Isotechnika Inc. Announces Highlights and Financials for 2003

EDMONTON, March 29 /PRNewswire-FirstCall/ -- Isotechnika Inc. announced today its financial results for the year ended December 31st, 2003.

The cash and short term investment position of the Company increased by $17.30 million to $81.50 million at December 31, 2003 from $64.20 million at December 31, 2002. This strengthening of the Company's cash position was attributed to two significant events that occurred in 2003:

- The Company received a milestone payment in the amount of $21.9 million from its Collaborative Partner, Roche for meeting the required endpoints of the Phase II psoriasis trial. This cash payment was comprised of $8.36 million which was recorded as revenue from Collaboration Partner and $13.54 million in equity investment. - The Company completed a private placement with US based institutional investors for net proceeds of $19.0 million.

During 2003, the Company also announced the following significant corporate and clinical events:

- ISA247, the Company's lead immunosuppressive drug candidate, successfully completed a Phase II psoriasis trial and a Phase IIa renal transplant trial, achieving all the primary and secondary endpoints for both trials. - The Company expanded its immunosuppressive drug pipeline with the discovery of two additional immunosuppressive drug candidates, TAFA-93 and TKB662 respectively. - The Company's intellectual property base was further strengthened with the issuance of two U.S. patents for ISA247. The United States became the fourth jurisdiction to issue a patent for ISA247 joining Australia, Canada and New Zealand. In 2003, the Company received seven new patents and filed eight new patent applications.

"Based on our strong cash position, our Company is well positioned to continue the development of ISA247 well into the future" stated Dr Robert Foster, Chairman and Chief Executive Officer, "It is important to maintain a healthy balance sheet, while pursuing timely development of our products. We will continue development of our drug pipeline, at a speed determined by the various scientific and regulatory requirements."

Financial results

For the three months ended December 31, 2003, the Company reported a consolidated net loss of $8.33 million compared to a consolidated net loss of $4.40 million for the three months ended December 31, 2002. The increase in the consolidated loss in the 4th quarter of 2003 resulted, in part, from a foreign exchange loss of $1.95 million compared to a gain of $141,000 in the 4th quarter of 2002. In addition, net research and development costs increased by $1.05 million to $3.75 million in the 4th quarter of 2003 as a result of charges from Roche for ISA247 shared development costs and costs associated with preclinical study contracts for TAFA-93, the Company's new mTor inhibitor.

For the year ended December 31, 2003 the Company reported a consolidated net loss of $18.99 million or $0.27 per common share, as compared to a consolidated net loss of $576,000 or $0.01 per common share for the year ended December 31, 2002. The increase in the consolidated loss for 2003 was primarily attributable to a decrease in revenue of $8.82 million due to less milestone revenues from our collaborative partner and foreign exchange losses incurred in 2003 of $5.77 million compared to a foreign exchange gain of $250,000 recorded in 2002. The Company incurred the foreign exchange losses in 2003 as a result of the significant appreciation of the Canadian dollar versus the US dollar during 2003

Revenue decreased by $8.82 million to $9.94 million for the year ended December 31, 2003 as compared to $18.76 million for 2002. Revenue from collaboration partner decreased to $8.36 million or 2003 compared to $14.10 million in 2002 resulting from a decrease in milestone payments from Roche. Additionally, in 2002 the Company received an option fee of $3.18 million from Roche which it recorded as Review and option fee revenue. There was no comparable revenue received in 2003 as no option agreements were entered into.

Contract analysis and product sales revenues increased to $1.58 million for 2003 compared to $1.48 million for 2002, an increase of $100,000 or 6%. The Company increased sales of its diagnostic products (Helikit breath kits and Isomax instruments) both in Canada and Southeast Asia.

Total research and development ("R&D") expended by the Company decreased to $11.67 million in 2003 from $21.28 million in 2002. The decrease was primarily due to the finalization of the Phase II psoriasis and Phase IIA renal transplant human clinical trials in early 2003 and the completion of various preclinical studies for ISA247 during 2002.

The Company, in 2003, recorded a recovery of R&D costs incurred of $4.16 million from Roche for their 70% share of ISA247 development costs incurred by Isotechnika and also recorded a charge of $4.32 million from Roche for Isotechnika's 30% share of the ISA247 development costs incurred by Roche. The majority of these costs related to the optimization of the manufacturing and formulation processes and for producing drug supply. These costs were netted and shown as development costs paid to collaboration partner in the amount of $165,000.

In 2002, the netting of these shared ISA247 development costs resulted in a recovery from Collaboration Partner of $10.94 million. In 2002, the Company incurred substantial drug supply, preclinical study and Phase II human clinical trial costs and received reimbursement from Roche for 70% of these shared ISA247 development costs.

