EDMONTON, March 9 /PRNewswire-FirstCall/ - Biomira Inc. today reported financial results for the fiscal year ended December 31, 2005. Results are reported in Canadian dollars with a December 31, 2005 rate of $1.00 Canadian equaling $0.86 U.S.
Highlights: - In January 2006, we announced the signing of a letter of intent to amend the agreements governing the collaboration between Biomira and Merck for L-BLP25. Under the letter of intent, approved by the Boards of both Companies, Merck will take over administrative and financial responsibility for the development and commercialization of L-BLP25, including the planned phase 3 trial in NSCLC. Merck also plans to investigate the use of L-BLP25 to treat other types of cancer. All future development, regulatory, commercialization and marketing costs for L-BLP25 (including the planned phase 3 trial, but excluding the Canadian territory) will be borne exclusively by Merck effective March 1, 2006. - Biomira conducts a phase 2, single-arm, multi-centre, open label study of L-BLP25. The trial assessed the safety of the formulation of L-BLP25 that is expected to be used in the upcoming phase 3 study, finding there were no safety concerns with the reformulated vaccine. - The start of the planned L-BLP25 phase 3 study is delayed to address an accelerated stability issue discovered during the manufacturing process. This issue has now been addressed. - Biomira arranges a U.S. $16.07 million financing, which closed at the end of January, 2006 - Dr. Christopher S. Henney join's Biomira's Board of Directors. - Biomira exercises its put option in relationship to Prima BioMed, acquiring a 1.62 per cent equity stake in the Company. Financial Update
Consolidated net losses for the years 2005, 2004, and 2003 were $19.0 million, $12.2 million, and $19.0 million, respectively. The increase in net loss in fiscal 2005, as compared to fiscal 2004, was primarily attributable to lower revenues as a result of the recognition into income in 2004 of the remaining deferred revenue balance related to Theratope(R) vaccine due to the return of development and commercialization rights for this product candidate by Merck KGaA announced in June 2004. In addition, we experienced an increase in research and development expenditures, as compared to fiscal 2004, due to increased spending associated with the L-BLP25 phase 2 safety study commenced in the second quarter of this year, and the planned L-BLP25 phase 3 clinical trial that is expected to commence in mid 2006. We anticipate this increase in clinical trial expenditures experienced in the current year to reverse in the second half of 2006 as a result of the recently announced amendment to the license agreements for L-BLP25.
Results for 2005 indicate a $6.8 million or 56% increase in the year over year loss resulting from lower revenues of $4.5 million, and higher research and development expenditures of $3.5 million, offset by lower general and administrative expenses of $0.3 million, reduced marketing and business development expenses of $0.4 million, higher investment and other income of $0.4 million, and reduced other operating expenditures of $0.1 million.
As at December 31, 2005, Biomira's cash and cash equivalents and short-term investments were $21.4 million compared to $38.6 million at the end of 2004, a decrease of $ 17.2 million or 45%. Major contributors to the net change included $1.0 million in warrant and stock option exercises, offset by $17.7 million used in operations, $0.4 million used for the purchase of capital assets, and $0.1 million related to payment of accrued share issuance costs related to the December 2004 financing. In January of 2006, we were able to secure an additional U.S. $16.07 million, before issue costs, which should provide sufficient funding to operate well into the latter half of 2007 and potentially into early 2008.
The following is selected annual consolidated financial information from our audited annual financial statements for each of the three most recently completed years ending December 31, 2005.
