Cypress Beats, but Loss Widens

Cypress Bioscience, Inc. (CYPB - Analyst Report) reported a net loss of 14 cents per share in the third quarter, 6 cents better than the Zacks Consensus Estimate of a net loss of 20 cents. Although revenues increased significantly from the year-ago period, net loss was higher due to higher operating expenses mainly due to costs associated with the setting up of the company’s commercial organization. Net loss in the year-ago period was 11 cents.
 
Total revenues came in at $6.1 million in the reported quarter, up significantly from the year-ago revenues of $0.9 million. Third quarter revenues of $6.1 million consisted of $5.2 million in commercial revenues, $0.8 million in revenues under collaborative agreements, and $0.075 million in revenues from the company’s personalized medicine service business.
 
Commercial revenues of $5.2 million included royalty revenue of $1.3 million, $0.5 million from commercial milestones and $3.4 million in co-promotion reimbursement in connection with the launch of Savella. Savella is being co-promoted with partner Forest Laboratories (FRX - Analyst Report).
 
Total operating expenses increased to $11.8 million in the reported quarter, up from the $6.1 million recorded in the year ago period. While research and development expenses declined to $1.3 million from the $2 million recorded in the year-ago period, selling, general and administrative expenses increased to $9.9 million. The increase was due to costs incurred by the company related to the setting up of its commercial organization.
 
We view the launch of Savella as a transformational event for the company. Cypress has a strong partner in Forest Labs and we believe Savella may have multi-hundred million dollar potential in the U.S.
 
Although we remain optimistic about Savella’s sales potential, we are concerned about the company’s early stage pipeline. We expect the company to pursue acquisitions and in-licensing opportunities to build its portfolio. We currently have a Neutral rating on the stock.