s Phase II/III trial for prevention of VOD in children and preparations for the Phase II/III trial for the prevention of VOD in adults. Growth in headcount and outside services to support increased activity in our clinical trials including clinical product production costs and stock-based compensation expense also contributed to increased research and development expenses.
 
The Company had 69 employees as of June 30, 2006, compared with 52 as of June 30, 2005. Other general and administrative expense increases were primarily the result of building corporate infrastructure, legal and public company expenses, an increase in internally provided administrative services to replace administrative services previously provided by affiliates, and stock-based compensation expense. The increase in internally provided services accounts for the decrease in charges from affiliates between the periods.

Interest income (expense), net, changed primarily due to the repayment and conversion of the Company’s Series A senior convertible notes in June 2005, and the higher level of invested funds compared with the prior year. For the six months ended June 30, 2005, interest expense on the Series A notes was €4.1 million, including non-cash interest expense of €3.8 million from the amortization of the issue discount and debt issue cost. These notes were converted or redeemed in June 2005. Additionally, interest income increased by €200 thousand from €11 thousand in the period ended June 30, 2005 to €211 thousand in the comparable 2006 period, as the result of a higher level of invested funds.

The Company ended the second quarter of 2006 with €24.8 million in cash and cash equivalents, compared with cash and cash equivalents of €12.8 million as of December 31, 2005.

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