Akesis says cash will be depleted in 'matter of months,' needs at least $500,000 more

By Angela McDaniels

Seattle, Oct. 27 - Akesis Pharmaceuticals, Inc.'s recurring losses and $7.2 million cumulative losses have raised substantial doubt about its ability to continue as a going concern, according to the company's 10-Q report for the quarter ended Sept. 30.

Cash and cash equivalents were $226,490 at Sept. 30, compared with $338,551 at Dec. 31, 2005. Cash used in operating activities for the nine months ended Sept. 30 totaled $511,757.

While Akesis has financed operations primarily through the sale of equity securities, stockholder loans and limited revenues from the sale of over-the-counter products, it said it had no revenues or other income sources for the first nine months of 2006.

The company said its monthly payroll and payroll-related expenses are $2,600, its monthly rent is $1,500 and it has other major expenditures related to the cost of liability insurance and professional fees to attorneys, public accountants, a public relations firm and clinical trial consultants.

Based on these circumstances, Akesis said its cash reserves may be exhausted in a "matter of months, if not earlier," and as a result, it may have to cease operations.

The company said its management is seeking to continue operations by obtaining additional financing, by entering into a strategic partnership to finance the development of its proposed products and by controlling overhead costs and operating expenses. Akesis may also issue additional shares and warrants.

The company estimated that it if received a near-term minimum cash infusion of $500,000, its cash balances would be sufficient to meet its anticipated minimum operating cash requirements for the next several months. To continue operations under such a minimum financing scenario, Akesis said it will need to keep expenditures at a minimal level and secure an additional financing.

In addition, $500,000 would not be enough to allow Akesis to continue the development of its proposed pharmaceutical products, according to the filing.

By the company's estimates, it would need a minimum of $3.2 million to fund at least one clinical feasibility study as well as its general and administrative expenses for the next 12 to 18 months. Each additional clinical study would cost $1.5 million.

Akesis said that if it successfully raises additional capital, the first clinical feasibility study it will begin is related to its metformin combination product. If it receives sufficient proceeds, it will also conduct clinical studies related to another to-be-determined combination product.

The company said there can be no assurance that it will be able to obtain needed additional capital or enter into relationships with corporate partners on a timely basis or at all.

Furthermore, any additional equity financing may be dilutive to shareholders; debt financing, if available, may involve restrictive covenants; and strategic arrangements, if necessary to raise additional funds, may require the company to relinquish its rights to its technologies or products, the company warned.

Akesis is a biopharmaceuticals company based in LaJolla, Calif., that develops treatments for diabetes and other metabolic disorders.

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