------------------------------------------------------------------------- (expressed in 000's except per share data) 2005 2004 2003(1) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Statement of Operations ------------------------------------------------------------------------- Total revenues $4,377 $8,941 $3,416 ------------------------------------------------------------------------- Total expenses $24,543 $21,935 $22,326 ------------------------------------------------------------------------- Other income (expense) $1,141 $769 $(64) ------------------------------------------------------------------------- Net loss $(19,025) $(12,225) $(18,974) ------------------------------------------------------------------------- Basic and diluted loss per share ($0.24) $(0.17) $(0.31) ------------------------------------------------------------------------- Weighted average number of common shares outstanding 78,660 72,941 62,498 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Balance Sheet ------------------------------------------------------------------------- Working capital $19,925 $37,107 $37,810 ------------------------------------------------------------------------- Total assets $24,263 $40,821 $43,065 ------------------------------------------------------------------------- Total long-term liabilities $1,147 $1,271 $6,701 ------------------------------------------------------------------------- Shareholders' equity $20,063 $36,963 $31,750 ------------------------------------------------------------------------- Common shares outstanding 78,817 78,340 72,545 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) Certain of the comparative figures from 2003 have been reclassified to conform to the current period's presentation. -------------------------------------------------------------------------
For a further discussion of the Company's complete financial results for the fiscal year ended December 31, 2005, please refer to the Company's Management Discussion & Analysis of Financial Condition and Results of Operations included in this news release. The Company's Financial Package, including audited consolidated financial statements, is filed separately on SEDAR at www.sedar.com.
Corporate Update
Biomira made important progress on the development of our lead product candidate, L-BLP25, during 2005, continuing to move the vaccine forward towards an extensive phase 3 clinical trial and working to secure the best possible financial framework in which to ensure its timely development.
The highlight of the year was the announcement in October of compelling survival data from our phase 2b study, which showed that patients with Stage IIIb locoregional non-small cell lung cancer who received the vaccine had a median survival of 30.6 months compared to 13.3 months for the unvaccinated group. Ensuring that these highly encouraging results can be fully tested in a phase 3 study has been the overriding focus of Biomira and Merck.
During the course of our regular discussions with Merck, we came to the conclusion, towards the end of 2005, that there would be considerable benefit for both sides in Merck's taking developmental and financial control of L-BLP25 in exchange for assuming most of the costs associated with L-BLP25. We were pleased to announce, on January 26, 2006 that a letter of intent had been signed whereby Merck would take full control of the development, regulatory and marketing costs related to L-BLP25. In return, Biomira has given up its U.S. co-marketing rights in exchange for a royalty arrangement which fully reflects the current stage and promise of the vaccine. The co-promotion arrangement in Canada remains unchanged, with, where appropriate, Biomira handling responsibility for a small specialized oncology sales force and Merck covering 50 per cent of the costs and receiving 50 per cent of sales.
We believe this is a significant and positive development for the progress of this important product candidate, for our patients and for the future of Biomira. By taking financial responsibility for the development and commercialization program, Merck has shown its strong and continued commitment to cancer vaccines and to L-BLP25 in particular. This new arrangement greatly facilitates the timely initiation of the phase 3 trial for L-BLP25 in NSCLC.
The revised arrangement with Merck has greatly reduced the financial risk to Biomira while retaining upside potential from a successful product candidate. It has also freed Biomira to focus on bringing our next vaccine, BGLP40, through the development process, and to concentrate on filling our pipeline with additional product candidates.
To this end, we were able to secure a U.S. $16.07 million financing at the end of January 2006. This money in our Treasury should provide sufficient funding to begin further development of BGLP40 and assessing in-licensing opportunities.
Biomira/Merck KGaA L-BLP25 Supply and Licensing Agreement
Pursuant to the letter of intent, Merck has now taken over most of the financial and administrative responsibility for L-BLP25 effective March 1, 2006. This includes the planned phase 3 study which is expected to get underway with patient enrolment commencing in mid 2006. Merck also intends to explore potential phase 2 studies of the vaccine in additional cancers, which will maximize both its clinical and commercial potential.
In return, Biomira's co-promotion interest in U.S. sales will be converted to a specified royalty rate, which will be higher than what Merck has agreed to pay on its sales of L-BLP25 in markets outside of North America (Rest of World (ROW)). The royalty and other arrangements with respect to the ROW will remain generally unchanged (Merck to assume a specified third party royalty obligation on behalf of Biomira). Similarly, the milestone payments to be made by Merck pursuant to the collaboration will remain essentially the same. The agreed upon royalty rate for the U.S. territory reflects the stage and promise of L-BLP25.
Biomira will retain the responsibility for manufacturing L-BLP25, both for clinical trials and following any market approval. Biomira will also retain the responsibility for marketing the product in Canada.
