Helix Biopharma Announces Fiscal 2012 Results
Published: Oct 26, 2012
AURORA, ON--(Marketwire - October 25, 2012) - Helix BioPharma Corp. (TSX: HBP) (FRANKFURT: HBP) ("HBP"), a biopharmaceutical company developing drug candidates for the prevention and treatment of cancer, today announced financial results for the year ended July 31, 2012.
The following are selected highlights during the 2012 fiscal year and subsequent to year-end.
The Company is moving forward with new leadership via a revised Board of Directors and the appointment of a new Chief Executive Officer. The Board of Directors of the Company was reconstituted on March 16, 2012 by the resignation and replacement of four of the six members with four of the five persons nominated by a group of concerned shareholders who led a dissident proxy solicitation at the Company's annual meeting of shareholders held on January 30, 2012. The reconstituted Board of Directors of the Company (the "New Board") now consists of William White, Robert Verhagen, Marek Orlowski, Mario Gobbo, Jack Kay, and W. Thomas Hodgson. The New Board is committed to instigating change at the Company and has:
- Received an order of the court approving the settlement of all proceedings relating to the annual meeting of shareholders held on January 30, 2012, confirming the composition of the New Board and that Helix's next annual general meeting of shareholders will not be held prior to January 15, 2013;
- Appointed William White, as the Company's Chairman of the Board;
- Appointed Robert Verhagen, as the Chief Executive Officer;
- Appointed Professor Slawomir Majewski as a directors on the Company's board effective October 19, 2012 -- previously Professor Slawomir Majewski has been serving as an observer at the request of the New Board in order to provide input and guidance, given the need for expert clinical and scientific knowhow;
- Approved the initiation of Company's Polish Phase I/II clinical trial of its lung cancer drug candidate L-DOS47 according to the approved protocol beginning with the monotherapy arm;
- Completed the voluntarily delisting of the Company's common stock from the NYSE MKT and voluntarily deregistration of the Company's common shares under the Securities Exchange Act of 1934, as amended, which resulted in the Company no longer being required to file reports with the U.S. Securities and Exchange Commission;
- Extended the expiry date of warrants issued in on September 8, 2009 for an additional six months, from September 7, 2012 to March 7, 2013;
- Reduced the number of staff by a total of eight; six in its Saskatoon laboratory and two in Aurora, prior to the end of the 2012 fiscal year and, subsequently terminated an additional six employees from the Saskatoon laboratory, in order to close the Saskatoon laboratory by the end of November 2012;
- Replaced Helix's legal counsel with Osler, Hoskin & Harcourt LLP who had acted as counsel to the concerned shareholders in the dissident solicitation.
For fiscal 2012, the Company recorded a loss of $17,423,000 and $11,355,000, respectively for the fiscal periods ended July 31, 2012 and 2011 for a loss per common share of $0.26 and $0.17, respectively. The higher loss incurred in the fiscal period ended July 31, 2012 was due to substantially higher expenses incurred in the second quarter of this fiscal year in connection with the Annual General Meeting, Special Committee and Settlement Agreement.
Revenues totalled $4,260,000 and $4,532,000 respectively for the fiscal periods ended July 31, 2012 and 2011 and represent a decrease of $272,000 (6.0%) when compared to the fiscal 2011 year. Product revenues totalled $4,260,000 and $4,406,000 respectively for the fiscal periods ended July 31, 2012 and 2011 and represent a decrease of $146,000 (3.3%) when compared to fiscal 2011. In fiscal 2012, higher combined product revenue from Orthovisc® and Monovisc® were offset by lower Klean-Prep™, Imunovir® and Normacol® revenues. The decrease in product revenue is mainly attributable to lower Klean-Prep™ due to increased competition and to a lesser extent, the discontinuance of Normacol®.
License fees and royalties totalled $nil and $126,000 respectively for the fiscal periods ended July 31, 2012 and 2011 and represent a decrease of $126,000 when compared to the fiscal 2011 year. License fees and royalty revenues are comprised solely of royalties related to sales of Klean-Prep® outside of Canada. On December 1, 2010, the Company entered into an agreement to sell certain international Klean-Prep® rights, excluding the U.S. and Canada to Helsinn-Birex Pharmaceuticals Limited and as a result, the Company no longer earned royalty revenue from international sales of Klean-Prep™.
Cost of sales totalled $1,741,000 and $1,642,000 respectively for the fiscal periods ended July 31, 2012 and 2011. As a percentage of product revenues, cost of sales were 40.9% and 37.3% for the fiscal periods ended July 31, 2012 and 2011, respectively. The lower cost of sales as a percent of product revenue in fiscal 2011 was primarily due to goods sold through in the first and second quarter of fiscal 2011 with a cost base of zero.