Net research and development expenses increased slightly in 2003 to $11.83 million from $11.19 million in 2002. R&D costs were incurred for the Company's new drug candidates, TAFA-93 and TKB662, offset by reduced ISA247 development costs incurred in 2003.

Corporate, administration and marketing costs increased to $8.92 million in 2003 compared to $7.82 million and reflected increased costs incurred for director fees, insurance, investor relations, business development consulting services and corporate and administration facilities.

The Company recorded a foreign exchange translation loss of $5.77 million for the year ended December 31, 2003 compared to a gain of $250,000 for 2002. Of the $5.77 million foreign exchange loss recorded in 2003, $4.56 million was unrealized at December 31, 2003. The loss incurred in 2003 was primarily a result of unrealized foreign exchange losses on US dollar denominated holdings of cash and short-term investments.

About Isotechnika Inc.

Isotechnika Inc. is an international biopharmaceutical company headquartered in Edmonton, Alberta, Canada. Drawing upon its expertise in medicinal chemistry and immunology, the Company is focused on the discovery and development of novel immunosuppressive therapeutics that are safer than currently available treatments. Its entrepreneurial management and world-class team of scientists are building a pipeline of immunosuppressive drug candidates for use in the prevention of organ rejection in transplantation and in the treatment of autoimmune diseases. Isotechnika looks to become the leader in development of immunosuppressant therapies.

Isotechnika's lead drug, ISA247, is an immunosuppressant that has successfully completed a Phase II trial for psoriasis and Phase IIa trial for kidney transplantation. Isotechnika recently expanded its product pipeline by developing two additional novel immunosuppressive compounds, TAFA-93 and TKB662. TAFA-93 is a novel small molecule mTOR inhibitor, a class of drugs currently used in the prevention of organ rejection in transplantation and as a coated stent therapy in the treatment of coronary artery disease. Pre- clinical studies of TKB662 have demonstrated inhibition of T cell and B cell activation and proliferation through multiple mechanisms of action including the inhibition of lymphocyte phosphorylation activity. As both TAFA93 and TKB662 have distinct mechanisms of action from calcineurin inhibitors such as ISA247 they have the potential to be administered as complementary therapies in both prevention of organ rejection and treatment of autoimmune diseases. Isotechnika Inc. is an S&P/TSX Composite Index company publicly traded under the symbol ISA. More information on Isotechnika can be found at http://www.isotechnika.com/.

Forward-Looking Statements

This press release may contain forward-looking statements. Forward looking statements, including the Company's belief as to the potential of its products, the Company's expectations regarding the issuance of additional patents and the Company's ability to protect its intellectual property, involve known and unknown risks and uncertainties, which could cause the Company's actual results to differ materially from those in the forward looking statements. Such risks and uncertainties include, among others, the availability of funds and resources to pursue research and development projects, the ability to economically manufacture its products, the potential of its products, the success and timely completion of clinical studies and trials, the Company's ability to successfully commercialize its products, the ability of the Company to defend its patents from infringement by third parties, and the risk that the Company's patents may be subsequently shown to be invalid or infringe the patents of others. Investors should consult the Company's quarterly and annual filings with the Canadian commissions for additional information on risks and uncertainties relating to the forward- looking statements. Investors are cautioned against placing undue reliance on forward-looking statements.

