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Ondine Biopharma Corporation Announces First Quarter 2010 Financial Results

5/14/2010 11:04:34 AM

VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 14, 2010) - Ondine Biopharma Corporation (the "Company" or "Ondine") (TSX: OBP)(AIM: OBP) a medical device company developing photodisinfection based products, announced its financial results for the three months ended March 31, 2010.

"During the first quarter of 2010, we completed the development of two important new products for the dental market," said Carolyn Cross, Chairman and CEO. "The products, a cordless (handheld) photodisinfection laser and a reformulated photosensitizer with advanced handling and disinfection properties, are being launched by our business partner Periowave Dental Technologies Inc. ("PDT Inc") at the current dental trade show in Toronto and the upcoming show in Montreal. The combination of the lightweight, cordless laser and advanced formulation treatment pack brings the next generation of Periowave™ to the clinician's office, significantly improving the alternatives available in the fight against periodontal disease.

Ondine also plans to initiate a comprehensive social media campaign to promote awareness and support for the important technologies that we are creating in the medical arena to address the growing worldwide problem of antibiotic resistance. Having established Ondine as a global leader in the development of photodynamic applications, this initiative is geared to obtain greater visibility for Ondine's innovative non-antibiotic technologies, including applications for the reduction of ventilator associated pneumonia (VAP), for decolonization of MRSA in the nose and for treatment of patients with antibiotic resistant chronic rhinosinusitis."


For the three months ended March 31, 2010 ("Q1 10") the Company recorded a loss of $1.14 million, or $0.01 per common share, compared with a loss of $1.45 million, or $0.02 per common share, for the three months ended March 31, 2009 ("Q1 09"). Product sales revenue, as a supplier to PDT Inc, for Periowave™ laser base stations and treatment kits for Q1 10 was $0.12 million generating a gross margin of $0.08 million (66.4%) compared to direct to market product sales of $0.19 million and gross profit margin of $0.12 million (62.8%) for Q1 09.


On March 17, 2010, the Company announced that it had received notification from the United States Food and Drug Administration (FDA) that the premarket approval submission for Periowave™ (the "Periowave™ PMA") has been accepted for filing. The FDA's action means that the Periowave™ PMA application is sufficiently complete and ready for substantive review. The Periowave™ PMA was submitted with the objective of obtaining regulatory clearance for the marketing of the Periowave™ Photodisinfection System in the United States for the treatment of chronic periodontitis in adults as an adjunct to standard methods of care. The submission incorporates the results of over nine years of preclinical and clinical development. During April 2010, the Company closed two tranches of a non-brokered private placement by issuing 13,800,000 units at $0.06 per unit for aggregate gross proceeds of $828,000 (the "April 2010 Private Placement"). Each Unit consists of one common share of the Company and one share purchase warrant (a "Warrant") entitling the holder to acquire one common share of the Company at an exercise price of $0.075 until one year from closing. 12,530,000 of the Warrants issued in the placement expire on April 5, 2011 and 1,270,000 expire on April 23, 2011.

Financial Review

The $0.31 million decrease in loss for Q1 10, when compared to Q1 09, was primarily due to Q1 10 including consulting revenue of $0.20 million, which did not occur in Q1 09, and expense reductions in general and administration (G&A) of $0.06 million; and in marketing and sales (M&S) of $0.14 million, which were partially offset by an increase in research and development (R&D) expenses of $0.08 million and a decrease in gross margin of $0.04 million. Sales during Q1 10 consisted of Periowave™ product, primarily laser base stations, sold to PDT Inc under a manufacturing and supply agreement entered into in June of 2009 as part of the Company's sale of its dental healthcare business (the "Dental Sale"). During Q1 09 the Company's sales consisted of Periowave™ product, primarily treatment kits, sold to three distributions in Canada and to a distributor in the United Kingdom. The margins obtained on the sales in Q1 10 were lower than the margins obtained on the Company's sales during Q1 09 reflecting the new position as supplier. However, the gross margin percentage for Q1 10 was comparable to that for Q1 09 due to the sale in Q1 10 of laser base stations that had previously been written off by the Company and accordingly there was no cost of sales in connection with the sale of that product. The gross margin percentage that will be earned on the Company's future sales under the manufacturing agreement referred to above will be lower than the gross margin percentage realized in Q1 10.

