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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."

FINANCIAL RESULTS

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.

RECENT DEVELOPMENTS

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 www.sedar.com.

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: 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.


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.

Contacts:
Ondine Biopharma Corporation
Carolyn Cross
Chairman and CEO
ccross@ondinebiopharma.com
www.ondinebiopharma.com

Canaccord Genuity Limited
Ryan Gaffney
Nominated Adviser
+4420 7050 6500


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