L-BLP25
In October, 2005 Biomira announced that the median survival for patients with Stage IIIB locoregional NSCLC who received L-BLP25 in a phase 2b study had been determined. These results demonstrated a median survival of 30.6 months in the vaccinated group compared with 13.3 months for the unvaccinated group. A more comprehensive analysis of these data is expected in the second quarter of this year. In November, 2005 Biomira announced the interim results of a phase 2 NSCLC single-arm, multi-centre, open label safety study of L-BLP25. The results showed the new formulation of the vaccine to be used in the phase 3 clinical trial program is not different from the previous formulation from a safety perspective.
The reformulated vaccine incorporated manufacturing changes intended to secure the future commercial supply of the vaccine. Testing has demonstrated that the steps taken to address the manufacturing issue discovered in late 2005 have been successful. Manufacturing for the phase 3 trial is expected to resume in the first quarter of this year and vaccine should be available mid 2006 to start the trial.
Next Steps
With the development program of L-BLP25 now in the hands of Merck, we have the freedom to focus our resources and development skills on filling out and advancing our pipeline and building additional value for shareholders.
We recently began a limited restructuring process for the Company to ensure that we have the right people and expertise to carry out the new mandate of Biomira while we continue to carry out the handover of L-BLP25 to Merck. We still maintain our expertise in all necessary areas to take advantage of the opportunities presented to us. We expect further reductions in staff once we have clarity on how long the Merck handover will take and we understand more fully what expertise we need for potential new product candidates that we hope to in-license.
Our immediate focus will be on BGLP40. BGLP40 is a third generation vaccine program utilizing a liposomal formulation of a vaccine with human MUC1 peptide antigens, carbohydrate antigens and a synthetic adjuvant.
BGLP40 is Biomira's first fully synthetic vaccine. The program offers the potential to eliminate some of the consistency issues faced in manufacturing biological products, as well as a large market potential as MUC1 and certain carbohydrate epitopes are expressed on the majority of solid tumour cancers. It is our hope that we can now focus our efforts on moving this product candidate through the pre-clinical process and into clinical trials in late 2007. We plan to also take advantage of our out-licensing expertise to seek, by the first half of 2007, an appropriate licensing arrangement for the future development of BGLP40. We decided to suspend an earlier search for an appropriate arrangement until we could show more data on this product candidate. We hope to be able to more definitively plan for the future of BGLP40 by the third quarter of 2006.
Biomira will also focus on exploring the full potential of our Synthetic Biologics Business Unit (SBBU), headed by Dr. Rao Koganty. This business unit, set up in 2005, is designed to develop and commercialize specific synthetic mimics of important biological compounds such as bacterial and viral products, which interact with various toll like receptors (TLRs) to modulate the immune system. Our SBBU has already developed an extensive portfolio of synthetic analogues of Lipid A, a vaccine adjuvant of bacterial origin. These synthetic adjuvants, which are covered by a portfolio of world-wide patent applications, are well recognized for their consistency in performance and production. Significant demand for high performance adjuvants, in a highly competitive environment, in the vaccine world creates excellent business and out-licensing opportunities.
The chemistry expertise of our SBBU is further diversified to potentially assist in pharmaceutical developments for external organizations. The SBBU is actively seeking collaborations by leveraging its expertise in the area of design and synthesis of new chemical entities of biological origin for the development of stand alone therapeutic products that address the unmet needs of immune disorders.
We hope to conclude our first SBBU licensing agreement sometime in 2006 or early next year and we are excited about the growth and prospects for this business unit.
For the Company, now that Merck has the responsibility for moving L-BLP25 forward, we are in a position to take advantage of several promising in-licensing opportunities. Due diligence is already underway on a number of promising projects and we look forward to sharing these with you if we decide to move to an in-licensing agreement. We want to develop a program that builds on our core competencies in synthetic immunotherapy, but also in other targeted approaches in treating human cancers.
We also have a controlling interest in our spin-off company, Oncodigm BioPharma Inc. This company was created to fully exploit Liposomal Interleukin-2 (L-IL-2) technology that Biomira did not have the resources to fully develop. We are now well positioned to re-evaluate the strategy for the future of L-IL-2.