The reduction in G&A expenses resulted primarily from a reduction in salaries and wages, due to a reduction in staff. The reduction in M&S expenses resulted from the elimination of substantially all of those expenses subsequent to the closing of the Dental Sale. The bulk of the increase in R&D expenses was due to an increase in consulting and professional fees, primarily in connection with the Company's product, the photodynamic endotracheal tube treatment system (the "PETT System"), for in situ disinfection of endotracheal tubes to prevent ventilator-associated pneumonia (VAP) and an increase in costs incurred in connection with the development of a cordless hand held laser, initially for use in the Periowave™ product. The PETT System to prevent VAP was acquired by the Company in December 2009 as part of the acquisition of Advanced Photodynamic Technologies, Inc.

The Company intends to continue to focus its resources on development of a select number of new applications of its platform PDD technology. In addition to the applications referred to above, during Q1 10 the Company continued to invest in research and development of, among other things, our MRSAid™ product for decolonization of pathogenic bacteria, such as methicillin-resistant Staphylococcus aureus (MRSA) in the anterior nares and in the Periowave™ PMA submission in connection with a number of FDA audits of certain of the Company's clinical studies.

Although Ondine sold its dental healthcare business to PDT Inc in June 2009, the Company expects that its continuing involvement in the dental market will be an important source of future cash flows for Ondine. The Company i) earns gross margin on its Periowave™ product sales to PDT Inc under a manufacturing and supply agreement; ii) receives consulting fees from PDT Inc under a management services agreement; and iii) receives royalties on PDT Inc's sales of Periowave™ product. The Company is also entitled to i) a net-receipts royalty if PDT Inc enters into a licensing agreement for Periowave™ with a third party; ii) milestone payments based on cumulative sales thresholds achieved by PDT Inc; and, iii) in lieu of future royalties and milestone payments, a share, based on a sliding scale over time, of the net sales proceeds if PDT Inc sells the dental healthcare business to a third party. Accordingly, one of the Company's near term business objectives is to continue to support PDT Inc as PDT Inc markets Periowave™ in Canada and Europe and as PDT Inc seeks to expand its sales activities into new markets, principally the United States.

As at March 31, 2010 the Company had cash and cash equivalents totaling $1.23 million compared with $1.05 million as at December 31, 2009. Accounts payable and accrued liabilities at March 31, 2010 were $1.30 million compared to $1.10 million at December 31, 2009. During the First Quarter 2010 the Company used cash of approximately $0.57 million for its operating activities and received cash of $0.75 million from equity subscriptions received in connection with the April 2010 Private Placement. During April 2010, the Company issued 947,688 common shares at a price of $0.12 per share to an arms length party as consideration for and in settlement of past advisory services provided to the Company.

Based on the Company's current level of activities and its future plans, the Company will need to raise additional capital in the near term to continue with its planned operating activities. Although there has been some improvement in certain sectors of the capital markets, the Company continues to believe that future market conditions may make it more difficult and time consuming than normal for companies at its stage of development to secure additional funding. Assurances can not be given that additional funding will be available on terms that are acceptable to the Company. In the interim, the Company will continue to control its expenses and defer capital outlays in order to extend the period it can operate utilizing its existing cash balances. Should the Company be unable to obtain additional cash in a timely manner, it would have to severely curtail or cease its activities and their can be no assurances that the Company would be able to continue in business.

At March 31, 2010 the Company had 110,548,457 common shares outstanding. Subsequent to March 31, 2010, the Company issued i) 13,800,000 common shares in connection with the April 10 Private Placement, ii) 947,688 common shares in connection with the settlement of an account payable to an arms length party; and 1,500,000 common shares on the exercise or warrants, and accordingly at the date of this news release the Company has 126,796,145 common shares outstanding.

