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Gentium S.p.A. (AMEX:GNT) (the "Company") today reported financial results for the quarter and year ended December 31, 2005. Highlights of the fourth quarter of 2005 and recent weeks as of the first week in April 2006 include: -- Phase III trial in U.S. for treatment of Veno-Occlusive Disease (VOD) with Multiple Organ Failure (Severe VOD): The Institutional Review Board (IRB) of the Dana-Farber/Harvard Cancer Center of Boston, Mass., which is also the IRB for Dana-Farber Cancer Institute, Massachusetts General Hospital, Beth Israel Deaconess Medical Center and The Children's Hospital, has given its approval to participate in the trial. All four of these institutions are expected to participate in the trial. Work to compile historical control data will begin immediately, and the first patients are expected to be treated by early May 2006; -- Phase II/III clinical trials in Europe for the prevention of VOD in children: 30 centers have IRB approval, 11 centers are open for patient admission, 15 patients are enrolled; -- Independent Phase I/II study of Defibrotide to treat advanced and refractory Multiple Myeloma (MM) patients 3 centers have IRB approval and are open for patient enrollment, 5 patents are enrolled; -- Phase II/III clinical trials in Europe for the prevention of VOD in adults: Investigators meeting scheduled for early Q2, trial expected to start Q2; -- The Company has recently engaged the first of several medical monitors, this one being based in the U.S., to act as a liaison with investigators, IRB's and CRO's; and, -- The Company has recently updated its investor presentation, which can found on its web site at www.gentium.it, including updated estimates on the market size and pricing for VOD based on research by Medical Marketing Economics, LLC. Clinical Highlights and Outlook Commenting on Gentium's clinical progress during the quarter, Laura Ferro, M.D., Chairman and Chief Executive Officer, said, "We are excited to be beginning our Phase III trial for the treatment of Severe VOD with Defibrotide. We note that Defibrotide addresses a life threatening disease for which there are currently no treatment options." Financial Highlights The Company reports its financial condition and operating results using U.S. Generally Accepted Accounting Principles (GAAP). The Company's manufacturing facility was closed from February through August 2004 for a major upgrade; therefore, comparison of 2005 operating results with 2004 results may not be meaningful. The Company's financial statements are prepared using the Euro (EUR), its functional currency. On December 31, 2005, EUR 1.00 = $1.18. For the fourth quarter ended December 31, 2005 compared with the prior year's fourth quarter: -- Total revenues were EUR 1.44 million, compared to EUR 1.23 million -- Operating costs and expenses were EUR 3.59 million, compared to EUR 2.97 million -- Operating loss was EUR 2.15 million, compared to EUR 1.73 million -- Interest (income) expense, net, was (EUR 0.05) million, compared to EUR 2.16 million -- Pre-tax loss was EUR 1.92 million, compared to EUR 4.00 million -- Net loss was EUR 2.51 million, compared to EUR 4.00 million -- Basic and diluted net loss per share was EUR 0.27, compared to EUR 0.80 For the year ended December 31, 2005 compared with the prior year: -- Total revenues were EUR 3.64 million, compared to EUR 3.70 million -- Operating costs and expenses were EUR 11.02 million, compared to EUR 8.45 million -- Operating loss was EUR 7.38 million, compared to EUR 4.75 million -- Interest expense, net, was EUR 4.15 million, compared to EUR 2.20 million -- Pre-tax loss was EUR 11.78 million, compared to EUR 7.0 million -- Net loss was EUR 12.43 million, compared to EUR 7.03 million -- Basic and diluted net loss per share was EUR 1.79 compared to EUR 1.41 -- Cash used in operating activities was EUR 8.7 million, compared to EUR 4.1 million -- Cash and cash equivalents amounted to EUR 12.8 million as of December 31, 2005. The Company's Italian GAAP financial statements will be presented for shareholder approval at the Company's upcoming annual ordinary shareholders' meeting. Dr. Ferro commented, "We are pleased to report that the EUR 8.7 million of cash used in operations and our capital expenditures for the year of EUR 1.3 million are in-line with expectations we set at the time of our IPO. In 2006 we will have a full year of public company related expenses as well as a full year of our increased staffing. In addition, the number of clinical trials we are running will result in a substantial increase in research and development spending in 2006. These increased expenses will be partially offset by the significant decrease in interest expense since our Series A notes were all converted or redeemed in 2005. However, we still expect a significantly larger loss in 2006 than in 2005. Currently, we expect to use approximately EUR 15 million of cash in operating activities and approximately EUR 1.7 million for capital expenditures." Operating Results and Trends As noted above, the Company's