MONTREAL, Aug. 10 /PRNewswire-FirstCall/ - Neurochem Inc. today announced results for the second quarter ended June 30, 2005. The Company reported a net loss of $18.7 million ($0.54 per share) for the quarter, compared to $14.1 million ($0.47 per share) for the same period the previous year. For the six-month period ended June 30, 2005, the net loss amounted to $35.7 million ($1.08 per share), compared to $23.2 million ($0.77 per share) for the same period the previous year. The increase is mainly due to research and development (R&D) expenses which amounted to $12.9 million this quarter compared to $7.0 million for the same period last year. For the six-month period, R&D expenses were $24.9 million compared to $12.6 million for the corresponding period of the previous year. The increase in expenses was primarily a result of patient recruitment activities which were concluded on schedule in June 2005 for the North American Phase III clinical trial for Alzhemed(TM), Neurochem’s investigational product candidate for the treatment of Alzheimer’s disease (AD), efforts performed in relation to the launch of the European Phase III clinical trial for Alzhemed(TM) later in the year, as well as the advance of the Fibrillex(TM) program for the treatment of AA Amyloidosis.
At the end of the quarter the Company reported cash, cash equivalents and marketable securities of $75.7 million, up from $29.2 million on December 31, 2004. Following the close of the quarter, Neurochem received additional proceeds of approximately $8.8 million from the exercise of warrants by Picchio Pharma Inc. (Picchio Pharma).
“Having achieved significant milestones during this past quarter, we are pleased with the progress being made with regard to the clinical development of our key products,” said Francesco Bellini, Neurochem’s Chairman, President and CEO. “We will initiate the filing of a NDA (New Drug Application) with the U.S. FDA (Food and Drug Administration) for Fibrillex(TM) during the third quarter. As well, we expect to start patient recruitment in Europe in the fall for the Phase III clinical trial for Alzhemed(TM). I am proud to lead a Company of this caliber and potential, with a team so dedicated to bringing our product candidates to market,” he concluded.
Recent Developments
Following the end of the quarter, Neurochem was informed that it has been included as a founding member of the NASDAQ Health Care Index, a market value weighted index containing NASDAQ-listed companies classified as “Health”, “Pharmaceutical” or “Biotechnology”. According to NASDAQ, the new index provides market participants with new opportunities to own shares in the Company through additional investment vehicles.
Conference Call
Neurochem will host a conference call Thursday, August 11, 2005, at 8:30 A.M ET. The telephone numbers to access the conference call are 1-416-695-6370 or 1-877-461-2815. A replay of the call will be available until Thursday, August 18, 2005. The telephone numbers to access the replay of the call are 1-416-695-5275 or 1-866-518-1010. Please mention that you are calling for the Neurochem conference replay.
Consolidated Financial Results Highlights
The following information should be read in conjunction with the unaudited consolidated financial statements for the six-month period ended June 30, 2005, as well as the audited consolidated financial statements for the year ended December 31, 2004. For discussion regarding related-party transactions, contractual obligations and commercial commitments, critical accounting policies, recent accounting pronouncements, and risks and uncertainties, refer to the Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations as well as the Annual Information Form for the year ended December 31, 2004. All dollar figures are Canadian dollars, unless specified otherwise.
Results of operations
For the three-month period ended June 30, 2005, the net loss amounted to $18,694,000 ($0.54 per share), compared to $14,072,000 ($0.47 per share) for the corresponding period last year. For the six-month period ended June 30, 2005, the net loss amounted to $35,664,000 ($1.08 per share), compared to $23,236,000 ($0.77 per share) for the same period last year.
Revenues from collaboration agreement amounted to $822,000 for the current quarter ($2,027,000 for the six-month period) and consist of the revenue earned under the agreement with Centocor, Inc. (Centocor) in respect of Fibrillex(TM). Revenue recognized is in respect of the non-refundable upfront payment received from Centocor, which is being amortized over the remaining estimated period to the date the regulatory approvals of the investigational product candidate are anticipated. The estimated period is subject to change based on additional information that the Company may receive periodically.
Reimbursable costs revenue amounted to $213,000 for the current quarter ($657,000 for the six-month period) and consists of costs reimbursable by Centocor in respect of Fibrillex(TM) related activities. The Company does not earn any margin on these reimbursable costs.
Research and development expenses, before research tax credits and grants, amounted to $12,897,000 for the current quarter ($24,862,000 for the six-month period), compared to $7,008,000 for the same period last year ($12,585,000 for the six-month period). The increase is due primarily to expenses incurred in relation to the development of Alzhemed(TM) for the North American Phase III clinical trial and preparation for the European Phase III clinical trial. For the quarter and six-month period ended June 30, 2005, R&D expenses also include costs incurred to support the on-going Fibrillex(TM) Phase II/III open-label extension study, the on-going Alzhemed(TM) Phase II open-label extension study, as well as on-going drug discovery programs.
Research tax credits amounted to $532,000 this quarter ($941,000 for the six-month period), compared to $309,000 for the corresponding period last year ($621,000 for the six-month period). Research tax credits represent refundable tax credits earned under the Quebec Scientific Research and Experimental Development Program. The increase is due to higher eligible expenses during the current period.
