Ondine Biopharma Announces Third Quarter 2008 Financial Results
VANCOUVER, Nov. 14 /CNW/ - Ondine Biopharma Corporation (the "Company" or
"Ondine", TSX: OBP; AIM: OBP) a medical technology company developing
photodisinfection based products, today announced its financial results for
the third quarter ended September 30, 2008.
"During the third quarter we continued to make important progress
including discussions with prospective strategic partners as well as towards
obtaining regulatory approval to market Periowave(TM) in the United States,"
stated Carolyn Cross, Ondine's President & CEO, "The FDA confirmed that our
Periowave(TM) system will be evaluated under the Premarket Approval (PMA)
pathway. Therefore, we have been focused on the tasks required to complete our
PMA submission. In light of the challenging capital marketplace, we have
initiated an expense control program and are focusing our resources on three
key priorities: advancing discussions with potential strategic partners,
obtaining FDA approval for Periowave(TM) and further developing our platform
photodisinfection technology."
2008 Third Quarter Results and Recent Developments
FINANCIAL RESULTS
For the quarter ended September 30, 2008 (the "Third Quarter of 2008"),
the Company recorded a loss of $3.25 million or $0.05 per common share
compared with a loss of $3.18 million or $0.06 per common share during the
quarter ended September 30, 2007 (the "Third Quarter of 2007"). For the nine
months ended September 30, 2008 (the "First Nine Months of 2008"), the Company
recorded a loss of $8.15 million or $0.13 per common share compared with a
loss of $10.42 million or $0.19 per common share during the nine months ended
September 30, 2007 (the "First Nine Months of 2007"). Product sales of our
laser base stations and treatment kits during the Third Quarter of 2008
amounted to $0.15 million with a negative gross margin of $0.27 million after
a $0.38 million provision for excess and obsolete inventory compared to
product sales of $0.36 million and a gross margin of $0.28 million (77.3%)
during the Third Quarter of 2007. Product sales of our laser base stations and
treatment kits during the First Nine Months of 2008 amounted to $0.61 million
with a gross margin of $0.04 million (7.8%) compared to product sales of $1.48
million and a gross margin of $0.77 million (52.0%) during the First Nine
Months of 2007.
REGULATORY AND PRODUCT DEVELOPMENTS
In August of 2008, the Company announced that it had received
confirmation from the United States Food & Drug Administration (FDA) that the
Company's Periowave(TM) Photodisinfection System will be evaluated as a Class
III medical device under premarket approval (PMA) regulations. Receipt of FDA
clearance through the PMA pathway would provide competitive barriers that will
offer strategic benefits to Ondine in the dental market.
In September of 2008, Company representatives presented a poster entitled
"Photodisinfection in the Treatment of Chronic Periodontitis" at the American
Academy of Periodontology's (AAP) annual meeting held in Seattle, Washington.
This peer-reviewed poster highlighted the positive results of the Company's
Canadian Multi-Centre Trial using its Photodisinfection System.
In October of 2008, Dr. Cale Street, the Company's Director of Research,
gave a presentation entitled "Photodisinfection: A safe and effective tool for
the treatment of adult periodontitis" at the 7th International Symposium on
Photodynamic Therapy and Photodiagnosis in Clinical Practice meeting held in
Italy. The purpose of the presentation was to provide the scientific and
clinical community with an overview of the development of photodisinfection
for the treatment of periodontal disease, with an emphasis on the results of
the Company's clinical studies utilizing its Periowave(TM) system for this
application.
In October of 2008 Company representatives presented data highlighting
the efficacy of Ondine's photodisinfection technology for eradicating
Staphylococcus aureus and the antibiotic resistant form, MRSA, at the joint
American Academy of Microbiology and Infectious Diseases Society of America, a
major international conference showcasing innovative research and technologies
in the field of infectious diseases, in Washington, DC. The poster was
entitled "Repeat Exposure of Bacterial Pathogens to Photodynamic Disinfection
does not Induce Resistance Formation".
