BURNABY, BC, March 19 /PRNewswire-FirstCall/ - Chromos Molecular Systems Inc. ("Chromos") announced today corporate developments related to its lead product candidate, CHR-1103, its convertible bridge loan and its Board of Directors.
Proposed CHR-1103 Collaboration
Chromos announced a non-binding term sheet with a U.S.-based biotechnology company under which it will enter into a collaboration agreement to co-develop its lead product, CHR-1103. Under the proposed collaboration, the U.S. biotechnology company will pay to Chromos US$3,000,000 upon execution of definitive agreements as well as additional future milestone payments. The partner company will assume the funding for a significant majority of the development expenses for the CHR-1103 program. Based on this expense funding ratio, the parties will share proportionately revenues related to the commercialization of CHR-1103, including all clinical indications. No other financial terms were disclosed. The transaction is subject to completion of final due diligence and execution of definitive agreements, which is expected to take place in April 2007.
"The formation of this collaboration will provide Chromos with a co-development partner for CHR-1103 that is led by a seasoned leadership team with the financial resources to assist driving this product through clinical development," said Alistair Duncan, President and CEO of Chromos. "This collaboration will also allow us to mitigate risk in the development of our first therapeutic product candidate and to maintain our focus on continuing to grow our cell line engineering business utilizing our proprietary ACE System."
CHR-1103 is a humanized monoclonal antibody directed against VLA-2, an integrin involved in maintenance of inflammation. In preclinical studies, it has been demonstrated that anti-VLA2 therapy reduces clinical signs of inflammation in animal models of multiple sclerosis (MS), inflammatory bowel disease and arthritis. The initial focus CHR-1103 is the acute treatment of relapse in MS. It is anticipated that an Investigational New Drug (IND) application for CHR-1103 will be filed at the beginning of 2008.
Amendments to the Terms of the Convertible Bridge Loan
Chromos has increased the convertible bridge loan financing arrangement that was previously announced on October 20, 2006 by $150,000 to $2,150,000. The additional proceeds of the loan will be used to fund operations of Chromos as it seeks to complete the proposed CHR-1103 collaboration and to raise additional financing.
In addition, for the promissory notes issued under the bridge loan, effective anytime after March 29, 2007 the note holders may demand repayment of the notes together with any accrued interest on one days' notice. This is a reduction in the notice period from the previous 10 days notice. In addition, if Chromos does not provide, on or before March 21, 2007, evidence to the satisfaction of the note holders that an equity financing is being arranged for a specified minimum size with a portion of the proceeds being used to repay the notes, then the notes will become immediately due and payable. The Company is actively pursuing an equity financing that is intended to provide the required evidence. The note holders, who are also significant common shareholders of the Chromos, have assured the Company of their endorsement for both a successful equity financing outcome and the proposed CHR-1103 collaboration. The conversion feature for the bridge loan has also been amended so that it is at the option of the note holders.
Chromos' current funds on hand, anticipated revenues from existing contractual agreements and the $150,000 of additional funds available from the bridge loan financing are expected to be sufficient to fund its operations until approximately the end of April of 2007. This assumes that in the interim the note holders of the bridge loan have not otherwise demanded repayment, in accordance with their rights as noted above, in which case Chromos would have insufficient funds to satisfy repayment requirements. There can be no assurance that Chromos will be able to complete the proposed CHR-1103 collaboration transaction or that additional financing will be available at all or on acceptable terms to permit Chromos' current operations to continue. If Chromos is unsuccessful in raising additional financing it may be required to scale back or terminate certain or all of its operations.
Chromos also announced that Mr. David Barr has resigned from its Board of Directors. Mr. Barr is CFO and Investment Manager of PenderFund Capital Management Ltd. which manages funds that are holders of a portion of the convertible, secured promissory notes. Mr. Barr indicated that he tendered his resignation as a director to avoid any potential conflict of interest created by PenderFund's ownership position of the convertible bridge loan referred to above.
This resignation brings the number of directors on the Board to four.
Chromos is a biopharmaceutical company with two drug development programs focused on inflammatory diseases and thrombotic disorders. The Company's lead product, CHR-1103, is a humanized monoclonal antibody being developed as an acute treatment for relapses associated with multiple sclerosis (MS). Chromos generates revenue from its proprietary ACE System technology to engineer production quality cell lines to manufacture biopharmaceutical products including monoclonal antibodies. For more information, please visit our website at www.chromos.com.
Risks and Uncertainties
Certain of the statements contained in this press release are forward-looking statements which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Chromos (the "Company"), or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.
To the extent possible, management implements strategies to reduce or mitigate the risks and uncertainties associated with the Company's operations. Operating risks include (i) the continued availability of capital to finance the Company's activities; (ii) the Company's limited cash position, (iii) the ability to successfully obtain proof of the effectiveness of the Company's technology (iv) the ability to complete and maintain corporate alliances, including the proposed CHR-1103 collaboration, relating to the development and commercialization of the Company's technology; (v) the ability to obtain and enforce patent and other intellectual property protection for the Company's technology; (vi) market acceptance of the Company's technology; (vii) the competitive environment and impact of technological change; (viii) the Company's ability to attract and retain employees to carry out its business plans; (ix) the timely development and commercialization of any technology or products that are contingent on the completion and maintenance of corporate alliances with third parties; (x) the demand for repayment of the outstanding notes by the note holders and (xi) regulatory approval of the conversion of the outstanding notes. Further details on Chromos' operating risks can be found in the Company's Quarterly and Annual Reports to Shareholders.
CONTACT: Jeff Charpentier, CA, Vice President Finance and CFO, (604) 415-7132, email: firstname.lastname@example.org
Chromos Molecular Systems Inc.