Revenue

The Company recognized revenue of $0.2 million during the first quarter of 2010 compared with $0.1 million during the first quarter of 2009. For the first quarter of 2010, revenue consisted primarily of the recognition of license fee payments previously received from Meda, Myriad Genetics, Endo Pharmaceuticals and Durect. For the first quarter of 2009, revenue consisted primarily of the recognition of license fee payments previously received from Myriad Genetics, Endo Pharmaceuticals and Durect.

General and Administrative Expense

General and administrative expense in each of the first quarters of 2010 and 2009 was $2.0 million. Selling expense is expected to increase during the year and to offset reductions in general and administrative expenses as the Company prepares to market Ceplene in the U.S. upon receipt of marketing approval.

Research and Development (R&D) Expense

R&D expense in the first quarter of 2010 decreased by approximately 6%, or $0.1 million, to $2.1 million compared with $2.2 million in the first quarter of 2009. The decrease was primarily related to lower salary and salary-related expenses and facility costs related to closing our research facility in San Diego in 2009, partially offset by higher regulatory fees and clinical trial expenses for Ceplene?®.

Other Income (Expense)

Other income (expense) during the first quarter of 2010 amounted to net expense of $0.6 million, compared with net expense of $18.4 million in 2009. The primary component of other income (expense) in both quarters is interest expense and foreign exchange loss. The first quarter of 2009 included $18.1 million of interest expense, which included $9.6 million in amortization of debt issuance costs and debt discount related to the conversion of $22.5 million of the Company's 7.5556% convertible subordinated notes due 2014 into approximately 8.3 million shares of its common stock.

Liquidity

As of March 31, 2010 EpiCept had $3.6 million in cash and cash equivalents. In January 2010 the Company received $3 million from Meda in connection with the signing of the Ceplene?® European marketing and distribution agreement. On May 3, 2010, the Company announced the first commercial sale of Ceplene?® in a major European country had occurred, which triggered a $2 million payment from Meda. The Company believes that its cash resources are sufficient to fund operations into the third quarter 2010. The Company may receive cash from certain licensing activities during 2010 and upon achievement of specified clinical milestones.

In February 2010 EpiCept established an "At-the-Market" offering program through which the Company may, from time to time, offer and sell shares of its common stock having an aggregate offering price of up to $15.0 million through its sales agent. Sales of the shares, if any, will be made by means of ordinary brokers' transactions on The Nasdaq Capital Market or, to the extent allowable by law, the Nasdaq OMX Stockholm Exchange, at market prices. EpiCept may utilize this program at such times and in such amounts to minimize any disruption to the trading of its stock. In times of low trading volume the Company may severely limit or refrain altogether from using the program. The Company expects to use this facility to meet liquidity needs that may arise in the event any of the anticipated cash inflows are delayed or do not occur, and it may seek alternative sources of financing, such as issuing additional debt or equity should funds raised through the program be insufficient to timely meet the Company's liquidity requirements. The Company began utilizing this program on a limited basis in April 2010.

SOURCE EpiCept Corporation