Research and development costs for the fiscal periods ended July 31, 2012 and 2011 totalled $7,450,000 and $8,669,000 respectively.
DOS47 research and development costs for the fiscal periods ended July 31, 2012 and 2011 totalled $4,140,000 and $5,201,000. The L-DOS47 research and development expenditures reflect expenditures associated with the preparation for commencement of a Polish Phase I/II clinical study and a U.S. Phase I clinical study with L-DOS47. On May 14, 2012 the Company announced the commencement of clinical site initiations and patient recruitment activities of its Polish Phase I/II clinical study in Poland. The Company planned to commence the L-DOS47 U.S. Phase I study in the fiscal 2012 year, but given the Company's limited cash resources, a decision has been made to postpone the commencement of this study pending the results of its Polish Phase I/II study with L-DOS47.
Topical Interferon Alpha-2b research and development expenses for the fiscal periods ended July 31, 2012 and 2011 totalled $2,037,000 and $2,616,000, respectively. The Company's research and development expenditures associated with Topical Interferon Alpha-2 for the current fiscal year have been limited and mainly reflect overhead costs associated with supporting the program. In the fiscal fourth quarter of 2012, the Company initiated a downsizing of the staff in the Saskatoon laboratory and in addition postponed the completion of work necessary to resolve the MHRA approval conditions. The Company proceeded with additional staff downsizing at its Saskatoon laboratory in October 2012, including a decision to close the Saskatoon laboratory by the end of November 2012. Costs associated with the downsizing will be charged to the Company's first quarter of fiscal 2013.
Operating, general and administration expenses for the fiscal periods ended July 31, 2012 and 2011 totalled $4,580,000 and $5,473,000 respectively and represents a decrease of $893,000 (16.3%) when compared to the fiscal 2011 year. The lower expenses can be attributed to the lower payroll expense in fiscal 2012 as the Company was without a permanent CEO for three months as well as reduced bonus expense, expenses incurred in fiscal 2011 in relation to the Company's listing on the NYSE MKT stock exchange, a one-time positive fiscal 2012 income adjustment for a reduction in vacation pay liability, lower stock-based compensation expense and lower investor relations expense.
Sales and marketing expenses for the fiscal periods ended July 31, 2012 and 2011 totalled $1,088,000 and $1,232,000 and represents a decrease of $144,000 (11.7%) when compared to fiscal 2011. The lower expenses can be attributed to lower promotion and advertising expenses, reduced regulatory and compliance costs, and lower sales commissions as a result of lower sales.
Special committee and settlement agreement expenses for the fiscal periods ended July 31, 2012 and 2011 totalled $6,536,000 and $nil, respectively. The expense amount included in the Company's consolidated financial statements for the fiscal periods ended July 31, 2012 and 2011 include, pursuant to the Settlement Agreement; a one-time payout associated with the previous CEO's resignation; actual expenditures incurred by the Company and the respondents relating to the settled matters and the Settlement Agreement.
Finance income and expense combined for the fiscal periods ended July 31, 2012 and 2011 totalled $108,000 and $188,000 respectively for the fiscal periods ended July 31, 2012 and 2011. The decrease in interest income in fiscal 2012 reflects lower cash balances.
Foreign exchange for the fiscal periods ended July 31, 2012 and 2011 reflects losses of $76,000 and $2,000 respectively for the fiscal periods ended July 31, 2012 and 2011. Foreign exchange gains and losses result mainly from the sales and purchases that are denominated in currencies other than functional currencies. In addition, they can arise from purchase transactions, as well as recognized monetary financial assets and liabilities denominated in foreign currencies.
Income tax expense for the fiscal periods ended July 31, 2012 and 2011 totalled $nil and $334,000 respectively for the fiscal periods ended July 31, 2012 and 2011. Fiscal 2011 income taxes were attributable to the Company's operations in Ireland and represent the tax on the gain on sale of a license.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations from public and private sales of equity, proceeds received upon the exercise of warrants and stock options, and, to a lesser extent, from interest income from funds available for investment, government grants, investment tax credits, and revenues from distribution, licensing and contract services. Since the Company does not have net earnings from its operations, the Company's long-term liquidity depends on its ability to access the capital markets, which depends substantially on the success of the Company's ongoing research and development programs, as well as economic conditions relating to the state of the capital markets generally.