Financial Review
The decline in gross margin percentage during the First Nine Months of
2008, as compared to the First Nine Months of 2007, is primarily due to the
recording of a provision for excess and obsolete inventory, primarily due to
an increase in the expected time required to obtain FDA clearance to market
Periowave(TM) in the United States. Having cancelled the Company's exclusive
distribution agreement with a Canadian dental distributor in February of 2008,
the Company commenced sales of its products to two additional dental
distributors in Canada during the second quarter of 2008. Product sales during
the Third Quarter of 2007 included a $271,000 sale of Periowave(TM) laser base
stations and treatment kits to a distributor in Germany as an initial order,
which did not recur in the Third Quarter of 2008.
The Company is seeing additional market acceptance for its products in
Canada. Our top users in Canada are currently deploying Periowave(TM) two to
three times per day in their practices. Information obtained from the
Company's Canadian distributors show an increase of 28% in the number of
treatment kits sold by them during the First Nine Months of 2008, when
compared to the First Nine Months of 2007. In addition, a number of dental
offices in Canada have purchased more than one laser base station. The
priority for the Canadian market is to establish the appropriate marketing and
sales strategies, as well as identifying key strategic partnership
opportunities, for the larger United States and European markets.
Although the Company is seeing increasing market acceptance for
Periowave(TM), its sales to date have been limited and there is not sufficient
sales history to reasonably predict future demand, including the full impact
of seasonality on its sales. The Company expects that the summer months will
generally be a slower sales period. In addition, substantially all of the
Company's sales in Canada have been to one distributor. In February 2008, the
Company elected to cancel its exclusive distribution agreement with that
distributor and thereafter the relationship continues on a non-exclusive
basis. The Company expects that the sale of its products through the
additional distributors will add to the installed base of its Periowave(TM)
PDD systems in Canada as the Company continues to work on increasing the
utilization rate of its consumable product by end users.
Sales by the Company to its distributors are not necessarily reflective
of the distributors' sales to dental offices. Until the Company has adequate
sales history to accurately forecast demand on an ongoing basis, fluctuations
in distributors' inventory levels could significantly impact sales in future
quarters.
During the Third Quarter of 2008, the Company continued to work with
leading hygiene and dental schools across Canada by assisting them with the
adoption of Periowave(TM) into their educational programs and training
clinics. Validation by these dental schools adds significant credibility to
the novel approach of using photodisinfection ("PDD") to treat gum disease. We
are confident that in time, the Periowave(TM) system will be incorporated into
their teaching curriculums and this will have a positive effect on the market
penetration of Periowave(TM) in the general dental community in Canada.
During the Third Quarter of 2008 the Company continued to invest in
research and development including, among other things: i) commenced certain
tasks required to enable the Company to file its PMA submission with the FDA;
ii) the analysis of the data collected from a clinical study of Periowave(TM)
for the treatment of periodontitis conducted by the University College London
Eastman Dental Hospital; and iii) the continuing research and development
programs on potential new applications of the Company's PDD technology being
conducted at the University College London, principally for the non-antibiotic
treatment of MRSA and other topical infections.
The increase in loss for the Third Quarter of 2008, when compared to the
Third Quarter of 2007, was primarily due to the negative gross margin in the
Third Quarter of 2008 compared to the positive gross margin in the Third
Quarter of 2007; an increase in general and administration expenses as further
described below; and a $0.23 million write down of an inventory deposit; which
were partially offset by decreases in research and development and in
marketing and sales expenses as further described below; and an increase in
other income, principally due to the Company recording a foreign exchange gain
in the Third Quarter of 2008 as compared to a foreign exchange loss in the
Third Quarter of 2007.
Research and development expenses for the Third Quarter of 2008 were
$1.13 million, a decrease of $0.23 million when compared to $1.36 million
incurred during the Third Quarter of 2007. The decrease was primarily due to a
reduction in bonus compensation, which reduced salaries and benefits costs,
and a reduction in clinical trial costs following the conclusion of the
Company's clinical trials utilizing Periowave(TM) for the treatment of
periodontitis. These reductions were partially offset by an increase in
stock-based compensation, primarily due to the stock options granted in the
second quarter of 2008.
General and administration expenses for the Third Quarter of 2008 were
$1.11 million, an increase of $0.24 million when compared to $0.87 million
incurred during the Third Quarter of 2007. The increase was primarily due to
increases in stock-based compensation and in bad debt expense, as the Company
recorded an allowance for doubtful accounts, which were partially offset by a
reduction in staff and in bonus compensation which reduced salaries and
benefits costs.
