VANCOUVER, BRITISH COLUMBIA--(Marketwire - November 11, 2010) - Ondine Biomedical Inc. (TSX: OBP)(AIM: OBP) (formerly Ondine Biopharma Corporation, the "Company" or "Ondine") a medical device company developing photodisinfection based products, announced its financial results for the third quarter ended September 30, 2010.
"Despite continued challenging economic conditions, Ondine experienced continued growth and partner interest across all our business sectors during the third quarter of 2010," stated Carolyn Cross, Chairman and CEO. "We initiated sales of our convenient, cordless handheld laser and our Advanced Treatment Kit to Ondine's dental business partner, Periowave Dental Technologies, Inc. Initial response from clinicians using the system has been highly favorable. Shortly after Ondine formed Sinuwave Technologies Corporation to develop a photodisinfection treatment for chronic, debilitating sinus infections, we were proud to have received immediate and significant interest in this application of photodisinfection through the sale of a majority interest in Sinuwave Technologies Corporation to a private equity group. In addition to the initial payment received on closing of this sale, Ondine is entitled to receive significant additional consulting fee revenue in connection with the development of the Sinuwave product, milestone payments, and manufacturing revenues and royalties on future sales of the product. This successful transaction demonstrates Ondine's evolved business model: completion of the initial research and development of photodisinfection products destined to fulfill critically-unmet medical needs, followed by rapid partnership in order to accelerate the development of multiple photodisinfection product opportunities."
FINANCIAL RESULTS
For the three months ended September 30, 2010 ("Third Quarter 2010") the Company recorded a loss of $0.32 million, or $0.00 per common share, compared with a loss of $1.58 million, or $0.02 per common share, for the three months ended September 30, 2009 ("Third Quarter 2009"). Revenue, net of cost of sales, for Third Quarter 2010 was $0.34 million, including gross margin of $0.01 million (12.9%) on Periowave™ product sales of $0.10 million compared to revenue, net of cost of sales, for Third Quarter 2009 of $0.17 million, including gross margin of $0.01 million (41.2%) on Periowave™ product sales of $0.03 million.
For the nine months ended September 30, 2010 ("Nine Months 2010"), the Company recorded a loss of $2.57 million or $0.02 per common share compared with a loss of $3.37 million or $0.04 per common share during the nine months ended September 30, 2009 ("Nine Months 2009"). Revenue, net of cost of sales, for the Nine Months 2010 was $0.83 million, including gross margin of $0.11 million (41.6%) on Periowave™ product sales of $0.26 million compared to revenue, net of cost of sales, for the Nine Months 2009 of $0.56 million, including gross margin of $0.35 million (63.9%) on Periowave™ product sales of $0.54 million.
RECENT DEVELOPMENTS
In September 2010, Ondine sold a majority interest in its then wholly owned subsidiary, Sinuwave Technologies Corporation ("STC"), for US$660,000 ($678,414) to a private equity investor group (the "STC Sale"). STC is developing the Sinuwave™ product, a photodisinfection treatment for the chronic sinusitis market. Immediately subsequent to the STC Sale, the private equity investor group completed an initial financing in STC for US$550,000. As a result of the sale, the initial financing transaction and certain related transactions, Ondine retains a 19.6% equity interest in STC. The private equity investor group has also committed to provide STC with additional financing totaling US$1.1 million in 2 tranches and would have the right to invest a further US$1.1 million in Sinuwave on exercise of share purchase warrants. Ondine and STC have entered into a memorandum of understanding, pursuant to which Ondine will i) receive monthly consulting revenue for management and research and development services in support of the development of Sinuwave™ product; ii) have the right and obligation to manufacture products for STC for the chronic sinusitis application on a cost plus basis; and iii) be entitled to milestone payments totaling US$250,000 based on the achievement of certain development milestones. Ondine is also entitled to receive royalties on STC sales of Sinuwave™ product pursuant to the terms of an intellectual property license agreement.
Effective October 14, 2010, the Company consolidated all of its issued and outstanding common shares on the basis of fifteen (15) "old" common shares for one (1) "new" common share (the "Share Consolidation"). Fractional shares remaining after giving effect to the consolidation have been cancelled, such that shareholdings of each shareholder have been rounded down to the nearest whole number of post-consolidation shares. Outstanding stock options and warrants were similarly adjusted by the consolidation ratio. Unless otherwise indicated, the share and per share amounts stated in this news release are the pre-consolidation amounts.
The Company is pleased to report during the quarter ended September 30, 2010 it shipped the initial commercial order of its latest products to its business partner, Periowave Dental Technologies, Inc. ("PDT Inc"). These products, which are for the dental market, consist of a convenient cordless handheld laser ("HHL") and a reformulated photosensitizer with advanced handling properties.