Additional analysis of the Company's financial results for the First Quarter 2010 is included in our management's discussion and analysis of financial condition and results of operations (MDA) for the quarter ended March 31, 2010, which will be available on the Company's website and on

Nominated Advisor - Acquisition and Change of Name

Ondine also announces the Company's Nominated Adviser and Broker has undertaken a change of name from Canaccord Adams Limited to Canaccord Genuity Limited following the acquisition by its parent company, Canaccord Financial Inc., of Genuity Capital Markets, the leading independent advisory and restructuring firm in Canada.

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. For additional information, please visit the Company's website at:

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. Ondine Biopharma Corporation Incorporated under the laws of British Columbia CONSOLIDATED BALANCE SHEETS As at (Unaudited - expressed in Canadian dollars) --------------------------------------------------------------------------- --------------------------------------------------------------------------- March 31, 2010 December 31, 2009 $ $ --------------------------------------------------------------------------- ASSETS Current Cash and cash equivalents 1,233,849 1,055,773 Accounts receivable 9,436 152,929 Inventories 204,392 205,512 Prepaid expenses and deposits 316,089 143,796 --------------------------------------------------------------------------- Total current assets 1,763,766 1,558,010 Capital assets 419,991 451,094 Intangible assets 571,550 610,012 --------------------------------------------------------------------------- 2,755,307 2,619,116 --------------------------------------------------------------------------- --------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable and accrued liabilities 1,300,423 1,102,681 Deposit payable 190,000 - Income taxes payable 1,963 1,482 Future income taxes payable 27,477 32,576 Current portion of deferred tenant inducement 4,899 46,437 Deferred revenue 54,055 95,391 --------------------------------------------------------------------------- Total current liabilities 1,578,817 1,278,567 Deferred tenant inducement, net of current portion 121,240 62,711 --------------------------------------------------------------------------- Total liabilities 1,700,057 1,341,278 --------------------------------------------------------------------------- Shareholders' equity Share capital 54,767,640 54,767,640 Equity subscriptions received 751,800 - Contributed surplus 5,355,556 5,191,921 Deficit (59,819,746) (58,681,723) --------------------------------------------------------------------------- Total shareholders' equity 1,055,250 1,277,838 --------------------------------------------------------------------------- 2,755,307 2,619,116 --------------------------------------------------------------------------- --------------------------------------------------------------------------- Ondine Biopharma Corporation CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS For the three months ended (Unaudited - expressed in Canadian dollars) --------------------------------------------------------------------------- --------------------------------------------------------------------------- March 31, 2010 March 31, 2009 $ $ --------------------------------------------------------------------------- REVENUE Product sales 116,164 194,183 Cost of sales 39,039 72,327 --------------------------------------------------------------------------- Gross margin 77,125 121,856 Consulting revenue 200,978 - Royalty revenue 6,586 - --------------------------------------------------------------------------- 284,689 121,856 --------------------------------------------------------------------------- EXPENSES Research and development 872,114 790,385 General and administration 521,307 582,406 Marketing and sales 4,727 145,423 Depreciation and amortization 72,628 61,510 --------------------------------------------------------------------------- (1,470,776) (1,579,724) --------------------------------------------------------------------------- Other Interest and miscellaneous income 8,000 309 Foreign exchange gain 41,856 11,336 --------------------------------------------------------------------------- 49,856 11,645 --------------------------------------------------------------------------- Loss before income taxes (1,136,231) (1,446,223) Current income tax expense (7,161) - Future income tax recovery 5,369 - --------------------------------------------------------------------------- Loss and comprehensive loss for the period (1,138,023) (1,446,223) --------------------------------------------------------------------------- --------------------------------------------------------------------------- Basic