Marketing and sales expenses for the Third Quarter of 2008 were $0.47
million, a decrease of $0.6 million when compared to $1.07 million incurred
during the Third Quarter of 2007. The decrease was primarily due to a
reduction in staff, which reduced salaries and benefits costs, and reductions
in advertising and promotions activities and consulting fees. These reductions
occurred as the Company transitions to its priorities of obtaining a strategic
partner for the dental application and focusing on its research and
development activities as it prepares its PMA submission for filing with the
FDA.
As at September 30, 2008 the Company had cash, cash equivalents and
short-term investments totaling $2.59 million compared with $10.15 million as
at December 31, 2007. During the First Nine Months of 2008 the Company used
cash of approximately $7.4 million for its operating activities, $3.7 million
was provided by net redemptions of short-term investments, $0.09 million was
used for the purchase of capital assets, $0.17 was used to acquire an
intangible asset, and $0.08 million was provided by the issuance of common
shares on exercise of stock options.
Based on the Company's current level of activities and its future plans,
the Company needs to raise additional capital in the near term to continue
with its planned activities. No assurances can be given that additional
funding will be available or, if available, that it will be on terms that are
acceptable to the Company. There is a risk that in early 2009 the Company
could have insufficient cash to operate its business if it is unable to raise
further funding. The Company believes the current challenging conditions in
the capital marketplace will make it more difficult and time consuming than
normal for companies at its stage of development to secure additional funding.
Various other options are being pursued to raise funds, such as through
strategic partnerships or the sale of certain of our assets. In addition, the
Company has and will continue to reduce its expenses and to defer capital
outlays in order to extend the period it can operate utilizing its existing
cash balances. However such reductions and deferrals may not be sufficient to
allow the Company to continue in business unless it is able to obtain further
cash to fund its operations. Should the Company be unable to obtain additional
funding in a timely manner, it would have to severely curtail its activities
and there can be no assurances that the Company will be able to continue in
business.
As at September 30, 2008 the Company had 61,359,176 common shares
outstanding.
Additional analysis of the Company's financial results for the three
months and nine months ended September 30, 2008 is included in our
management's discussion and analysis of financial condition and results of
operations (MDA) for the Third Quarter of 2008, which will be available on the
Company's website and on www.sedar.com.
About Ondine Biopharma Corporation
Ondine is developing non-antibiotic therapies for the treatment of a
broad spectrum of bacterial, fungal and viral infections. The Company is
focused on developing leading edge products utilizing its patented
light-activated technology. Photodisinfection provides broad-spectrum
antimicrobial efficacy without encouraging the formation and spread of
antibiotic resistance. The Company is based in Vancouver, British Columbia,
Canada, with a research and development laboratory in Bothell, Washington,
USA, and an international office in St. Michael, Barbados. For additional
information, please visit the Company's website at: www.ondinebiopharma.com.
Forward-Looking Statements:
Certain statements contained in this release containing words like
"believe", "intend", "may", "expect" and other similar expressions, are
forward-looking statements that involve a number of risks and uncertainties.
Factors that could cause actual results to differ materially from those
projected in the Company's forward-looking statements include the following:
market acceptance of our technologies and products; our ability to obtain
financing; our financial and technical resources relative to those of our
competitors; our ability to keep up with rapid technological change;
government regulation of our technologies; our ability to enforce our
intellectual property rights and protect our proprietary technologies; the
ability to obtain and develop partnership opportunities; the timing of
commercial product launches; the ability to achieve key technical milestones
in key products and other risk factors identified from time to time in the
Company's public filings.
The TSX Exchange has not reviewed and does not accept responsibility for
the adequacy or accuracy of this release.