At July 31, 2012 and 2011, the Company had cash and cash equivalents totalling $4,862,000 and $19,044,000, respectively. The $14,182,000 decrease in cash and cash equivalents in fiscal 2012 reflects a use of cash in operating activities of $14,112,000, which includes a net loss for the year of $17,423,000 with significant adjustments in operating activities related to stock-based compensation of $1,422,000; depreciation of property, plant and equipment of $699,000; loss on disposal and impairment on property, plant and equipment of $320,000; stock-based consideration of $69,000; other receivables of $216,000 and $534,000 in changes to non-cash working capital.
The Company's cash resources have been severely impacted by the costs incurred in connection with the Annual General Meeting, Special Committee and Settlement Agreement. As a result, the Company's cash position of $4,862,000 as at July 31, 2012 is insufficient to meet anticipated cash needs for working capital and capital expenditures through the next twelve months. Various cost-cutting and cost-deferral measures have been initiated and further measures are being considered in order to extend the Company's cash resources, permitting it more time to seek additional financing. By prioritizing the monotherapy arm of the Company's Polish Phase I/II clinical study for L-DOS47 and pushing out the non-monotherapy arms, coupled with certain cost-cutting and cost-deferral measures which have already taken place, the Company believes its current cash resources may not be sufficient to continue operations beyond March 2013.
Securing additional financing is of utmost priority to the Company. However, there is no assurance that additional financing can be obtained in a timely manner or at all.
The Company's consolidated fiscal 2012 and 2011 financial statements are summarized below.
Consolidated Statements of Net Loss and Comprehenisve Loss (thousand $, except for per share data) 2012 2011 ---------- ---------- Revenue: Product revenue 4,260 4,406 License fees & royalties - 126 ---------- ---------- 4,260 4,532 Expenses: Cost of sales 1,741 1,642 Research and development 7,450 8,669 Operating, general and admin 4,580 5,473 Sales and marketing 1,088 1,232 Special committee and settlement agreement 6,536 - Loss on disposal and impairment on property, plant and equipment 320 59 ---------- ---------- 21,715 17,075 Loss before other income finance items and income tax expense (17,455) (12,543) Other income Gain on sale of license: - 1,336 Finance items Finance income 125 200 Finance expense (17) (12) Foreign exchange loss (76) (2) ---------- ---------- 32 186 Income tax expense - (334) ---------- ---------- Net loss and total comprehensive loss (17,423) (11,355) ========== ========== Loss per share: Basic (0.26) (0.17) Diluted (0.26) (0.17) Consolidated Statements of Cash Flows (thousand $) 2012 2011 ---------- ---------- Cash provided by (used in): Net Loss for the year (17,423) (11,355) Items not involving cash: Depreciation of property, plant and equipment 699 404 Deferred lease credit (25) (24) Stock-based compensation 1,422 2,089 Stock-based consideration 69 187 Foreign exchange loss 76 2 Loss on disposal and impairment on property, plant and equipment 320 59 Realized gain on sale of license - (1,336) Other receivables 216 (201) ---------- ---------- (14,646) (10,175) Changes in non-cash working capital 534 (164) ---------- ---------- Operating activities (14,112) (10,339) Financing activities 43 15,431 Investing activities (37) 829 Effect of exchange rate changes on cash and cash equivalents (76) (2) ---------- ---------- Cash and cash equivalents: Increase/(decrease) in the year (14,182) 5,919 Beginning of the year 19,044 13,125 ---------- ---------- End of the year 4,862 19,044 ========== ========== Consolidated Statement of Financial Position (thousand $) 2012 2011 ---------- ---------- Non current assets 1,493 2,691 Current assets: Prepaids 107 202 Inventory 421 528 Accounts receivable 733 1,906 Cash and cash equivalents 4,862 19,044 ---------- ---------- 6,123 21,680 ---------- ---------- Total assets 7,616 24,371 ========== ========== Shareholders' equity 6,224 22,113 Non current liabilities 23 48 Current liabilities: Deferred lease credit 25 25 Income tax payable - 296 Accrued liabilities 694 804 Accounts payable 650 1,085 ---------- ---------- 1,369 2,210 Total liabilities 1,392 2,258 ---------- ---------- Total liabilities and shareholders'equity 7,616 24,371 ========== ==========
The Company's complete 2012 Consolidated Financial Statements, Management's Discussion and Analysis and Annual Information Form are being filed today with Canadian securities regulatory authorities and will be available at www.sedar.com, as well as on the Company's website at www.helixbiopharma.com. Shareholders have the ability to receive a hard copy of the Company's complete audited financial statements free of charge upon request.
About Helix BioPharma Corp.
Helix BioPharma Corp. is a biopharmaceutical company specializing in the field of cancer therapy. The company is actively developing innovative products for the prevention and treatment of cancer based on its proprietary technologies. Helix's product development initiatives include its novel L-DOS47 new drug candidate and its Topical Interferon Alpha-2b. Helix is currently listed on the TSX and FSE under the symbol "HBP".
