LAVAL, QC, May 9 /PRNewswire-FirstCall/ - Neurochem Inc. reported results for the first quarter ended March 31, 2006. The Company reported a net loss of $17,134,000 ($0.45 per share) for the quarter, compared to $16,970,000 ($0.54 per share) for the same period the previous year. The modest increase is due to research and development (R&D) expenses which amounted to $13,726,000 this quarter, compared to $11,965,000 for the same period the previous year, relating to tramiprosate's (Alzhemed(TM)) ongoing North American and European Phase III clinical trials. The increase in R&D was almost offset by the decrease in general and administrative expenses (G&A). G&A totalled $3,442,000 for the current quarter, compared to $5,165,000 the same quarter last year. The decrease in G&A is primarily attributable to a reduction in legal fees regarding the dispute with Immtech International, Inc. (recently renamed Immtech Pharmaceuticals, Inc.)
At the end of the quarter, the Company reported cash, cash equivalents and marketable securities of $59,595,000, compared to $71,091,000 on December 31, 2005. The decrease is primarily due to funds used in operations and investing activities.
"Neurochem is moving closer to bringing new hope to millions of people suffering from devastating illnesses," said Dr. Francesco Bellini, Neurochem's Chairman, President and CEO. "We are very pleased that the FDA filed the new drug application for Fibrillex(TM), which also received priority review. Neurochem continues to meet its objectives and we will continue to work closely with the FDA as the agency reviews the submission and prepares itself to render a decision on eprosidate (Fibrillex(TM)), for the treatment of AA amyloidosis. Alzhemed(TM)'s program is advancing through a Phase III clinical trial in North America and we are progressing well with patient recruitment for the Phase III clinical trial in Europe," he concluded.
Consolidated Financial Results Highlights
The following discussion and analysis should be read in conjunction with the Company's unaudited consolidated financial statements for the quarter ended March 31, 2006, as well as the Company's audited consolidated financial statements for the year ended December 31, 2005, which have been prepared in accordance with Canadian generally accepted accounting principles. For discussion regarding related-party transactions, contractual obligations, disclosure controls and procedures, critical accounting policies, recent accounting pronouncements, and risks and uncertainties, refer to the Annual Report and the Annual Information Form for the year ended December 31, 2005. All dollar figures are Canadian dollars, unless specified otherwise.
Results of operations
For the three-month period ended March 31, 2006, the net loss amounted to $17,134,000 ($0.45 per share), compared to $16,970,000 ($0.54 per share) for the corresponding period last year.
Revenue from collaboration agreement amounted to $607,000 for the current quarter, compared to $1,205,000 for the same period last year. This revenue is earned under the agreement with Centocor, Inc. (Centocor) in respect of eprodisate (Fibrillex(TM)), an oral investigational product candidate for the treatment of Amyloid A (AA) amyloidosis. Revenue recognized is in respect of the non-refundable upfront payment received from Centocor, which is being amortized over the estimated period through to the anticipated regulatory approval date of the investigational product candidate. The estimated period is subject to change based on additional information that the Company may receive periodically. The other portion of the upfront payment received from Centocor (U.S. $6,000,000) has been classified as deferred revenue and is not being amortized as earned revenues given that it is potentially refundable. In the event that the Company receives an approval letter issued by the U.S. Food and Drug Administration (FDA), the amount would no longer be refundable and would be amortized as earned revenue. In April 2006, the Company received notification from the FDA that it has filed and designated the eprodisate (Fibrillex(TM)) New Drug Application (NDA) for priority review, with a goal date of August 13, 2006, when the FDA is expected to render a decision.
Reimbursable costs revenue amounted to $230,000 for the current quarter, compared to $444,000 for the same period last year and consists of costs reimbursable by Centocor in respect of eprodisate (Fibrillex(TM)) related activities. The Company earns no margin on these reimbursable costs.
Research and development expenses, before research tax credits and grants, amounted to $13,726,000 for the current quarter, compared to $11,965,000 for the same period last year. The increase is primarily due to expenses incurred in relation to the development of tramiprosate (Alzhemed(TM)) for the ongoing Phase III clinical trials in North America and Europe. Tramiprosate (Alzhemed(TM)) is the Company's investigational product candidate for the treatment of Alzheimer's disease (AD). In July 2005, the Company completed the enrolment of 1,052 patients with mild-to-moderate AD for its North American Phase III clinical trial. The study duration is 18 months and the trial is being conducted in close to 70 clinical centers in the U.S. and in Canada. In September 2005, the Company launched its Phase III clinical trial in Europe, with 930 mild-to-moderate AD patients expected to participate. The study duration is also 18 months and the trial will be conducted in approximately 70 centers in ten European countries. As of March 31, 2006, 289 patients have been successfully screened and 175 of them were randomized in the European clinical trial. Enrollment for the European clinical trial is expected to be completed during the fall of 2006. The Phase III clinical trials on tramiprosate (Alzhemed(TM)) are designed to demonstrate the safety, efficacy and disease-modifying potential of the product candidate in the treatment of AD. In February 2006, the Company announced its intention to initiate during the second quarter of 2006 an 18-month open-label extension study for its ongoing North American Phase III clinical trial for tramiprosate (Alzhemed(TM)). In February 2006, the Company completed the submission of an NDA with the FDA for its investigational product candidate, eprodisate (Fibrillex(TM)). For the quarter ended March 31, 2006, research and development expenses also included costs incurred to support the on-going eprodisate (Fibrillex(TM)) Phase II/III open-label extension study, as well as on-going drug discovery programs. The Company expects research and development expenses to increase in the future as product candidates progress through the stages of clinical development and as the Company continues to invest in product research and development.