With Merck assuming the ongoing development and costs of L-BLP25, the future of L-BLP25 is now secure and our financial risk has been greatly reduced. We can now begin the restructuring process to meet the challenges of seeking new business and development opportunities. With the U.S. $16.07 million we raised at the end of January, we are also in a position to focus on bringing our next vaccine, BGLP40, through development and look at exploring our promising in-licensing and out-licensing opportunities. We face the future with renewed confidence and energy and will concentrate on building shareholder value through the development of a pipeline for the future of the Company. We appreciate your continued support for the Company and your dedication to moving with us in our new developments.
Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A), prepared as at February 28, 2006, should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, 2005. These financial statements, which follow the MD&A, have been prepared in accordance with generally accepted accounting principles in Canada (Canadian GAAP) that differ in some respects from those of the United States (U.S. GAAP). Unless otherwise indicated, all amounts shown are in Canadian dollars.
Overview of the Business
Biomira Inc. is an international biotechnology company headquartered in Canada which is engaged primarily in the research and development of innovative therapeutic approaches to cancer management. Our research and development efforts are currently focused on our core competency in immunotherapeutics, particularly developing synthetic vaccines and novel strategies for cancer immunotherapy. Our strategic mission is to build a sustainable and profitable company by bringing patients innovative, targeted therapeutics that extends quality and duration of life.
BLP25 Liposome Vaccine (L-BLP25)
Corporate resources during 2005 were primarily directed towards the ongoing development of our lead product candidate L-BLP25. L-BLP25 is a synthetic MUC1 peptide vaccine incorporating a 25-amino acid sequence of the MUC1 cancer mucin that is encapsulated in a liposomal delivery system and is designed to induce an immune response to cancer cells. This product candidate has completed phase 2b clinical testing with the Company first releasing survival analysis data in April 2004. In October 2005 we provided an update to the survival data from our phase 2b study, which showed that patients with Stage IIIb locoregional non-small cell lung cancer (NSCLC) who received the vaccine had a median survival of 30.6 months compared to 13.3 months for the unvaccinated group, a difference of 17.3 months. Ensuring that these highly encouraging results can be fully tested in a phase 3 study has been the overriding focus of Biomira and Merck KGaA (Merck) of Darmstadt, Germany.
In September, Biomira and Merck, announced completion of enrolment of a phase 2 single arm, multi-centre open label safety study. This trial enrolled a total of 22 patients with NSCLC from eight clinical trial sites in Canada. The trial is designed to assess the safety of the formulation of L-BLP25 that is intended to be used in the planned phase 3 study. The new formulation incorporates manufacturing changes intended to secure the future commercial supply of the vaccine. In November, we announced the comparability results showing that the new formulation of the vaccine is not different from the previous formulation from a safety perspective.
In September, Biomira and Merck also announced a change to the anticipated timetable for the start of the planned L-BLP25 phase 3 study in the treatment of NSCLC. The change was to address an accelerated stability issue discovered during the manufacturing of the vaccine to be used in the phase 3 trial. An investigation with the contract manufacturer indicated that excess moisture in the product may have been the cause of the instability. Further testing has demonstrated that the corrective actions taken to resolve the stability issue have been successful. However, as a result of this delay, the start of the trial, which was planned for the end of 2005, is now expected to commence in mid 2006.
Biomira/Merck L-BLP25 Collaboration
In January 2006, we announced the signing of a letter of intent to amend the agreements governing the collaboration between Biomira and Merck for L-BLP25. Under the letter of intent, approved by the Boards of both Companies, Merck will take over administrative and financial responsibility for the development and commercialization of L-BLP25, including the planned phase 3 trial in NSCLC. Merck also plans to investigate the use of L-BLP25 to treat other types of cancer. All future development, regulatory, commercialization and marketing costs for L-BLP25 (including the planned phase 3 trial, but excluding the Canadian territory) will be borne exclusively by Merck effective March 1, 2006.
