Cypress Bioscience, Inc. (CYPB) reported a net loss of 12 cents per share in the first quarter of 2010, a couple of cents above the Zacks Consensus Estimate of 10 cents. However, quarterly loss was lower than the year-ago loss of 24 cents, mainly due to a significant decline in operating expenses.
 
Quarterly revenues came in at $8.1 million, up from the year-ago revenues of $7.9 million. Revenues consisted of $7.1 million in commercial revenues, $0.9 million in revenues under collaborative agreements and $0.2 million in revenues from Cypress’ personalized medicine service business.
 
Commercial revenues of $7.1 million included royalty revenue of $2.6 million and $4.1million in co-promotion reimbursement in connection with the launch of Savella. Savella is being co-promoted with partner Forest Laboratories (FRX).
 
Savella received US Food and Drug Administration (FDA) approval in January 2009 for fibromyalgia, a chronic and debilitating condition characterized by widespread pain and stiffness throughout the body, accompanied by severe fatigue, insomnia and mood symptoms.
 
Fibromyalgia syndrome (FMS) is estimated to affect about 6 million people in the US. We believe Savella may have multi-hundred million dollar potential.
 
Total operating expenses for the quarter declined 27.1% to $12.9 million. The significant decline was primarily due to lower research and development expenses. Research and development expenses were $0.9 million in the reported quarter, down from $7.2 million reported in the year ago quarter, which included the impact of certain non-recurring expenses.
 
Selling, general and administrative expenses increased to $11.3 million. While sales and marketing costs declined due to a decrease in costs incurred in connection with marketing and promotional activities for Cypress ’ personalized medicine services business and costs related to the training of the Savella sales force, general and administrative expenses increased due to increased legal and consulting costs and higher stock-based compensation expense.
 
We currently have a Neutral recommendation on Cypress. While we remain optimistic about Savella’s sales potential, we are concerned about Cypress’ early-stage pipeline. We believe Cypress will pursue acquisitions and in-licensing opportunities to boost its pipeline. Meanwhile, we expect investor focus to remain on the sales ramp-up of Savella.
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