<< Isotechnika Inc. Consolidated Balance Sheet (Canadian dollars, in thousands) December 31 December 31 2003 2002 $ $ (Audited) (Audited) Assets Current assets Cash and cash equivalents 35,822 31,252 Short-term investments 45,680 32,952 Accounts receivable 374 3,512 Inventories 728 813 Prepaid expenses and other 535 471 ------------------------------ 83,139 69,000 Property and equipment 11,156 8,993 Patent costs 2,229 1,791 ------------------------------ 96,524 79,784 ------------------------------ ------------------------------ Liabilities Current liabilities Accounts payable and accrued liabilities 6,619 4,503 Current portion of long-term debt and obligations under capital leases 242 206 Current portion of deferred lease inducements 91 - ------------------------------ 6,952 4,709 Long-term debt and obligations under capital leases 309 203 Deferred lease inducements 378 - ------------------------------ 7,639 4,912 ------------------------------ Shareholders' Equity Share capital 139,838 107,184 Contributed surplus 714 - Deficit (51,667) (32,312) ------------------------------ 88,885 74,872 ------------------------------ 96,524 79,784 ------------------------------ ------------------------------ Isotechnika Inc. Consolidated Statement of Operations (Canadian dollars, in thousands) Three Months Ended Year Ended December 31 December 31 (Unaudited) (Audited) 2003 2002 2003 2002 $ $ $ $ Revenue Revenue from Collaboration partner - - 8,355 14,097 Review and option fee - - - 3,180 Contract analysis and product sales 408 325 1,580 1,484 ------------------------------------------------ 408 325 9,935 18,761 ------------------------------------------------ Expenses Research and development 3,047 4,275 11,666 21,281 Net development costs charged by (recovered from) Collaboration partner 707 (1,568) 165 (10,094) ------------------------------------------------ 3,754 2,707 11,831 11,187 Corporate administration and marketing 2,237 1,827 8,918 7,818 Contract analysis and product sales 304 178 1,173 1,080 Amortization 623 469 1,800 1,072 Interest on long-term debt and obligations under capital leases 13 11 45 33 Stock-based compensation 39 - 714 - ------------------------------------------------ 6,970 5,192 24,481 21,190 ------------------------------------------------ Loss before the under-noted (6,562) (4,867) (14,546) (2,429) ------------------------------------------------ Other income (expenses) Investment income 369 483 1,545 1,688 Realized foreign exchange translation losses (837) - (1,215) - Unrealized foreign exchange translation losses (gain) (1,109) 141 (4,557) 250 Gain (loss) on sale of capital assets (23) (45) (56) 28 ------------------------------------------------ (1,600) 579 (4,283) 1,966 ------------------------------------------------ Net loss before capital taxes (8,162) (4,288) (18,829) (463) ------------------------------------------------ Capital Taxes 164 113 164 113 ------------------------------------------------ Net Loss for the year (8,326) (4,401) (18,993) (576) ------------------------------------------------ ------------------------------------------------ Basic and diluted loss per common share (0.11) (.07) (0.27) (0.01) ------------------------------------------------ ------------------------------------------------ Consolidated Statement of Deficit (Canadian dollars, in thousands) Three Months Ended Year Ended December 31 December 31 (Unaudited) (Audited) 2003 2002 2003 2002 $ $ $ $ Balance - Beginning of period (43,278) (27,766) (32,312) (31,591) Net income (loss) for the period (8,326) (4,401) (18,993) (576) Cost of common shares repurchased in excess of stated capital (63) (145) (362) (145) ------------------------------------------------ Balance - End of period (51,667) (32,312) (51,667) (32,312) ------------------------------------------------ ------------------------------------------------ Isotechnika Inc. Consolidated Statement of Cash Flows (Canadian dollars, in thousands) Three Months Ended Year Ended December 31 December 31 (Unaudited) (Audited) 2003 2002 2003 2002 $ $ $ $ Cash provided by (used in) Operating activities Net loss for the period (8,326) (4,401) (18,993) (576) Items not affecting cash Amortization 623 469 1,800 1,072 Unrealized foreign exchange translation loss (gain) 1,109 (141) 4,557 (250) Stock-based compensation 39 - 714 - Loss (gain) on sale of capital assets 23 45 56 (28) Amortization of deferred lease inducements (67) - (67) - ------------------------------------------------ (6,599) (4,028) (11,933) 218 Net change in other operating assets and liabilities 1,992 (1,654) 5,275 (1,806) ------------------------------------------------ (4,607) (5,682) (6,658) (1,588) ------------------------------------------------ Investing activities Purchase of short term investments (14,673) (24,389) (12,728) (28,713) Unrealized foreign exchange translation loss on short-term investments (621) - (2,552) - Purchase of property and equipment (668) (2,042) (2,931) (6,839) Proceeds on sale of property and equipment - 625 - 764 Patent costs (81) (18) (480) (701) ------------------------------------------------ (16,043) (25,824) (18,691) (35,489) ------------------------------------------------ Financing activities Issuance of share capital 25 379 33,123 19,601 Purchase of share capital (153) (323) (831) (323) Repayment of long-term debt and capital leases (97) (52) (368) (236) ------------------------------------------------ (225) 4 31,924 19,042 ------------------------------------------------ Effect of foreign exchange rate fluctuation on cash and cash equivalents (488) 141 (2,005) 250 ------------------------------------------------ Increase (decrease) in cash and cash equivalents (21,363) (31,361) 4,570 (17,785) Cash and cash equivalents - Beginning of period 57,185 62,613 31,252 49,037 ------------------------------------------------ Cash and cash equivalents - End of period 35,822 31,252 35,822 31,252 ------------------------------------------------ ------------------------------------------------ >>

Isotechnika Inc.

CONTACT: Mr Dennis Bourgeault CA, Chief Financial Officer, IsotechnikaInc., 780 487-1600, 780-484-4105(fax), dbourgeault@isotechnika.com, StephanieGillis-Paulgaard, Manager, Corporate Communications, Isotechnika Inc.,780-487-1600, 780-484-4105(fax), sgillis-paulgaard@isotechnika.com;Archived images on this organization are available through CNW E-Pix athttp://www.newswire.ca/. Images are free to members of The Canadian Press.To request a free copy of this organization's annual report, please go tohttp://www.newswire.ca/ and click on reports@cnw.