In return, our co-promotion interest in U.S. sales will be converted to a specified royalty rate, which will be higher than what Merck has agreed to pay on its sales of L-BLP25 in markets outside of North America (the Rest of World (ROW)). The royalty and other arrangements with respect to the ROW will remain generally unchanged (Merck to assume a specified third party royalty obligation on behalf of Biomira). Similarly, the milestone payments to be made by Merck pursuant to the collaboration will remain essentially the same. The agreed upon royalty rate for the U.S. territory reflects the stage and promise of L-BLP25.
We will retain responsibility for manufacturing L-BLP25, both for clinical trials and following any marketing approval. The existing arrangements for Canada remain in place with Biomira responsible for the Canadian territory.
Under the terms of the letter of intent, the parties have agreed to use commercially reasonable efforts to execute the amendments to the agreements governing the collaboration within 60-90 days of the effective date of January 26, 2006.
As a result of the signing of the letter of intent with Merck, we began a limited restructuring process for the Company to ensure that we have the right people and expertise to carry out the business of the Company, while we continue to carry out the transition of L-BLP25 responsibilities to Merck. Initially we will be reducing our workforce by 14 employees at an estimated severance cost of approximately $1.1 million; however we will continue to maintain our core expertise in all necessary areas to take advantage of the opportunities presented to us. We expect further reductions in staff once we have clarity on how long the Merck transition will take and we understand more fully what expertise we need for potential new product candidates that we hope to in-license.
Business Development
With the development program of L-BLP25 now in the hands of Merck, we can focus our efforts and direct more of our resources to fill out and advance our pipeline to build additional value for our shareholders.
Our immediate focus will be on gathering more data and advancing our follow-on vaccine, BGLP40, a third generation vaccine. It is a completely synthetic MUC1 based liposomal, multiple target cancer vaccine, which we believe may provide benefit in several cancer indications. BGLP40 is a vaccine designed to evoke both a cellular and humoral immune response against major cancer-associated target epitopes expressed on adenocarcinomas. We anticipate being able to more definitively plan for the future of BGLP40 by the third quarter of 2006, with the hope that we can move this product through the pre-clinical process and into clinical trials in late 2007.
In April 2005, we created a Synthetic Biologics Business Unit which continues to focus on exploring the full potential of chemically synthesized biologicals for use in protective and therapeutic vaccines. We have developed technologies that can be used by other companies developing non-competing vaccine technology. Our expertise in this area complements our current programs and provides new upside business potential as we continue to actively seek licensing opportunities for our synthetic adjuvants.
Now that Merck has the responsibility for moving L-BLP25 forward, we can also focus on taking advantage of several potential in-licensing opportunities. Due diligence is already underway on a number of encouraging projects as we work towards developing a program that builds on our core competencies in synthetic immunotherapy, but also in other targeted approaches in treating human cancers.
We also have a controlling interest in our spin-off company, Oncodigm BioPharma Inc. This company was created to fully exploit Liposomal Interleukin-2 (L-IL-2) technology that Biomira did not have the resources to fully develop. We are now well-positioned to re-evaluate the strategy for the future of L-IL-2.
Corporate Update
In February we announced the resignation from the Board of Directors of Dr. Sheila Moriber Katz and the subsequent appointment of Christopher S. Henney, PhD, DSc. Dr. Henney is a co-founder of three major publicly held U.S. biotechnology companies, Immunex Corporation, ICOS and Dendreon Corporation . Dr. Henney was also the Chairman and Chief Executive Officer of Dendreon Corporation. He serves on the Board of Directors of Bionomics Ltd. , in Adelaide, South Australia, and as Chairman of SGX Pharmaceuticals, Inc. (formerly Structural Genomix), in San Diego, CA. In March of 2005, Dr. Henney was appointed as Chairman of Xcyte Therapies Inc. .
In July we exercised our right to acquire a 1.62% equity position in Prima BioMed Ltd. ("Prima"), an Australian biotech company. In March 2004, we announced a technology licensing and commercial agreement with Cancer Vac Pty. Ltd. (Cancer Vac), a subsidiary of Prima, acquiring a 10 percent equity stake in Cancer Vac. Biomira had the right to convert this stake to shares in Prima, which we have now exercised.