General and administrative expenses totaled $5,917,000 for the current quarter ($11,082,000 for the six-month period), compared to $4,624,000 for the same quarter last year ($8,589,000 for the six-month period). The increase is attributable to the expansion of the corporate infrastructure to support growth and higher legal fees incurred in respect of the dispute with Immtech International, Inc. (Immtech). The expansion of corporate infrastructure includes an increase in operating costs related to the facilities acquired during the second quarter of 2004 and other corporate agreements and matters.
Reimbursable costs amounted to $213,000 for the current quarter ($657,000 for the six-month period) and consist of costs incurred on behalf of Centocor in respect of Fibrillex(TM) related activities and reimbursable by Centocor.
Stock-based compensation amounted to $2,292,000 for the current quarter ($3,062,000 for the six-month period), compared to $2,239,000 for the corresponding quarter last year ($2,663,000 for the six-month period). 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. For the quarter and six-month period ended June 30, 2005, stock-based compensation also includes expenses of $1,441,000 relating to 140,000 common shares to be issued to the Chairman, President and Chief Executive Officer, pursuant to an agreement signed in December 2004. Regulatory and shareholders’ approval were obtained during the current quarter.
Special charges amounted to nil for the quarter and six-month period ended June 30, 2005, compared to $2,085,000 for the quarter and six-month period ended June 30, 2004, and were related to the relocation to facilities acquired from Shire Biochem Inc. in May 2004.
Depreciation and amortization amounted to $575,000 for the current quarter ($1,145,000 for the six-month period), compared to $499,000 for the same quarter last year ($867,000 for the six-month period). The increase reflects the depreciation and amortization associated with the acquisition during the past year of additional property and equipment, including the facilities acquired in the second quarter of 2004, and the increase in patent costs.
Interest and bank charges amounted to $133,000 for the current quarter ($254,000 for the six-month period), compared to $24,000 for the same quarter last year ($48,000 for the six-month period). The increase is due to interest expense on the $10,500,000 revolving decreasing term credit facility entered into by the Company to finance the acquisition of the facilities in 2004.
Interest income amounted to $633,000 for the current quarter ($884,000 for the six-month period), compared to $253,000 for the same quarter last year ($575,000 for the six-month period). The increase results from higher average cash balances in the current period compared to the same period last year, due to proceeds received from the public offering in March 2005. Refer to the Liquidity and Capital Resources section for details.
Foreign exchange gains amounted to $1,406,000 for the current quarter ($1,632,000 for the six-month period), compared to $1,650,000 for the same quarter last year ($2,091,000 for the six-month period). 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 US dollars. The decrease is attributable to lower foreign exchange gains realized in the current quarter compared to the same period last year on the conversion of US dollars into Canadian dollars.
Other income amounted to $296,000 for the current quarter ($347,000 for the six-month period), compared to $85,000 for both the quarter and six-month period ended June 30, 2004. Other income consists of non-operating revenue, such as rental revenue.
Variable interest entities
On January 1, 2005, the Company adopted the recommendations of the CICA Accounting Guideline 15 - Consolidation of Variable Interest Entities (VIE). This guideline requires the Company to identify VIEs in which it has an interest, to determine whether it is the primary beneficiary of such entities and, if so, to consolidate the VIEs. The implementation of AcG-15 resulted in the consolidation of the Company’s interest in a holding company that owns Innodia Inc.'s shares, starting January 1, 2005. The effect of the implementation of this accounting guideline was to adjust the net carrying value of the long-term investment and the opening deficit by $2,501,000 at January 1, 2005. The revised carrying amounts of the long-term investment and non-controlling interest at January 1, 2005 were $3,359,000 and $1,439,000, respectively. The implementation of this accounting guideline resulted in the consolidation in the current quarter of a share of loss in a company subject to significant influence of $824,000 ($1,579,000 for the six-month period) and non-controlling interest of $245,000 ($470,000 for the six-month period), in the Consolidated Statement of Operations.
Litigation
In connection with an agreement concluded in 2002, Immtech 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 has been scheduled by the arbitral tribunal for mid-September 2005.
Immtech has claimed monetary damages which, to date, it has estimated at between a total of US$18 million and US$42 million, which includes an estimated valuation for equitable relief. The Company counterclaims damages which, to date, it has estimated at no less than US$3.5 million, which includes an estimated valuation for equitable relief. The outcome of this matter, or the likelihood and the amount of loss, if any, is not determinable. 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.
LIQUIDITY AND CAPITAL RESOURCES
As at June 30, 2005, the Company had available cash, cash equivalents and marketable securities of $75,727,000, compared to $29,173,000 at December 31, 2004. The increase is primarily due to proceeds received from the issue of additional share capital during the first quarter of 2005 (as described below), net of funds used in operations and in investing activities.