In November 2010, the Company announced its Bothell, Washington based subsidiary, Ondine Research Laboratories, Inc. ("ORL") has been awarded a grant in the amount of US$244,479 under the Qualifying Therapeutic Discovery Project (QTDP) tax credit program. ORL was awarded funding to support continuing research and development for the MRSAid™ product for non-antibiotic nasal decolonization of Staphylococcus aureus and methicillin-resistant Staphylococcus aureus ("MRSA"). The QTDP program was created to support innovative medical research by small life sciences companies and to assist in the development of novel cost-saving therapies as part of the Patient Protection and Affordable Care Act of 2010. Cash grants were awarded based on a competitive application process after evaluation by the National Institutes of Health and the Internal Revenue Service.
Financial Review
The $0.80 million decrease in loss for the Nine Months 2010, when compared to the Nine Months 2009, was primarily due to i) an increase of $0.48 million in consulting revenue; ii) a decrease of $0.45 million in marketing and sales ("M&S") expenses; and iii) a $0.63 million loss on sale and write-down of investment that occurred during the Nine Months 2009, while no comparable transaction occurred during the Nine Months 2010. These decreases in loss were partially offset by i) an increase of $0.35 million in research and development ("R&D") expenses; ii) the decrease of $0.24 million in gross margin described above; and iii) a decrease of $0.10 million in gain on sale of assets. The Company recognized a $0.58 million gain on sale of assets during Nine Months 2010 in connection with the STC Sale on September 13, 2010, compared with a gain of $0.68 million for Nine Months 2009 recognized in connection with the sale of the Company's dental business to PDT Inc that occurred on June 5, 2009 (the "Dental Sale").
The $1.26 million decrease in loss for Third Quarter 2010, when compared to Third Quarter 2009, was primarily due to i) an increase of $0.15 million in consulting revenue; ii) a $0.58 million gain on sale of assets, in connection with the STC Sale, while there was no comparable transaction for Third Quarter 2009; and iii) Third Quarter 2009 including a $0.63 million loss on sale and write-down of investment, while there was no comparable transaction for Third Quarter 2010.
Sales during the Nine Months 2010 consisted of Periowave™ product, primarily laser base stations and cordless hand held lasers, sold to PDT under a manufacturing and supply agreement entered into in June of 2009 as part of the Dental Sale. During the Nine Months 2009 the Company's sales consisted of Periowave™ product, primarily treatment kits, sold to three distributors in Canada and to a distributor in the United Kingdom. The margins obtained on the sales in the Nine Months 2010 were lower than the margins obtained on the Company's sales during the Nine Months 2009 reflecting the Company's new position as supplier to PDT Inc. The gross margin percentage for the Nine Months 2010 reflects the sale in the first quarter of 2010 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 with PDT Inc referred to above will be lower than the gross margin percentage realized during the Nine Months 2010.
In connection with the Dental Sale, the Company and PDT entered into a management services agreement effective from the closing date, June 5, 2009. The consulting revenue received by the Company from PDT Inc under this agreement, together with the consulting revenue earned from PDT Inc in connection with a research and development agreement and the consulting revenue earned under the agreement with STC referred to above, accounts for the increase in consulting revenue for the Nine Months 2010, as compared to the Nine Months 2009. 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 development of Endowave™, the Company's product 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 Endowave™ product 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 the Nine Months 2010 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, primarily in connection with a number of FDA audits of certain of the Company's clinical studies. The PMA was submitted by the Company on behalf of PDT to obtain FDA approval for the sale of Periowave™ in the United States for the treatment of periodontitis in adults as an adjunct to standard methods of care. The Company is now also supporting the development of the Sinuwave product under contract with STC.
As at September 30, 2010 the Company had cash and cash equivalents totaling $0.56 million compared with $1.06 million as at December 31, 2009. Accounts payable and accrued liabilities at September 30, 2010 were $1.11 million compared to $1.1 million at December 31, 2009. During the Nine Months 2010, the Company used cash of approximately $2.4 million for operating activities, received total cash proceeds of $0.89 million, net of issuance costs, from a private placement that closed in April 2010 and on the exercise of share purchase warrants by Carolyn Cross, Chairman and CEO, received a loan of $0.5 million from Carolyn Cross, and received $0.66 million from the STC Sale that closed in September 2010.
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 there can be no assurances that the Company would be able to continue in business.
At September 30, 2010 the Company had 126,796,145 common shares outstanding. As a result of the Share Consolidation, the Company has 8,453,042 common shares outstanding as of the date of this news release.
Additional analysis of the Company's financial results for the three months and nine months ended September 2010 is included in Ondine's management's discussion and analysis of financial condition and results of operations (MDA) for the quarter ended September 30, 2010, which will be available on the Company's website and on www.sedar.com.