Forward-Looking Statements and Risks and Uncertainties
This news release contains forward-looking statements and information (collectively, "forward-looking statements") within the meaning of applicable Canadian securities laws. Forward-looking statements are statements and information that are not historical facts but instead include financial projections and estimates; statements regarding plans, goals, objectives, intentions and expectations with respect to the Company's future business, operations, research and development, including the focus of the Company on its two drug candidates, L-DOS47 and Topical Interferon Alpha-2b (cervical lesions indication); and other information in future periods.
Forward-looking statements include, without limitation, statements concerning (i) the Company's ability to operate on a going concern being dependent mainly on obtaining additional financing; (ii) the Company's growth and future prospects being dependent on the success of one or both of L-DOS47 and Topical Interferon Alpha-2b; (iii) the Company's priority continuing to be L-DOS47; (iv) the Company's development programs for Topical Interferon Alpha-2b, DOS47 and L-DOS47, including but not limited to, extension of the drug candidates to other indications and the identification and development of further tumour-targeting antibodies for DOS47; (v) the Company's Polish Phase I/II clinical trials for L-DOS47; (vi) its planned future U.S. Phase I clinical trial for L-DOS47; (vii) indication and therapeutic and market opportunities for the two drug candidates; (viii) the nature, design and timing of future clinical trials, and commercialization plans; (ix) future expenditures, insufficiency of the Company's current cash resources and the need for financing and cost-cutting and/or cost-deferral measures; and (x) future financing requirements, the seeking of additional funding and anticipated future revenue and operating losses. Forward-looking statements can further be identified by the use of forward-looking terminology such as "expects", "plans", "designed to", "potential", "is developing", "believe", "intended", "continues", "opportunities", "anticipated", "2012", "2013", "next", ongoing", "pursue", "to seek", "proceed", "objective", "estimate", "future", "wish", or the negative thereof or any other variations thereon or comparable terminology referring to future events or results, or that events or conditions "will", "may", "could", "would", or "should" occur or be achieved, or comparable terminology referring to future events or results.
Forward-looking statements are statements about the future and are inherently uncertain, and are necessarily based upon a number of estimates and assumptions that are also uncertain. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, such statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Forward-looking statements, including financial outlooks, are intended to provide information about management's current plans and expectations regarding future operations, including without limitation, future financing requirements, and may not be appropriate for other purposes. Certain material factors, estimates or assumptions have been applied in making forward-looking statements in this news release, including, but not limited to, the safety and efficacy of L-DOS47 and Topical Interferon Alpha-2b (low-grade cervical lesions); that sufficient financing will be obtained in a timely manner to allow the Company to continue operations; that sufficient cost-deferral and/or cost-cutting measures will be taken; the timely provision of services and supplies, including Interferon alpha-2b raw materials, or other performance of contracts by third parties; future revenue and costs; the absence of any material changes in business strategy or plans, other than the implementation of cost-deferral and/or cost-cutting measures; and the timely receipt of required regulatory approvals, and strategic partner support.
The Company's actual results could differ materially from those anticipated in the forward-looking statements contained in this news release as a result of numerous known and unknown risks and uncertainties, including without limitation, the risk that the Company's assumptions may prove to be incorrect; the risk that additional financing may not be obtainable in a timely manner, or at all, and that the Company may be unsuccessful in its cost-cutting and cost-deferral initiatives; clinical trials may not commence or complete within anticipated timelines or may fail; third party suppliers of necessary services or of drug product and other materials may fail to perform or be unwilling or unable to supply the Company, which could cause delay or cancellation of the Company's research and development or distribution activities; necessary regulatory approvals may not be granted or may be withdrawn; the Company may not be able to secure necessary strategic partner support; general economic conditions, intellectual property and insurance risks; changes in business strategy or plans; and other risks and uncertainties referred to elsewhere in this news release, any of which could cause actual results to vary materially from current results or the Company's anticipated future results. Certain of these risks and uncertainties, and others affecting the Company, are more fully described in the Helix's Annual Report, in particular under the headings "Forward-looking Statements" and "Risk Factors", and other reports filed with the Canadian Securities Administrators from time to time at www.sedar.com. Forward-looking statements and information are based on the beliefs, assumptions, opinions and expectations of Helix's management on the date of this new release, and Helix does not assume any obligation to update any forward-looking statement or information should those beliefs, assumptions, opinions or expectations, or other circumstances change, except as required by law.
Helix BioPharma Corp.
Tel: 905 841-2300