Research tax credits amounted to $520,000 this quarter, compared to $409,000 for the corresponding period last year. Research tax credits represent refundable tax credits earned under the Quebec Scientific Research and Experimental Development Program. The increase is mainly attributable to increased research and development expenses incurred in Quebec, eligible for refundable tax credits.
General and administrative expenses totaled $3,442,000 for the current quarter, compared to $5,165,000 for the same quarter last year. The decrease is primarily attributable to a reduction in legal fees with regards to the dispute with Immtech International, Inc. (Immtech) (now known as Immtech Pharmaceuticals, Inc.). See Litigation section below.
Reimbursable costs amounted to $230,000 for the current quarter, compared to $444,000 for the same period last year, and consist of costs incurred on behalf of Centocor in respect of eprodisate (Fibrillex(TM)) related activities and reimbursable by Centocor.
Stock-based compensation amounted to $916,000 for the current quarter, compared to $770,000 for the corresponding quarter last year. This expense relates to employee and director stock options, and stock-based incentives, whereby compensation cost is measured at fair value at the date of grant and is expensed over the award's vesting period. The increase is due to new stock options granted during the past twelve months.
Depreciation, amortization and write-off of patents amounted to $493,000 for the current quarter, compared to $570,000 for the same quarter last year. The decrease results mainly from the sale-leaseback transaction entered into by the Company in November 2005 in respect of its facilities and campus located in Laval, Quebec.
Interest and bank charges amounted to $27,000 for the current quarter, compared to $121,000 for the same quarter last year. The decrease is attributable to the reimbursement in November 2005, in connection with the sale-leaseback transaction, of the long-term debt previously contracted to finance the acquisition of facilities and campus from Shire BioChem Inc. in 2004.
Interest income amounted to $643,000 for the current quarter, compared to $251,000 for the same quarter last year. The increase is mainly attributable to higher average cash balances in the current quarter, compared to the same quarter last year. The higher average cash balance results from the net proceeds received from the public offering in March 2005, the exercise of warrants by a subsidiary of Picchio Pharma Inc. (Picchio Pharma) in July 2005 and February 2006, as well as the sale-leaseback transaction in November 2005. Furthermore, interest rates were higher during the current quarter compared to the same quarter last year. Please refer to the Liquidity and Capital Resources section for details on the warrant exercised in February 2006.
Foreign exchange loss amounted to $46,000 for the current quarter, compared to a gain of $226,000 for the same quarter last year. Foreign exchange gains or losses arise on the movement in foreign exchange rates related to the Company's net monetary assets held in foreign currencies, primarily U.S. dollars.
Other income amounted to $285,000 for the current quarter, compared to $51,000 for the same quarter last year. Other income consists of non-operating revenue, primarily sub-lease revenue.
Share of loss in a company subject to significant influence amounted to $816,000 and non-controlling interest amounted to $262,000 for the current quarter, compared to $755,000 and $225,000 respectively for the corresponding quarter last year. These items result from the consolidation of the Company's interest in a holding company that owns Innodia Inc. shares, for which Neurochem is the primary beneficiary. In March 2006, the Company invested an additional amount of $1,660,000 in that holding company in connection with a financing of Innodia Inc. As a result of the transaction, the Company's indirect equity investment in Innodia Inc. is approximately 23% of the issued and outstanding shares. Innodia Inc. is a private development stage company engaged in developing novel drugs for the treatment of type 2 diabetes and underlying diseases.
Litigation
In connection with an agreement concluded in 2002, Immtech (which changed its name on March 22, 2006, to Immtech Pharmaceuticals, Inc.) brought claims against the Company in legal proceedings filed on August 12, 2003, with the Federal District Court for the Southern District of New York, U.S.A. The dispute is now before an arbitral tribunal convened in accordance with the rules of the International Court of Arbitration. A hearing before the arbitral tribunal was held in mid-September 2005. Neurochem's external legal counsel was advised by the arbitral tribunal on May 5, 2006, that the hearing in this matter was closed as of April 17, 2006. The parties await the arbitral tribunal's award. The outcome of this matter and the amount of loss, if any, cannot reasonably be estimated. Accordingly, no provision for possible loss has been recorded by the Company in connection with this matter. The Company has, and will continue to, vigorously defend itself against claims brought by Immtech. See note 7 to the Consolidated Financial Statements.