On March 9, 2005, the Company completed a public offering of its common shares in the United States and in Canada. The Company issued four million common shares at a price of US$15.30 per share. Total proceeds from the offering were $74,495,000 (US$61,200,000) and the issue costs totaled $4,955,000. Certain funds raised from the share issuance were denominated in U.S. dollars. The Company maintains a significant U.S. dollars position to serve as a natural hedge of exchange rate fluctuations with respect to planned U.S. dollar denominated research and development expenditures primarily relating to its phase III clinical programs. Net proceeds will be used to fund the clinical trials of the Company’s product candidates (primarily Alzhemed(TM)), other research and development programs, advancing Fibrillex(TM), working capital and general corporate purposes.
On July 25, 2005, Picchio Pharma exercised a warrant previously issued pursuant to a July 2002 private placement, generating total proceeds to the Company of $8,764,000 and the issuance of 2,800,000 common shares from treasury.
As at July 31, 2005, the Company had 37,379,393 common shares outstanding, 220,000 common shares issuable to the Chief Executive Officer upon the achievement of specified performance targets, 2,324,485 options granted under the stock option plan and 1,200,000 warrants issued and outstanding.
<< Consolidated Financial Information (unaudited) (1) (in thousands of Canadian dollars, except per share data) Consolidated Three-month period ended Six-month period ended Statements June 30 June 30 of Operations ------------------------------------------------------- 2005 2004 2005 2004 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (unaudited) (unaudited) (unaudited) (unaudited) Revenues: Collaboration agreement $822 - $2,027 - Reimbursable costs 213 - 657 - ------------------------------------------------------------------------- 1,035 - 2,684 - ------------------------------------------------------------------------- Expenses: Research and development 12,897 7,008 24,862 12,585 Research tax credits (532) (309) (941) (621) Research grants (10) (110) (19) (229) General and administrative 5,917 4,624 11,082 8,589 Reimbursable costs 213 - 657 - Stock-based compensation 2,292 2,239 3,062 2,663 Special charges - 2,085 - 2,085 Depreciation and amortization 575 499 1,145 867 Interest and bank charges 133 24 254 48 ------------------------------------------------------------------------- 21,485 16,060 40,102 25,987 ------------------------------------------------------------------------- Net loss before undernoted items: (20,450) (16,060) (37,418) (25,987) Interest income 633 253 884 575 Foreign exchange gain 1,406 1,650 1,632 2,091 Other income 296 85 347 85 Share of loss in a company subject to a significant influence (824) - (1,579) - Non-controlling interest 245 - 470 - ------------------------------------------------------------------------- Net loss ($18,694) ($14,072) ($35,664) ($23,236) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net loss per share: Basic ($0.54) ($0.47) ($1.08) ($0.77) Diluted ($0.54) ($0.47) ($1.08) ($0.77) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted average number of shares outstanding: Basic 34,646,842 30,162,322 33,056,654 30,013,058 Diluted 36,347,525 34,907,357 35,490,532 34,736,983 ------------------------------------------------------------------------- ------------------------------------------------------------------------- At At June 30 December 31 Consolidated Balance Sheets 2005 2004 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (unaudited) (audited) Cash, cash equivalents and marketable securities $75,727 $29,173 Other current assets 6,656 20,410 ------------------------------------------------------------------------- Total current assets 82,383 49,583 Restricted cash 7,354 - Long-term prepaid expenses and deposits 1,554 1,361 Long-term investment 1,780 4,421 Capital assets 20,704 21,083 ------------------------------------------------------------------------- Total assets $113,775 $76,448 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Current liabilities $17,790 $16,406 Deferred revenue 9,278 9,772 Long-term accrued liabilities 116 126 Long-term debt 9,475 9,450 Non-controlling interest 969 - Shareholders’ equity 76,147 40,694 ------------------------------------------------------------------------- Total liabilities and shareholders’ equity $113,775 $76,448 ------------------------------------------------------------------------- ------------------------------------------------------------------------- >> (1) Condensed from the Company’s unaudited consolidated financial statements. About Neurochem
Neurochem is focused on the development and commercialization of innovative therapeutics for neurological disorders. The Company’s pipeline of proprietary, disease-modifying oral products addresses critical unmet medical needs. 1,3-propanedisulfonate (1,3PDS; Fibrillex(TM)) is designated as an orphan drug and a Fast Track Product candidate and is also part of an FDA Continuous Marketing Applications Pilot 2 program. The Phase II/III clinical trial of Fibrillex(TM) for the treatment of AA Amyloidosis was recently concluded. The Company is in the process of submitting a NDA for Fibrillex(TM) that the FDA has agreed to file and review. 3-amino-1-propanesulfonic acid (3APS; Alzhemed(TM)), for the treatment of Alzheimer’s disease, is in a Phase III clinical trial and 3APS (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.
------------------------------------------------------------------------- For further information, please contact: Lise Hebert, Ph.D. Tel: 1-450-680-4570 Vice President, Corporate Communications lhebert@neurochem.com
NEUROCHEM INC.
CONTACT: Lise Hebert, Ph.D., Vice President, Corporate Communications,1-450-680-4570, lhebert@neurochem.com
