Somaxon Pharmaceuticals Inc. (SOMX) filed Quarterly Report for the period ended 2009-03-31.
Somaxon Pharmaceuticals Inc. is a specialty pharmaceutical company focused on the in-licensing and development of proprietary product candidates for the treatment of diseases and disorders in the fields of psychiatry and neurology. Somaxon's lead product candidate SILENOR is in Phase III clinical trials for the treatment of insomnia Somaxon Pharmaceuticals Inc. has a market cap of $9.6 million; its shares were traded at around $0.52 .
Highlight of Business Operations:In May 2008, we entered into a loan agreement with Silicon Valley Bank and Oxford Finance Corporation under which we borrowed $15.0 million, less debt issuance costs of $0.2 million, for net proceeds of $14.8 million. In connection with entering the loan agreement, we issued warrants to purchase common stock with a value of $0.9 million allocated to equity which resulted in a corresponding debt discount. In March 2009, we repaid the entire remaining $13.7 million principal amount of the loan, together with the final payment of $0.6 million required under the loan agreement. As part of the repayment, we issued to Oxford Finance Corporation an aggregate of 200,000 warrants to purchase common stock having a ten-year term and an exercise price of $0.25, which the lenders agreed to accept in lieu of the $0.9 million prepayment penalty required under the loan agreement. We no longer have any obligations under the loan agreement.
We have incurred significant net operating losses to date. As of December 31, 2008, we had federal net operating loss carryforwards of $132.4 million and California net operating loss carryforwards of $129.6 million. Federal net operating loss carryforwards begin to expire 20 years after being generated and California net operating loss carryforwards begin to expire ten years after being generated. We also have research and development credits as of December 31, 2008 of $4.1 million for federal purposes and $1.9 million for California purposes. Federal research and development credits begin to expire 20 years after being generated and California research and development credits do not expire. We have fully reserved our net operating loss carryforwards and research and development credits until such time that it is more likely than not that they will be realized.
Pursuant to Sections 382 and 383 of the Internal Revenue Code, annual use of our net operating loss carryforwards and tax credits may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period. We determined that such an ownership change occurred as of June 30, 2005 due to various stock issuances used to finance our development activities. This ownership change resulted in limitations on the utilization of tax attributes, including net operating loss carryforwards and tax credits. We estimate that $0.3 million of our California net operating loss carryforwards were effectively eliminated. Additionally, $18.3 million of our federal net operating loss carryforwards, $17.3 million of our state net operating loss carryforwards and $0.9 million of our federal research and development credits were subject to the Section 382 limitation. A portion of the limited net operating loss carryforwards becomes available for use each year. At December 31, 2008, we estimate that $8.6 million of our federal net operating loss carryforwards and $7.7 million of our state net operating loss carryforwards remain limited. Net operating loss carryforwards and research and development credits generated subsequent to the ownership change are currently not subject to limitations, but could be limited in the future if additional ownership changes occur. As of May 1, 2009, we have not updated our Section 382 analysis, which was completed in conjunction with our initial public offering in December 2005.
Since inception, our operations have been financed primarily through the private placement of equity securities, our initial public offering and debt in the form of our secured credit facility, which has since been fully repaid. Through March 31, 2009, we have received net proceeds of approximately $90.0 million from the sale of shares of our preferred stock and net proceeds of $50.9 million through sales of our common stock, including the exercise of stock options.
We expect to continue to incur losses and have negative cash flows from operations for the foreseeable future as we pursue NDA approval for Silenor, seek to commercialize Silenor and potentially pursue development of other product candidates. For the three months ended March 31, 2009, net cash used in operating activities was $3.0 million, compared to $7.3 million for the three months ended March 31, 2008. The decrease in net cash used in operating activities was primarily due to a decrease in our net loss as we implemented cost reduction measures in response to the delay in the potential approval for Silenor by the FDA, as well as the receipt of $1.0 million from the termination of our nalmefene license with BioTie in March 2009.