Ondine Biopharma Corporation
Incorporated under the laws of British Columbia
CONSOLIDATED BALANCE SHEETS
As at (Unaudited - expressed in Canadian dollars)
-------------------------------------------------------------------------
September 30, December 31,
2008 2007
$ $
-------------------------------------------------------------------------
ASSETS
Current
Cash and cash equivalents 711,095 4,540,245
Short-term investments 1,875,707 5,606,836
Accounts receivable 325,488 653,448
Inventories 288,378 570,561
Prepaid expenses and deposits 386,946 526,520
-------------------------------------------------------------------------
Total current assets 3,587,614 11,897,610
Capital assets 860,109 991,606
Intangible assets 258,804 114,714
-------------------------------------------------------------------------
4,706,527 13,003,930
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 1,151,789 1,873,860
Income taxes payable 33,027 30,765
Current portion of deferred tenant inducement 44,017 42,374
Future income tax 71,955 67,026
-------------------------------------------------------------------------
Total current liabilities 1,300,788 2,014,025
Deferred tenant inducement, net of current
portion 120,991 145,967
-------------------------------------------------------------------------
Total liabilities 1,421,779 2,159,992
-------------------------------------------------------------------------
Shareholders' equity
Share capital 51,336,368 51,193,823
Contributed surplus 3,911,634 3,467,847
Deficit (51,963,064) (43,816,528)
Accumulated other comprehensive loss (190) (1,204)
-------------------------------------------------------------------------
Total shareholders' equity 3,284,748 10,843,938
-------------------------------------------------------------------------
4,706,527 13,003,930
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Ondine Biopharma Corporation
CONSOLIDATED STATEMENTS OF LOSS
AND COMPREHENSIVE LOSS
(Unaudited - expressed in Canadian dollars)
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
------------------------- -------------------------
2008 2007 2008 2007
$ $ $ $
-------------------------------------------------------------------------
REVENUE
Product sales 147,923 358,826 610,338 1,476,959
Cost of sales 422,066 81,409 562,457 708,984
-------------------------------------------------------------------------
Gross margin (274,143) 277,417 47,881 767,975
-------------------------------------------------------------------------
EXPENSES
Research and
development 1,133,621 1,365,411 3,402,048 4,618,604
General and
administration 1,105,039 865,720 2,784,696 3,327,323
Marketing and sales 470,176 1,069,913 1,707,415 2,996,860
Depreciation and
amortization 69,996 118,736 251,655 317,035
Write-down of
inventory deposit 232,000 - 232,000 -
-------------------------------------------------------------------------
(3,010,832) (3,419,780) (8,377,814) (11,259,822)
-------------------------------------------------------------------------
Other
Interest income 23,998 66,447 147,230 280,613
Foreign exchange
gain (loss) 9,660 (107,075) 36,167 (226,409)
-------------------------------------------------------------------------
33,658 (40,628) 183,397 54,204
-------------------------------------------------------------------------
Loss before income
taxes (3,251,317) (3,182,991) (8,146,536) (10,437,643)
Income tax recovery - - - 13,000
-------------------------------------------------------------------------
Loss for the period (3,251,317) (3,182,991) (8,146,536) (10,424,643)
Unrealized gain on
short-term investments 66 545 1,014 2,768
-------------------------------------------------------------------------
Comprehensive loss
for the period (3,251,251) (3,182,446) (8,145,522) (10,421,875)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic and diluted loss
per common share (0.05) (0.06) (0.13) (0.19)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted average number
of common shares
outstanding 61,357,727 54,692,493 61,247,653 54,660,259
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Ondine Biopharma Corporation
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited - expressed in Canadian dollars)
-------------------------------------------------------------------------
Share Contributed
Number of Capital Surplus
Common Shares $ $
-------------------------------------------------------------------------
Balance, December 31, 2006 54,592,493 45,453,690 1,801,209
Transitional adjustment to
beginning balance on adoption
of new accounting policy - - -
Common shares issued for cash
during the year for:
Exercise of stock options 100,000 25,000 -
Private placement of units
(net of issue costs) 6,335,182 5,697,133 1,267,036
Reallocation of contributed
surplus arising from
stock-based compensation on
exercise of stock options - 18,000 (18,000)
Stock-based compensation - - 417,602
Loss for the year - - -
Unrealized gain on short-term