manufacturing facility was closed from February through August 2004 for a major upgrade; therefore, comparisons of 2005 operating results with 2004 results may not be meaningful. The fluctuation in product sales revenue for the three- and twelve-month periods compared with the prior year is primarily the result of changes in demand by our principal customer, Sirton, who experienced a slight increase in demand from its principal customer, Crinos, and for the twelve-month period due to a decrease in sales in 2005 compared to 2004 from a customer in Korea. Total revenues for the year ended December 31, 2005 were less than in 2004, in spite of an increase in product sales during the twelve-month period, because of milestone payments earned in 2004. Cost of goods sold increased during the three- and twelve-month periods compared with the prior-year period. The increase is mainly due to a revision of estimated lives on the Company's manufacturing facilities and equipment which resulted in lower depreciation expense in the fourth quarter offset by an inventory write-off and an increase in quality control costs. Additionally, in the fourth quarter of 2004 the Company expensed some batch costs associated with the start-up of the revamped manufacturing plant. Research and development spending increased during the three- and twelve-month periods in 2005 compared to 2004 primarily due to the costs for the Company's Phase II trial in the U.S. for the treatment of Severe VOD and preparations for the Company's Phase III trial. Additionally, during the fourth quarter of 2005 the Company incurred expenses in connection with the preparation of its Phase II/III trial for prevention of VOD in children. The Company increased its employee headcount from 35 at the end of 2004 to 55 at December 31, 2005. Other general and administrative expense increases were primarily the result of building corporate infrastructure, public company expenses and an increase in internally provided administrative services to replace administrative services previously provided by affiliates, which began to occur in the second quarter. These factors also account for the decrease in charges from affiliates during the periods. In the fourth quarter of 2004 and the first quarter of 2005, the Company issued approximately $8.0 million of convertible notes. As a result, interest expense increased substantially in 2005. In conjunction with the Company's initial public offering, $2.9 million of these notes were converted into common equity and the balance was repaid in June and July of 2005. The Company incurred interest expense of EUR 4.3 million, which included non-cash interest expense of EUR 3.8 million from amortization of the issue discount and issue costs on these notes during the year ended December 31, 2005. In conclusion, Dr. Ferro said, "The coming year promises to be an important one for Gentium as we continue to move our product candidates forward toward future potential commercial use." About Gentium Gentium, S.p.A., located in Como, Italy, is a biopharmaceutical company focused on the research, discovery and development of drugs to treat and prevent a variety of vascular diseases and conditions related to cancer and cancer treatments. Cautionary Note Regarding Forward-Looking Statements This press release contains "forward-looking statements." In some cases, you can identify these statements by forward-looking words such as "may," "might," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of these terms and other comparable terminology. These statements are not historical facts but instead represent the Company's belief regarding future results, many of which, by their nature, are inherently uncertain and outside the Company's control. It is possible that actual results may differ, possibly materially, from those anticipated in these forward-looking statements. For a discussion of some of the risks and important factors that could affect future results, see the discussion in our Prospectus filed with the Securities and Exchange Commission under Rule 424(b)(5) under the caption "Risk Factors." NOTE: All figures in tables are in EUR unless otherwise stated. -0- *T GENTIUM S.p.A. Balance Sheets (in thousands, except share data) As of As of December December 31, 2004 31, 2005 --------- --------- ASSETS Cash and cash equivalents 2,461 12,785 Receivables 9 8 Receivables from related parties 1,490 1,867 Inventories 886 1,628 Prepaid expenses and other current assets 1,617 918 --------- --------- Total Current Assets 6,463 17,206 Property, manufacturing facility and equipment, at cost 16,152 17,456 Less: Accumulated depreciation (7,609) (8,825) --------- --------- Property, manufacturing facility and equipment, net 8,543 8,631 Intangible assets, net of amortization 243 267 Other non-current assets 660 9 --------- --------- Total Assets 15,909 26,113 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Bank overdraft 100 - Accounts payable 3,927 2,644 Payables to related parties 1,498 542 Short-term bank borrowings 2,690 - Accrued expenses and other current liabilities 