EDMONTON, Aug. 3 /PRNewswire-FirstCall/ - Isotechnika Inc. announced today its financial results for the second quarter ended June 30, 2006, and provided a review of the Company’s corporate and scientific highlights of the second quarter.
Corporate and Scientific Highlights
-----------------------------------
The following are significant events which occurred in the second quarter to the current date:
Isotechnika signed an agreement with Lux Biosciences, Inc. of Jersey City, New Jersey on May 24, 2006, granting Lux Biosciences, Inc. the worldwide rights to develop and commercialize Isotechnika’s lead drug, ISA247 for the treatment and prophylaxis of all ophthalmic diseases.
Under the terms of the agreement: - Lux Biosciences, Inc. will make upfront and milestone payments to Isotechnika. Assuming all development milestones are achieved, the amount of this deal will be $32.7 million USD. Isotechnika received an upfront payment of $3 million USD upon signing the agreement. - Lux Biosciences, Inc. will pay Isotechnika royalties based on a percentage of net sales. - Lux Biosciences, Inc. has exclusive worldwide marketing rights of ISA247 for all ophthalmic indications. - Lux Biosciences, Inc. would be responsible, at its sole expense, for pre-clinical and clinical development, registration, and marketing of ISA247 for all ophthalmic indications. - Isotechnika will be providing input on clinical trial design and will be reviewing and consulting on all regulatory filings. - A Joint Steering Committee (“JSC”) with equal membership from Isotechnika and Lux Biosciences, Inc. will be formed to oversee the development and commercialization of all ophthalmic indications.
Isotechnika also signed an option agreement with Cellgate Inc. of Redwood City, California on April 25, 2006. This agreement allows Isotechnika the option to obtain an exclusive license to develop and commercialize conjugates consisting of Cellgate’s patented transporter technology for the topical delivery of ISA247 in patients suffering from mild to moderate psoriasis.
Under the terms of the agreement, Cellgate Inc. will perform studies to evaluate the feasibility of using their technology to topically deliver ISA247. These studies will commence over the next few months and are expected to be completed over a one year period. In exchange for this work, Isotechnika will pay Cellgate Inc. a total of $500,000USD with $100,000USD paid upfront and the remainder at predetermined time points. Upon successful completion of the studies, Isotechnika has the option to license the technology from Cellgate Inc. to further develop and commercialize conjugates for topical delivery of ISA247.
In June, 2006, Isotechnika was granted U.S. Patent # 7,060,672 for its lead immunosuppressive drug, ISA247. The patent entitled “Novel Cyclosporin Analog Formulations” is the first patent to be issued in this patent family in the United States. These patent claims have been filed in a total of 36 countries.
Isotechnika was represented at the 81st Annual Conference of the Canadian Dermatology Association. Dr. Richard Langley, one of the principal investigator’s, presented 24 week data from the Company’s Canadian Phase III psoriasis trial on July 1, 2006.
On May 25, 2006, Isotechnika established an equity drawdown facility to a maximum of $40 million (the “Facility”) with Azimuth Opportunity, Ltd. (“Azimuth”). Under the Facility, for a period of two years, Isotechnika may at its discretion, from time to time, sell common shares to Azimuth.
Approximately 75% of the net proceeds from any sale of the securities under the Facility are intended to be used to fund the ongoing ISA247 psoriasis development program which includes a European Phase III clinical trial which is planned to commence in 2006, subject to Isotechnika receiving the necessary regulatory approvals. The remaining 25% is expected to be used for working capital and general corporate purposes.
On July 14, 2006, the Company announced it had issued a drawdown notice under the equity drawdown facility. Pursuant to the terms of the Common Share purchase agreement the drawdown pricing period, which is for 20 consecutive trading days, commenced on July 14, 2006, and will end on August 11, 2006. The maximum drawdown amount under this drawdown notice is $2.0 million and may be less depending on the stock price over the pricing period. The maximum amount of $2.0 million is composed of $500,000 mandatory drawdown (based on the floor price set by the Company) and $1.5 million as an additional purchase amount which the purchaser has the option to purchase in consultation with the Company.
The terms of the equity drawdown are described in more detail in a prospectus supplement dated May 25, 2006, which Isotechnika filed with the Alberta Securities Commission and the Ontario Securities Commission pursuant to the multi-jurisdictional disclosure system on www.sedar.com. The Company had receipted a $40 million base-shelf prospectus dated May 23, 2006.
Financial results
-----------------
At June 30, 2006, cash, cash equivalents and short-term investments totalled $39.0 million, compared to $44.9 million at March 31, 2006, and $52.8 million at December 31, 2005. The Company used $5.9 million of cash, cash equivalents and short-term investments in the second quarter of 2006 primarily for operating activities.