investments - - -
-------------------------------------------------------------------------
Balance, December 31, 2007 61,027,675 51,193,823 3,467,847
Common shares issued for cash
during the period for:
Exercise of stock options 331,501 82,875 -
Reallocation of contributed
surplus arising from
stock-based compensation on
exercise of stock options - 59,670 (59,670)
Stock-based compensation - - 503,457
Loss for the period - - -
Unrealized gain on short-term
investments - - -
-------------------------------------------------------------------------
Balance, September 30, 2008 61,359,176 51,336,368 3,911,634
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(Unaudited - expressed in Canadian dollars)
-------------------------------------------------------------------------
Accumulated
Other Total
Comprehensive Shareholders'
Deficit Loss Equity
$ $ $
-------------------------------------------------------------------------
Balance, December 31, 2006 (30,663,407) - 16,591,492
Transitional adjustment to
beginning balance on adoption
of new accounting policy 4,401 (4,401) -
Common shares issued for cash
during the year for:
Exercise of stock options - - 25,000
Private placement of units
(net of issue costs) - - 6,964,169
Reallocation of contributed
surplus arising from
stock-based compensation on
exercise of stock options - - -
Stock-based compensation - - 417,602
Loss for the year (13,157,522) - (13,157,522)
Unrealized gain on short-term
investments - 3,197 3,197
-------------------------------------------------------------------------
Balance, December 31, 2007 (43,816,528) (1,204) 10,843,938
Common shares issued for cash
during the period for:
Exercise of stock options - - 82,875
Reallocation of contributed
surplus arising from
stock-based compensation on
exercise of stock options - - -
Stock-based compensation - - 503,457
Loss for the period (8,146,536) - (8,146,536)
Unrealized gain on short-term
investments - 1,014 1,014
-------------------------------------------------------------------------
Balance, September 30, 2008 (51,963,064) (190) 3,284,748
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Ondine Biopharma Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - expressed in Canadian dollars)
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
------------------------- -------------------------
2008 2007 2008 2007
$ $ $ $
-------------------------------------------------------------------------
OPERATING ACTIVITIES
Loss for the period (3,251,317) (3,182,991) (8,146,536) (10,424,643)
Add items not
affecting cash:
Depreciation and
amortization 69,996 120,331 251,655 318,630
Stock-based
compensation 204,193 110,963 503,457 287,134
Deferred leasehold
inducement (10,583) 14,914 (23,333) 9,064
Unrealized foreign
exchange gain 3,008 (4,002) 4,929 (9,671)
Changes in non-cash
working capital items
relating to operations:
Accounts receivable 288,929 100,238 327,960 232,521
Inventories 338,095 65,984 282,183 209,483
Prepaid expenses and
deposits 128,235 2,593 139,574 2,841
Accounts payable and
accrued liabilities (61,559) 20,083 (722,071) 199,329
Income taxes payable 1,381 (1,238) 2,262 (31,847)
-------------------------------------------------------------------------
Cash used in operating
activities (2,289,622) (2,753,125) (7,379,920) (9,207,159)
-------------------------------------------------------------------------
FINANCING ACTIVITIES
Issuance of share
capital 4,166 - 82,875 25,000
-------------------------------------------------------------------------
Cash provided by
financing activities 4,166 - 82,875 25,000
-------------------------------------------------------------------------
INVESTING ACTIVITIES
Net redemptions of
short-term
investments (15,517) 2,157,751 3,732,143 6,134,377
Purchase of capital
assets (4,031) (39,231) (92,009) (392,649)
Acquisition of
intangible asset (172,239) - (172,239) -
-------------------------------------------------------------------------
Cash provided by
(used in) investing
activities (191,787) 2,118,520 3,467,895 5,741,728
-------------------------------------------------------------------------
Decrease in cash and
cash equivalents
during the period (2,477,243) (634,605) (3,829,150) (3,440,431)
Cash and cash
equivalents,
beginning of period 3,188,338 1,717,051 4,540,245 4,522,877
-------------------------------------------------------------------------
Cash and cash
equivalents, end of
period 711,095 1,082,446 711,095 1,082,446
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For further information: Carolyn Cross, President and Chief Executive
Officer, Ondine Biopharma Corporation, (604) 669-0555,
ccross@ondinebiopharma.com; Canaccord Adams Ltd, Nominated Adviser & Broker,
Neil Johnson, Ryan Gaffney, +4420 7050 6500; Adam Peeler, Investor Relations,
The Equicom Group Inc., (416) 815-0700 ext. 225, apeeler@equicomgroup.com
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