and diluted loss per common share (0.01) (0.02) --------------------------------------------------------------------------- --------------------------------------------------------------------------- Weighted average number of common shares outstanding 110,548,457 65,500,140 --------------------------------------------------------------------------- --------------------------------------------------------------------------- Ondine Biopharma Corporation CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited - expressed in Canadian dollars) --------------------------------------------------------------------------- --------------------------------------------------------------------------- Equity Sub- scrip- Total Number tions Contri- Share- of Share Rec- buted holders' Common Capital eived Surplus Deficit Equity Shares $ $ $ $ $ --------------------------------------------------------------------------- Balance, December 31, 2008 61,359,176 51,336,368 - 4,087,139 (54,086,249) 1,337,258 Common shares issued for cash (net of issue costs): February 2009 Private Placement 8,620,168 497,671 - - - 497,671 Units issued for cash (net of issue costs) June 2009 Private Placement 8,395,275 503,054 - 347,293 - 850,347 December 2009 Private Placement 8,000,000 253,644 - 144,113 - 397,757 Common shares issued for acquisi- tion of an investment 14,851,250 1,714,669 - 27,870 - 1,742,539 Common shares issued (net of issue costs) for acquisi- tion of APT 8,856,458 438,927 - - - 438,927 Common shares issued for research and develop- ment agreement 466,130 23,307 - - - 23,307 Stock-based compen- sation - - - 585,506 - 585,506 Loss and compre- hensive loss for the year - - - - (4,595,474) (4,595,474) --------------------------------------------------------------------------- Balance, December 31, 2009 110,548,457 54,767,640 - 5,191,921 (58,681,723) 1,277,838 Equity subscrip- tions received - - 751,800 - - 751,800 Stock-based compen- sation - - - 163,635 - 163,635 Loss and compre- hensive loss for the period - - - - (1,138,023) (1,138,023) --------------------------------------------------------------------------- Balance, March 31, 2010 110,548,457 54,767,640 751,800 5,355,556 (59,819,746) 1,055,250 --------------------------------------------------------------------------- --------------------------------------------------------------------------- Ondine Biopharma Corporation CONSOLIDATED STATEMENTS OF CASH FLOWS For the three months ended (Unaudited - expressed in Canadian dollars) --------------------------------------------------------------------------- --------------------------------------------------------------------------- March 31, 2010 March 31, 2009 $ $ --------------------------------------------------------------------------- OPERATING ACTIVITIES Loss and comprehensive loss for the period (1,138,023) (1,446,223) Add items not affecting cash: Depreciation and amortization 72,628 61,510 Stock-based compensation 163,635 120,532 Deferred tenant inducement 16,991 (10,590) Changes in non-cash working capital items relating to operations: Accounts receivable 143,493 178,789 Inventories 1,120 (62,639) Prepaid expenses and deposits (172,293) 28,717 Accounts payable and accrued liabilities 197,742 45,927 Deposit payable 190,000 - Future income taxes (5,099) - Income taxes payable 481 (14,760) Deferred revenue (41,336) - --------------------------------------------------------------------------- Cash used in operating activities (570,661) (1,098,737) --------------------------------------------------------------------------- FINANCING ACTIVITIES Equity subscriptions received 751,800 - Issuance of common shares, net of issuance costs - 505,369 --------------------------------------------------------------------------- Cash provided by financing activities 751,800 505,369 --------------------------------------------------------------------------- INVESTING ACTIVITIES Purchase of capital assets (3,063) - --------------------------------------------------------------------------- Cash used in investing activities (3,063) - --------------------------------------------------------------------------- Net increase/(decrease) in cash and cash equivalents 178,076 (593,368) Cash and cash equivalents, beginning of period 1,055,773 1,033,248 --------------------------------------------------------------------------- Cash and cash equivalents, end of period 1,233,849 439,880 --------------------------------------------------------------------------- --------------------------------------------------------------------------- The TSX Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Ondine Biopharma Corporation
Carolyn Cross
Chairman and CEO

Canaccord Genuity Limited
Ryan Gaffney
Nominated Adviser
+4420 7050 6500

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