The consolidated loss for the second quarter of 2006 was $6.7 million, or $0.08 per common share, compared to a loss of $8.0 million, or $0.11 per common share, in the second quarter of 2005. For the six months ended June 30, 2006, the consolidated loss was $12.0 million or $0.14 per common share compared to $16.4 million or $0.22 per common share for the comparable period in 2005. The consolidated loss has decreased primarily as a result of licence fee revenue earned in the period, reduced research and development expenses and reduced corporate, administration and marketing expenses.
Revenue increased to $1.0 million for the second quarter ended June 30, 2006, compared to $250,000 for the second quarter ended June 30, 2006. Revenue in the second quarter of 2006 was comprised of $703,000 for licensing fees and $341,000 for diagnostic product sales, as compared to $nil for licensing fees and $250,000 for diagnostic product sales for the second quarter of 2005. On a year-to-date basis, revenue for the six months ended June 30, 2006, was $2.6 million compared to $634,000 for the same period in fiscal 2005. Licensing fees represent the amortization of deferred revenue related to upfront payments the Company has received from its out-licensing agreements with Lux Biosciences, Inc. and Atrium Medical Corporation.
Research and development expenditures were $5.4 million in the second quarter of 2006, compared to $6.1 million in the first quarter of 2005, a decrease of $700,000. The Company incurred total research and development expenditures of $10.4 million for the six months ended June 30, 2006, as compared to $11.9 million for the same period in 2005.
Research and development expenditures for the second quarter of 2006 included clinical trial costs for the Phase III ISA247 Canadian psoriasis extension trial, the ISA247 Phase IIb kidney transplant trial, the TAFA93 Phase Ib multiple ascending dose trial, start up and implementation costs related to the Phase III ISA247 European psoriasis trial and the ongoing quarterly non-clinical study costs to conduct the mouse and rat carcinogenicity studies. The Company expects its research and development expenditures will increase for the remainder of 2006 due to planned expenditures for the ISA247 Phase IIb kidney transplant trial, Phase III ISA247 European psoriasis trial and ISA247 drug supply.
Corporate, administration and marketing costs totalled $1.9 million for the second quarter of 2006, compared to $1.9 million for the second quarter of 2005. Isotechnika incurred a total corporate, administration and marketing expenditure of $3.6 million for the six months ended June 30, 2006, as compared with $4.6 million for the same period in fiscal 2005. The decrease for the six month period ended June 30, 2006 was due to decreased stock-based compensation expense ($317,000 in the first six months of 2006, compared to $780,000 in the same period of 2005), decreased executive salary costs of approximately $300,000 primarily related to the departure of the Executive Vice President in November, 2005, and reduced professional and consulting fees expended in 2006 when compared to 2005.
The interim financial statements and the Management’s Discussion and Analysis for the second quarter ended June 30, 2006, are accessible on Isotechnika’s Web site at www.isotechnika.com or on SEDAR at www.sedar.com.
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 treatment of autoimmune diseases and for use in the prevention of organ rejection in transplantation. Isotechnika looks to become the leader in development of immunosuppressant therapies.
Isotechnika’s lead compound, ISA247 is an immunosuppressant currently in an extension protocol of a Canadian Phase III human clinical trial for the treatment of moderate to severe psoriasis and a North American Phase IIb human clinical trial for the prevention of kidney graft rejection. The Company also has an additional immunosuppressive compound in its drug pipeline, TAFA93 which is in Phase I.
Isotechnika Inc. is a publicly traded company on the Toronto Stock Exchange under the symbol ISA. More information on Isotechnika can be found at 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 Sheets ------------------------------------------------------------------------- (expressed in thousands of Canadian dollars) June 30 December 31 2006 2005 (Unaudited) $ $ Assets Current assets Cash and cash equivalents 16,795 19,402 Short-term investments 22,182 33,425 Accounts receivable 381 447 Inventories 331 312 Prepaid expenses and other deposits 1,839 830 -------------------------- 41,528 54,416 Property and equipment 5,919 6,506 Patents 2,469 2,200 -------------------------- 49,916 63,122 -------------------------- -------------------------- Liabilities Current liabilities Accounts payable and accrued liabilities 3,413 5,649 Deferred revenue 2,370 3,489 Current portion of long-term debt 1,568 1,887 Current portion of deferred lease inducements 61 61 -------------------------- 7,412 11,086 Long-term debt 1,974 2,717 Deferred lease inducements 94 125 Deferred revenue 2,477 - -------------------------- 11,957 13,928 -------------------------- Shareholders’ Equity Share capital Common stock Authorized Unlimited number of common shares without par value Issued and outstanding 84,308,492 (December 31, 2005: 84,108,492) 158,254 157,812 Warrants 1,094 1,094 Contributed surplus 3,194 2,843 Deficit (124,583) (112,555) -------------------------- 37,959 49,194 -------------------------- 49,916 63,122 -------------------------- -------------------------- Isotechnika Inc. Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) ------------------------------------------------------------------------- (expressed in thousands of Canadian dollars, except numbers of shares and warrants) Common stock Warrants --------------------------------------------- Number Amount Number Amount # $ # $ Balance - December 31, 2005 84,108,492 157,812 1,293,147 1,094 Exercise of stock options 200,000 442 - - Issue of stock options - - - - Net loss for the period - - - - --------------------------------------------- Balance - June 30, 2006 84,308,492 158,254 1,293,147 1,094 --------------------------------------------- --------------------------------------------- Share- Contributed holders surplus Deficit equity ---------------------------------- Balance - December 31, 2,843 (112,555) 49,194 2005 Exercise of stock options (108) - 334 Issue of stock options 459 - 459 Net loss for the period - (12,028) (12,028) ---------------------------------- Balance - June 30, 2006 3,194 (124,583) 37,959 ---------------------------------- ---------------------------------- Isotechnika Inc. Consolidated Statements of Operations (Unaudited) ------------------------------------------------------------------------- (expressed in thousands of Canadian dollars, except per share amounts) Three Months Ended Six Months Ended June 30 June 30 June 30 June 30 2006 2005 2006 2005 $ $ $ $ Revenue Licensing revenue 703 - 1,964 - Product sales and contract analysis 341 250 677 634 --------------------------------------------- 1,044 250 2,641 634 --------------------------------------------- Expenses Research and development 5,369 6,130 10,357 11,927 Corporate, administration and marketing 1,893 1,903 3,604 4,609 Amortization of property and equipment 420 455 842 909 Product sales and contract analysis 143 158 305 431 Interest on long-term debt 82 117 177 240 Amortization of patent costs 8 14 16 26 Loss on disposal of equipment 29 3 29 7 --------------------------------------------- 7,944 8,780 15,330 18,149 --------------------------------------------- Loss before the undernoted (6,900) (8,530) (12,689) (17,515) --------------------------------------------- Other income (expense) Investment income 392 362 837 766 Foreign exchange translation gain (loss) (158) 180 (176) 333 --------------------------------------------- 234 542 661 1,099 --------------------------------------------- Net loss for the period (6,666) (7,988) (12,028) (16,416) --------------------------------------------- --------------------------------------------- Basic and diluted loss per share (0.08) (0.11) (0.14) (0.22) --------------------------------------------- --------------------------------------------- Weighted average number of common shares outstanding (in thousands) 84,296 75,144 84,251 75,013 --------------------------------------------- --------------------------------------------- Isotechnika Inc. Consolidated Statements of Cash Flows (Unaudited) ------------------------------------------------------------------------- (expressed in thousands of Canadian dollars) Three Months Ended Six Months Ended June 30 June 30 June 30 June 30 2006 2005 2006 2005 $ $ $ $ Cash provided by (used in) Operating activities Net loss for the period (6,666) (7,988) (12,028) (16,416) Items not affecting cash Amortization of deferred revenue (703) - (1,964) - Amortization of property and equipment 420 455 842 909 Amortization of patent costs 8 14 16 26 Loss on disposal of equipment 29 3 29 7 Amortization of deferred lease inducements (15) (22) (31) (45) Stock-based compensation 414 26 460 1,263 Unrealized foreign exchange translation loss (gain) related to non-operating activities 198 (161) 179 (228) --------------------------------------------- (6,315) (7,673) (12,497) (14,484) Licensing fee proceeds received 3,322 - 3,322 - Net change in other operating assets and liabilities (1,867) 347 (3,198) (1,093) --------------------------------------------- (4,860) (7,326) (12,373) (15,577) --------------------------------------------- Investing activities Decrease in short-term investments 5,276 3,826 10,944 9,060 Purchase of property and equipment (264) (60) (322) (127) Proceeds on sale of equipment 35 - 38 486 Patent costs (77) (54) (285) (99) --------------------------------------------- 4,970 3,712 10,375 9,320 --------------------------------------------- Financing activities Repayment of long-term debt (472) (434) (920) (855) Issuance of share capital 64 413 334 413 --------------------------------------------- (408) (21) (586) (442) --------------------------------------------- Effect of foreign exchange rate fluctuations on cash and cash equivalents (27) 90 (23) 116 --------------------------------------------- Decrease in cash and cash equivalents (325) (3,545) (2,607) (6,583) Cash and cash equivalents - Beginning of period 17,120 14,851 19,402 17,889 --------------------------------------------- Cash and cash equivalents - End of period 16,795 11,306 16,795 11,306 --------------------------------------------- --------------------------------------------- Cash and cash equivalents are comprised of: Cash on deposit 3,671 4,750 3,671 4,750 Money market securities and investment deposits 13,124 6,556 13,124 6,556 --------------------------------------------- 16,795 11,306 16,795 11,306 --------------------------------------------- ---------------------------------------------
Isotechnika Inc.
CONTACT: Dr. Randall Yatscoff, President & CEO, Isotechnika Inc., (780)487-1600 (246), (780) 484-4105 (fax), ryatscoff@isotechnika.com; DennisBourgeault, Chief Financial Officer, Isotechnika Inc., (780) 487-1600(226), (780) 484-4105 (fax), dbourgeault@isotechnika.com
