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SemBioSys Genetics Inc. (SBS.TO) Announces Second Quarter Results


8/13/2010 10:58:11 AM

Calgary, Aug. 13, 2010 - SemBioSys Genetics Inc. (TSX:SBS), SemBioSys Genetics, Inc. a development stage biotechnology Company that utilizes its patented plant seed oilbody expression technology platforms to develop biosimilar drug candidates and high value proteins, today announced its operational and financial results for the second quarter, ended June 30, 2010.

"We made great progress during the second quarter, especially with respect to our partnering discussions in China and the rest of the world, with highly qualified candidates for both our SBS Insulin and Apo AI(Milano) programs. We are in the diligence phase with a number of parties and are working towards closing our first strategic pharmaceutical development deal in an expedient manner," stated James Szarko, President and CEO of SemBioSys. "Subsequent to the end of the quarter, in preparation for managing several strategic global initiatives, we hired a new President of U.S. and International Operations and announced the appointments of three new Vice Presidents. These announcements included a new head of business development to assist in advancing our partnering activities on insulin and Apo AIMilano. We continue to be resourceful and use innovative methods to extend our cash runway in order to facilitate a successful partnership."

Operational Highlights

- Received positive final results from an in vivo animal study of plant-derived Apo AI(Milano), conducted by an independent third party, demonstrating a statistically significant increase in reverse cholesterol transport in treated animals versus control.

- Achieved inventory threshold of Apo AI(Milano) expressing seed to meet planned Active Pharmaceutical Ingredient ("API") requirements for the completion of preclinical and toxicology studies to support the filing of an investigational new drug application (IND) to the U.S. Food and Drug Administration (FDA).

- Planted approximately 40 acres of Apo AI(Milano) expressing seed in North America.

- Completed the first outdoor planting of our second generation, humanized insulin expressing seed line.

- Advanced partnering discussions for our insulin and Apo AI(Milano) programs.

- Appointed Rick Pierce as President of U.S. and International Operations and Karen Boodram as Vice President of Business Development, to lead the Company's partnering process, and promoted Dr. Joe Boothe to Vice President of Research and Development and Dr. Harm Deckers to Vice President of Operations and Legal Affairs.

Financials

SemBioSys has historically operated in two reportable segments: (i) Biopharmaceuticals and Bioproducts and (ii) Specialty Ingredients. Effective July 29, 2009, the Company divested its majority interest in Botaneco Specialty Ingredients Inc. and Botaneco Inc. (collectively referred to as "Botaneco"), and, therefore, it no longer has control nor significant influence over these entities. As a result, the Specialty Ingredients segment is no longer being consolidated and its operating results are included in discontinued operations. On November 20, 2009 the Company disposed of our remaining investment in Botaneco.

Net loss for the three months ended June 30, 2010 compared to the same period last year:

- $2,891,999 or $0.06 per share from continuing operations compared to $2,615,412 or $0.09 per share; - $nil from discontinued operations compared to $1,270,700 or $0.04 per share; and - $2,891,999 or $0.06 per share in total net loss compared to $3,886,112 or $0.13 per share.

Net loss for the three months ended June 30, 2010 increased over the same period last year, due to a one time non-cash expense of $625,000 for the renegotiation of an existing license agreement.

Net loss for the six months ended June 30, 2010 compared to the same period last year:

- $4,955,750 or $0.10 per share from continuing operations compared to $5,073,087 or $0.18 per share; - $nil from discontinued operations compared to $2,641,478 or $0.09 per share; and - $4,955,750 or $0.10 per share in total net loss compared to $7,714,565 or $0.27 per share.

Net loss decreased in 2010 as a result of completing the insulin clinical trials in the first quarter of 2009, combined with the savings realized from the cost reduction program implemented in the third quarter of 2009.

Revenue for the three months ended June 30, 2010 compared to the same period last year:

- $111,039 in revenue from continuing operations compared to $290,199; - $nil in revenue from discontinued operations compared to $199,331; and - $111,039 in total revenue compared to $489,530.

Revenue for the six months ended June 30, 2010 compared to the same period last year:

- $467,504 in revenue from continuing operations compared to $1,451,694; - $nil in revenue from discontinued operations compared to $337,300; and - $467,504 in total revenue compared to $1,788,994.

The decrease in revenue in 2010 for continuing operations is due mainly to the recognition of licensing option fees in 2009 from an option agreement entered into with MannKind related to the Company's Biosimilar Insulin program; offset by licensing fees recorded 2010 related to the Company's GLA program.

Expenditures (net of cost recoveries in each case) for the three months ended June 30, 2010 compared to the same period last year:

- $2,931,651 in expenditures from continuing operations compared to $2,905,538; - $nil in expenditures from discontinued operations compared to $1,267,980; and - $2,931,651 in total expenses net of cost recoveries compared to $4,173,518.