Somaxon Pharmaceuticals Inc. is a specialty pharmaceutical company focused on the in-licensing and development of proprietary product candidates for the treatment of diseases and disorders in the fields of psychiatry and neurology. Somaxon's lead product candidate SILENOR is in Phase III clinical trials for the treatment of insomnia Somaxon Pharmaceuticals Inc. has a market cap of $9.6 million; its shares were traded at around $0.52 .
Highlight of Business Operations:In May 2008, we entered into a loan agreement with Silicon Valley Bank and Oxford Finance Corporation under which we borrowed $15.0 million, less debt issuance costs of $0.2 million, for net proceeds of $14.8 million. In connection with entering the loan agreement, we issued warrants to purchase common stock with a value of $0.9 million allocated to equity which resulted in a corresponding debt discount. In March 2009, we repaid the entire remaining $13.7 million principal amount of the loan, together with the final payment of $0.6 million required under the loan agreement. As part of the repayment, we issued to Oxford Finance Corporation an aggregate of 200,000 warrants to purchase common stock having a ten-year term and an exercise price of $0.25, which the lenders agreed to accept in lieu of the $0.9 million prepayment penalty required under the loan agreement. We no longer have any obligations under the loan agreement.
We have incurred significant net operating losses to date. As of December 31, 2008, we had federal net operating loss carryforwards of $132.4 million and California net operating loss carryforwards of $129.6 million. Federal net operating loss carryforwards begin to expire 20 years after being generated and California net operating loss carryforwards begin to expire ten years after being generated. We also have research and development credits as of December 31, 2008 of $4.1 million for federal purposes and $1.9 million for California purposes. Federal research and development credits begin to expire 20 years after being generated and California research and development credits do not expire. We have fully reserved our net operating loss carryforwards and research and development credits until such time that it is more likely than not that they will be realized.
Pursuant to Sections 382 and 383 of the Internal Revenue Code, annual use of our net operating loss carryforwards and tax credits may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period. We determined that such an ownership change occurred as of June 30, 2005 due to various stock issuances used to finance our development activities. This ownership change resulted in limitations on the utilization of tax attributes, including net operating loss carryforwards and tax credits. We estimate that $0.3 million of our California net operating loss carryforwards were effectively eliminated. Additionally, $18.3 million of our federal net operating loss carryforwards, $17.3 million of our state net operating loss carryforwards and $0.9 million of our federal research and development credits were subject to the Section 382 limitation. A portion of the limited net operating loss carryforwards becomes available for use each year. At December 31, 2008, we estimate that $8.6 million of our federal net operating loss carryforwards and $7.7 million of our state net operating loss carryforwards remain limited. Net operating loss carryforwards and research and development credits generated subsequent to the ownership change are currently not subject to limitations, but could be limited in the future if additional ownership changes occur. As of May 1, 2009, we have not updated our Section 382 analysis, which was completed in conjunction with our initial public offering in December 2005.
Since inception, our operations have been financed primarily through the private placement of equity securities, our initial public offering and debt in the form of our secured credit facility, which has since been fully repaid. Through March 31, 2009, we have received net proceeds of approximately $90.0 million from the sale of shares of our preferred stock and net proceeds of $50.9 million through sales of our common stock, including the exercise of stock options.
We expect to continue to incur losses and have negative cash flows from operations for the foreseeable future as we pursue NDA approval for Silenor, seek to commercialize Silenor and potentially pursue development of other product candidates. For the three months ended March 31, 2009, net cash used in operating activities was $3.0 million, compared to $7.3 million for the three months ended March 31, 2008. The decrease in net cash used in operating activities was primarily due to a decrease in our net loss as we implemented cost reduction measures in response to the delay in the potential approval for Silenor by the FDA, as well as the receipt of $1.0 million from the termination of our nalmefene license with BioTie in March 2009.
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