About Ondine Biomedical Inc.
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, primarily for the Hospital Acquired Infection market. Photodisinfection provides broad-spectrum antimicrobial efficacy without encouraging the formation and spread of antibiotic resistance. The Company is headquartered 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.ondinebio.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 Biomedical Inc.
(formerly Ondine Biopharma Corporation)
Incorporated under the laws of British Columbia
CONSOLIDATED BALANCE SHEETS
As at (Unaudited - expressed in Canadian dollars)
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September 30, December 31,
2010 2009
$ $
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ASSETS
Current
Cash and cash equivalents 559,646 1,055,773
Accounts receivable 116,175 152,929
Inventories 238,209 205,512
Prepaid expenses and deposits 340,731 143,796
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Total current assets 1,254,761 1,558,010
Capital assets 458,821 451,094
Intangible assets 443,623 610,012
Investment 20,880 -
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2,178,085 2,619,116
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 1,109,177 1,102,681
Deposit payable 165,680 -
Income taxes payable 2,255 1,482
Current portion of deferred tenant inducement 6,206 46,437
Loan payable 500,000 -
Deferred revenue - 95,391
Future income tax 28,369 32,576
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Total current liabilities 1,811,687 1,278,567
Deferred tenant inducement, net of current
portion 139,806 62,711
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Total liabilities 1,951,493 1,341,278
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Shareholders' equity
Share capital 55,433,329 54,767,640
Share issue commitment 55,936 -
Contributed surplus 5,985,032 5,191,921
Deficit (61,247,705) (58,681,723)
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Total shareholders' equity 226,592 1,277,838
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2,178,085 2,619,116
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Ondine Biomedical Inc.
(formerly Ondine Biopharma Corporation)
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(Unaudited - expressed in Canadian dollars)
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Three months ended Nine months ended
September 30, September 30,
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2010 2009 2010 2009
$ $ $ $
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REVENUE
Product sales 99,107 32,532 257,815 542,293
Cost of sales 86,273 19,128 150,508 195,620
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Gross margin 12,834 13,404 107,307 346,673
Consulting revenue 310,569 159,317 692,618 215,495
Royalty revenue 12,581 - 28,731 -
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335,984 172,721 828,656 562,168
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EXPENSES
Research and development 706,333 680,256 2,415,061 2,063,890
General and administration 451,326 448,923 1,422,293 1,425,833
Marketing and sales 3,236 17,548 8,226 454,102
Depreciation and
amortization 77,761 60,768 224,375 183,077
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(1,238,656) (1,207,495) (4,069,955) (4,126,902)
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Other income/(expense)
Gain on sale of assets 579,675 - 579,675 683,388
Gain on settlement of debt - - 52,123 -
Loss on sale and write-down
of investment - (629,618) - (629,618)
Interest and miscellaneous
income 5,472 13,351 22,082 13,712
Foreign exchange
gain/(loss) (3,348) 39,810 23,229 98,889
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581,799 (576,457) 677,109 166,371
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Loss before income taxes (320,873) (1,611,231) (2,564,190) (3,398,363)
Current income tax
expense - - (7,161) -
Future income tax
recovery - 29,223 5,369 29,223
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Loss and comprehensive loss
for the period (320,873) (1,582,008) (2,565,982) (3,369,140)
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Basic and diluted loss per
common share (0.00) (0.02) (0.02) (0.04)
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Weighted average number of
common shares outstanding 126,796,145 93,225,869 126,387,365 78,068,042
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Ondine Biomedical Inc.
(formerly Ondine Biopharma Corporation)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited - expressed in Canadian dollars)
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Share Total
Issue Contrib- Share-
Number of Share Commit- uted holders'
Common Capital ment Surplus Deficit Equity
Shares $ $ $ $ $
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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
development
agreement 466,130 23,307 - - - 23,307
Stock-
based
compen-
sation - - - 585,506 - 585,506
Loss and
comprehen-
sive loss
for the
year - - - - (4,595,474) (4,595,474)
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Balance,
December
31, 2009 110,548,457 54,767,640 - 5,191,921 (58,681,723) 1,277,838
Units
issued
for cash
(net of
issue
costs)
April
2010
Private
Placement 13,800,000 504,994 - 314,797 - 819,791
Common
shares
issued
for
settlement
of debt
(net of
issue
costs) 947,688 58,519 - - - 58,519
Common
shares
issued
for
exercise
of
warrants 1,500,000 75,000 - - - 75,000
Realloca-
tion of
contributed
surplus
as a
result of
warrant
exercise - 27,176 - (27,176) - -
Stock-
based
compensa-
tion - 