In January 2006, we completed a financing totaling U.S. $16.07 million, before issue costs, with Rodman & Renshaw, LLC of New York acting as exclusive placement agent. The Company issued 10,572,368 units, each consisting of one common share and 0.25 of a warrant, at an issue price of U.S. $1.52. Each warrant entitles the holder thereof to purchase one common share at an exercise price of U.S. $2.50. The warrants have a 42-month term, from the date of closing, and a no-exercise period of six months. The financing closed at the end of January and was fully subscribed.
2006 - Moving forward
With this additional money in our treasury and the development program of L-BLP25 now in the hands of Merck, we are well positioned to begin further development of BGLP40 and assessing potential in-licensing opportunities. We are excited about the challenges of seeking new business and development opportunities and we face the future with renewed confidence and energy. In 2006 we will move forward with focusing on building additional shareholder value through the development of a pipeline for the future of the Company.
Results of Operations
Consolidated net losses for the years 2005, 2004, and 2003 were $19.0 million, $12.2 million, and $19.0 million, respectively. The increase in net loss in fiscal 2005, as compared to fiscal 2004, was primarily attributable to lower revenues as a result of the recognition into income in 2004 of the remaining deferred revenue balance related to Theratope(R) vaccine due to the return of development and commercialization rights for this product candidate by Merck announced in June 2004. In addition, we experienced an increase in research and development expenditures, as compared to fiscal 2004, due to increased spending associated with the L-BLP25 phase 2 safety study commenced in the second quarter of 2005 and the planned L-BLP25 phase 3 clinical trial that is expected to commence in mid 2006. We anticipate this increase in clinical trial expenditures experienced in the current year to reverse in the second half of 2006 as a result of the recently announced amendment to the licensing agreement for L-BLP25.
Results for 2005 indicate a $6.8 million or 56% increase in the year over year loss resulting from lower revenues of $4.5 million, and higher research and development expenditures of $3.5 million, offset by lower general and administrative expenses of $0.3 million, reduced marketing and business development expenses of $0.4 million, higher investment and other income of $0.4 million, and reduced other operating expenditures of $0.1 million.
Revenues
Revenues from operations for the years ended 2005, 2004, and 2003 were $4.4 million, $8.9 million, and $3.4 million, respectively. The 2005 year over year decrease of $4.5 million or 51% primarily stems from lower licensing revenues recognized into income as a result of the return of Theratope development and commercialization rights by Merck announced in June 2004.
Revenues from contract research and development for fiscal 2005, totaling $3.8 million compared to $2.1 million for the same period in 2004, represents contract research and development funding received from Merck associated with L-BLP25 and Theratope. The increase in funding received from Merck in 2005 is primarily attributable to increased clinical expenditures incurred by Biomira in relation to the L-BLP25 phase 2 safety study commenced in the second quarter of this year, and in preparation of the planned phase 3 clinical trial expected to commence in mid 2006.
Licensing revenues from collaborative arrangements for fiscal 2005 of $0.2 million compared to $6.5 million for fiscal 2004, represents the amortization of upfront payments received from Merck and an upfront sublicensing fee from Cancer Vac upon commencement of the respective collaborations. The decreased revenue primarily results from return of the Theratope development and commercialization rights by Merck in June 2004 and the immediate recognition into income of the remaining related deferred revenues totalling $5.9 million.
Licensing, royalties and other revenue for fiscal 2005, totalling $0.3 million, was similar to the same period in 2004. Licensing, royalties and other revenue relates to contract manufacturing activities utilizing various Biomira patented technologies and compounds for external customers.
Operating revenues are not expected to increase significantly until certain milestone payments tied to clinical advancement/success have been earned, and commercialization of one or more of our products has occurred. Under the terms of the recently signed letter of intent with Merck we will be eligible for milestone payments upon execution of the amendments to the licensing agreement, and upon enrolment of the first patient into the planned phase 3 pivotal study in NSCLC. These payments may occur in fiscal 2006 depending on the timing of the triggering events. In addition to the potential outcomes related to our lead technology, we will continue to explore licensing opportunities and collaborative alliances for em