Related party transactions Refer to note 6 of the Consolidated Financial Statements. LIQUIDITY AND CAPITAL RESOURCES
As at March 31, 2006, the Company had available cash, cash equivalents and marketable securities of $59,595,000, compared to $71,091,000 at December 31, 2005. The decrease is primarily due to funds used in operations and investing activities. The decrease is partially compensated by proceeds received from the exercise of a warrant by Picchio Pharma.
On February 16, 2006, Picchio Pharma, the Company's largest shareholder, exercised the warrant previously issued pursuant to a February 2003 private placement which was otherwise scheduled to expire on February 18, 2006, generating total proceeds to the Company of $9,372,000 and resulting in the issuance of 1,200,000 common shares from treasury.
As at April 30, 2006, the Company had 38,644,449 common shares outstanding, 220,000 common shares issuable to the Chief Executive Officer upon the achievement of specified performance targets and 2,477,787 options granted under the stock option plan.
<< Neurochem Inc. Consolidated Financial Information(1) (in thousands of Canadian dollars, except per share data) Three-month period ended March 31 ------------------------------------------------------------------------- Consolidated Statements of Operations 2006 2005 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (unaudited) (unaudited) Revenues: Collaboration agreement $ 607 $ 1,205 Reimbursable costs 230 444 ------------------------------------------------------------------------- 837 1,649 ------------------------------------------------------------------------- Expenses: Research and development 13,726 11,965 Research tax credits (520) (409) Research grants (15) (9) General and administrative 3,442 5,165 Reimbursable costs 230 444 Stock-based compensation 916 770 Depreciation, amortization and write-off of patents 493 570 Interest and bank charges 27 121 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 18,299 18,617 ------------------------------------------------------------------------- Net loss before undernoted items: (17,462) (16,968) Interest income 643 251 Foreign exchange gain (loss) (46) 226 Other income 285 51 Share of loss in a company subject to significant influence (816) (755) Non-controlling interest 262 225 ------------------------------------------------------------------------- Net loss ($17,134) ($16,970) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net loss per share: Basic ($0.45) ($0.54) Diluted ($0.45) ($0.54) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted average number of common shares outstanding: Basic 38,154,106 31,401,858 Diluted 38,154,106 34,568,931 ------------------------------------------------------------------------- ------------------------------------------------------------------------- At At March 31 December 31 Consolidated Balance Sheets 2006 2005 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (unaudited) (audited) Cash, cash equivalents and marketable securities $ 59,595 $ 71,091 Other current assets 14,031 13,298 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total current assets 73,626 84,389 Capital assets 10,474 10,327 Other long-term assets 4,164 2,230 ------------------------------------------------------------------------- Total assets $ 88,264 $ 96,946 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Current liabilities $ 20,162 $ 17,420 Deferred revenue 3,370 8,779 Deferred gain on sale of property 19,402 19,759 Long-term accrued liabilities 342 207 Non-controlling interest 1,492 509 Shareholders' equity 43,496 50,272 ------------------------------------------------------------------------- Total liabilities and shareholders' equity $ 88,264 $ 96,946 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) Condensed from the Company's unaudited consolidated financial statements. >> About Neurochem
Neurochem is focused on the development and commercialization of innovative therapeutics to address critical unmet medical needs. Eprodisate (Fibrillex(TM)) is designated as an orphan drug, is a Fast Track product candidate and is also part of the US Food and Drug Administration (FDA) Continuous Marketing Application Pilot 1 and Pilot 2 programs. In April 2006, the FDA filed and granted the eprodisate (Fibrillex(TM)) new drug application for priority review. Tramiprosate (Alzhemed(TM)), for the treatment of Alzheimer's disease, is currently in Phase III clinical trials in both North America and Europe and tramiprosate (Cerebril(TM)), for the prevention of Hemorrhagic Stroke caused by Cerebral Amyloid Angiopathy, has completed a Phase IIa clinical trial.
To Contact Neurochem
For additional information on Neurochem and its drug development programs, please call the North American toll-free number 1 877 680-4500 or visit our Web Site at: www.neurochem.com.
Certain statements contained in this news release, other than statements of fact that are independently verifiable at the date hereof, may constitute forward-looking statements. Such statements, based as they are on the current expectations of management, inherently involve numerous risks and uncertainties, known and unknown, many of which are beyond Neurochem's control. Such risks include but are not limited to: the impact of general economic conditions, general conditions in the pharmaceutical industry, changes in the regulatory environment in the jurisdictions in which Neurochem does business, stock market volatility, fluctuations in costs, and changes to the competitive environment due to consolidation, as well as other risks disclosed in public filings of Neurochem. Consequently, actual future results may differ materially from the anticipated results expressed in the forward- looking statements. The reader should not place undue reliance, if any, on the forward-looking statements included in this news release. These statements speak only as of the date made and Neurochem is under no obligation and disavows any intention to update or revise such statements as a result of any event, circumstances or otherwise. Please see the Annual Information Form for further risk factors that might affect the Company and its business.
Lise Hebert, Ph.D., Vice President, Corporate Communications,
(450) 680-4570, lhebert@neurochem.com
NEUROCHEM INC.CONTACT: Lise Hebert, Ph.D., Vice President, Corporate Communications,(450) 680-4570, lhebert@neurochem.com