432 1,063 Current maturities of long-term debt 2,781 916 Convertible notes payable, net of discount 2,082 - Deferred income 564 283 --------- --------- Total Current Liabilities 14,074 5,448 Long-term debt, net of current maturities 3,361 2,485 Termination indemnities 548 706 --------- --------- Total Liabilities 17,983 8,639 --------- --------- Share capital (par value: EUR 1.00; 13,300,100 and 12,690,321 shares authorized, 5,000,000 and 9,610,630 shares issued at December 31, 2004 and 2005, respectively) 5,000 9,611 Additional paid in capital 5,834 33,197 Accumulated deficit (12,908) (25,334) --------- --------- Total Shareholders' Equity (Deficit) (2,074) 17,494 --------- --------- Total Liabilities and Shareholders' Equity 15,909 26,113 ========= ========= GENTIUM S.p.A. Statements of Operations (Unaudited, in thousands, except per share data) For the Three Months For the Year Ended Ended December 31, December 31, --------------------- --------------------- 2004 2005 2004 2005 ---------- ---------- ---------- ---------- Revenues: Sales to affiliates 1,151 1,360 2,870 3,260 Third party product sales - 6 243 101 ---------- ---------- ---------- ---------- Total product sales 1,151 1,366 3,113 3,361 Other income and revenues 82 70 583 280 ---------- ---------- ---------- ---------- Total Revenues 1,233 1,436 3,696 3,641 Operating costs and expenses: Cost of goods sold 1,126 1,199 2,579 2,920 Charges from affiliates 750 266 1,665 1,047 Research and development 461 1,512 2,922 4,629 General and administrative 592 571 1,194 2,309 Depreciation and amortization 37 40 89 118 ---------- ---------- ---------- ---------- 2,966 3,588 8,449 11,023 ---------- ---------- ---------- ---------- Operating loss (1,733) (2,152) (4,753) (7,382) Foreign currency exchange gain (loss), net (98) 186 (55) (249) Interest income (expense), net (2,165) 49 (2,192) (4,148) ---------- ---------- ---------- ---------- Pre-tax loss (3,996) (1,917) (7,000) (11,779) Income tax expense (benefit): Current (113) - 65 - Deferred 65 (598) (37) (646) ---------- ---------- ---------- ---------- (48) (598) 28 (646) ---------- ---------- ---------- ---------- Net loss (4,004) (2,515) (7,028) (12,425) ========== ========== ========== ========== Net loss per share: Basic and diluted net loss per share (0.80) (0.27) (1.41) (1.79) ========== ========== ========== ========== Weighted average shares used to compute basic net loss per share 5,000,000 9,391,449 5,000,000 6,933,104 ========== ========== ========== ========== Weighted average shares used to compute diluted net loss per share 5,000,000 9,391,449 5,000,000 6,933,104 ========== ========== ========== ========== GENTIUM S.p.A. Statements of Cash Flows (Unaudited, in thousands) For the Three For the Year Months Ended Ended December 31, December 31, --------------- ---------------- 2004 2005 2004 2005 ------- ------- ------- -------- Cash Flows From Operating Activities: ------- ------- ------- -------- Net loss (4,004) (2,515) (7,028) (12,425) ------- ------- ------- -------- Adjustments to reconcile net income to net cash provided by (used in) operating activities: Unrealized foreign exchange loss 313 - 313 575 Depreciation and amortization 386 208 743 1,315 Non cash interest expense 1,972 - 1,972 3,837 Deferred income taxes (benefit) (9) 598 (37) 646 Write down of inventory to net realizable value - 161 50 291 Stock based compensation 379 216 379 579 Changes in operating assets and liabilities: Accounts receivable (1,098) (966) 981 (376) Inventories 423 (106) 534 (1,033) Prepaid expenses and other current assets (659) (206) (1,784) (149) Accounts payable and accrued expenses 102 696 359 (1,793) Deferred income (152) (67) (353) (281) Termination indemnities 24 13 19 158 Income taxes payable (123) - (304) - ------- ------- ------- -------- Net cash used in operating activities (2,446) (1,968) (4,119) (8,657) ------- ------- ------- -------- Cash Flows From Investing Activities: Capital expenditures (823) (239) (5,178) (1,263) Intangible expenditures (19) (63) (163) (124) ------- ------- ------- -------- Net cash used in investing activities (842) (302) (5,341) (1,387) ------- ------- ------- -------- Cash Flows From Financing Activities: Capital contribution - - - 3,900 Proceeds from long-term debt 2,350 - 5,205 - Repayments of long-term debt (67) (111) (374) (581) Proceeds from Series A convertible Notes 4,477 - 4,477 1,459 Repayment of Series A convertible Notes - - - (4,221) Proceeds (repayment) of affiliate's loan (800) - 2,200 (2,200) Proceeds (repayment) from bank overdrafts and short-term borrowings (779) - 390 (2,790) Proceeds from initial public offering and private placement, net of offering expenses - 8,154 - 24,801 ------- ------- ------- -------- Net cash provided by financing activities 5,181 8,043 11,898 20,368 ------- ------- ------- -------- Increase in cash and cash equivalents 1,893 5,773 2,438 10,324 Cash and cash equivalents, beginning of period 568 7,012 23 2,461 ------- ------- ------- -------- Cash and cash equivalents, end of period 2,461 12,785 2,461 12,785 ======= ======= ======= ======== *T