Expenditures (net of cost recoveries in each case) for the six months ended June 30, 2010 compared to the same period last year:

- $5,247,543 in expenditures from continuing operations compared to $6,494,788; - $nil in expenditures from discontinued operations compared to $2,610,677; and - $5,247,543 in total expenses net of cost recoveries compared to $9,105,465.

The overall decrease in expenditures is primarily due to the cost reductions implemented in the third quarter of 2009, in addition to decreased post-clinical costs as the majority of the post-clinical work for the insulin clinical trial was completed in early 2009.

At June 30, 2010, the Company had cash and cash equivalents of $1,635,926 as compared to $3,687,548 at December 31, 2009. The decrease in cash during the period resulted primarily from our net cash burn offset by the proceeds received relating to the private placement completed in March 2010. Total short-term debt and convertible debentures were $2,326,047 at June 30, 2010 compared to $1,534,535 at December 31, 2009. The increase in debt relates mainly to the $625,000 of convertible debentures issued in June to UTI Limited Partnerships as part of the consideration paid to renegotiate certain terms of our existing technology license agreement.

At June 30, 2010, the Company had a net negative working capital balance of $267,648 as compared to December 31, 2009, when it had a positive net working capital of $1,595,217. The decrease in working capital is primarily due to the increase in the short-term portion of long-term debt resulting from the accrued royalties on the $1,350,000 of funding SemBioSys received from AVAC in 2009 that is secured by certain SemBioSys assets. Also contributing to the decrease is the short-term portion of the convertible debentures issued in June 2010. SemBioSys has initiated discussions with AVAC regarding repayment of the outstanding investment and accrued royalties of $1,656,319. The discussions have contemplated pushing back the repayment of the investment and accrued royalties from November 2010 to the end of 2011. If the Company is successful in obtaining these terms the investment would be reclassified from short-term debt to long-term debt. Had the investment been reclassified on June 30, 2010 and December 31, 2009, the Company would have had positive working capital of $1,923,967 and $3,129,752 respectively.

As at August 13, 2010, the Company had 51,374,536 common shares outstanding, 12,655,341 warrants, 4,666,773 options, 1,423,840 broker warrants, 672,628 deferred share units and debentures which are convertible into 3,587,406 common shares.

About SemBioSys

Calgary, Alberta-based SemBioSys is a development stage biotechnology Company that utilizes its patented plant seed oilbody expression technology platforms to develop biosimilar drug candidates and high value proteins. SemBioSys' seed-based protein expression system can enable exceptionally low cost of production with unprecedented scalability and reliability. SemBioSys is focusing the platform selectivity to develop biosimilar product candidates with tremendous commercial value. The Company's current pharmaceutical development programs include insulin (SBS-1000, regulated as a biosimilar in Europe) and Apo AI(Milano), a new chemical entity and next-generation cardiovascular therapy with blockbuster revenue potential if it reaches market for treatment of atherosclerosis. SemBioSys' Apo AI(Milano) is a des-1,2- variant of Apo AI(Milano) as previously described in scientific literature. SemBioSys is listed on the Toronto Stock Exchange under the ticker SBS. More information is available at www.sembiosys.com.

This press release contains certain forward-looking statements, including, without limitation, statements containing the words "believe", "may", "plan", "will", "estimate", "continue", "anticipate", "intend", "expect" and other similar expressions which constitute "forward-looking information" within the meaning of applicable securities laws. Forward-looking statements reflect the Company's current expectation and assumptions, and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. These forward-looking statements involve risks and uncertainties including, but not limited to, changing market conditions and market size, the acceptance of an IND by the FDA in respect of clinical studies, the submission of a CTA to the appropriate European authorities, the successful initiation and timely and successful completion of clinical studies, the fact that Apo AI(Milano) is currently a development stage drug, the establishment of corporate alliances and partnerships, the impact of competitive products and pricing, new product development, uncertainties related to the regulatory approval process and other risks detailed from time-to-time in the Company's ongoing filings with the Canadian securities regulatory authorities which filings can be found at www.sedar.com. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements either as a result of new information, future events or otherwise, except as required by applicable Canadian securities laws.

To view SemBioSys complete press release including financial statements, please visit http://newswire.ca/en/releases/archive/August2010/13/c2407.html

For further information: SemBioSys Genetics Inc., Rick Pierce, President, U.S. and International Operations, Phone: (617) 447-8299, E-mail: piercer@sembiosys.com; The Equicom Group Inc., Ross Marshall, Vice President, Phone: (416) 815-0700 ext. 238, E-mail: rmarshall@equicomgroup.com



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