Ondine Biopharma Corporation Announces Third Quarter 2009 Financial Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - November 12, 2009) - Ondine Biopharma Corporation (the “Company” or “Ondine”) (TSX: OBP)(AIM: OBP) a medical device company developing photodisinfection based products, today announced its financial results for the third quarter ended September 30, 2009.

“During the third quarter of 2009, we advanced several of our photodynamic product development initiatives, including an innovative cordless laser photodisinfection system with applications in both new medical and existing dental markets,” said Carolyn Cross, Ondine’s Chairman & CEO. “Subsequent to regulatory approval we expect to supply the new laser to Periowave Dental Technologies, Inc. through our existing manufacturing contract, further enhancing the broad appeal of the Periowave™ photodisinfection system. The lightweight, powerful unit is also ideally suited for a range of medical applications, in both professional and consumer markets. Our research and development efforts are now focused on large clinically-unmet needs in such medical markets, with several products including our groundbreaking MRSAid™ photodisinfection system nearing completion. MRSAid™ represents a completely new method for controlling MRSA superbug carriage in the nose, a primary source of hospital-acquired infections. Cost control, in these financial markets, also continues to be a strategic imperative. We are pleased with our ability to deliver on product development milestones with significantly reduced budgets, and we hope to continue our progress towards developing our medical product pipeline.”

FINANCIAL RESULTS

For the three months ended September 30, 2009 (the “Third Quarter 2009") the Company recorded a loss of $1.58 million, or $0.02 per common share, compared with a loss of $3.25 million, or $0.05 per common share, for the three months ended September 30, 2008 (the “Third Quarter 2008"). Product sales revenue for Periowave™ laser base stations and treatment kits for the Third Quarter 2009 was $0.032 million generating a gross margin of $0.013 million (41.2%) compared to product sales for the Third Quarter 2008 of $0.15 million and a negative gross margin of $0.27 million after a $0.38 million provision for excess and obsolete inventory. The lower sales in the Third Quarter 2009 are primarily due to the sale of the Company’s Dental Healthcare Business that occurred in June 2009.

For the nine months ended September 30, 2009 (the “First Nine Months of 2009"), the Company recorded a loss of $3.37 million or $0.04 per common share compared with a loss of $8.15 million or $0.13 per common share during the nine months ended September 30, 2008 (the “First Nine Months of 2008"). Product sales of our laser base stations and treatment kits during the First Nine Months of 2009 amounted to $0.54 million with a gross margin of $0.35 million (63.9%) compared to product sales of $0.61 million and a gross margin of $0.04 million (7.8%) during the First Nine Months of 2008. The results for the First Nine Months 2009 include a gain of $0.68 million on the sale of the Company’s Dental Healthcare Business and a $ 0.63 million loss on disposal and write-down of the Company’s investment in Grafton Resource Investments Ltd. (the “Grafton Fund”) as further described below.

RECENT DEVELOPMENTS

On September 22, 2009 the Company sold 21,000 Ordinary Shares of its investment in the Grafton Fund for cash proceeds of $618,000 (US$577,500). Ondine acquired its investment in the Grafton Fund shares via a share exchange transaction executed in June 2009. The Company recognized a pre-tax loss of $341,000 on this sale. The Company has elected to write-down the carrying value of its remaining 18,042 shares in the Grafton Fund by $288,956 based on the price per unit obtained by the Company in the sale made in September 2009.

Financial Review

The results for the First Nine Months of 2009 were significantly impacted by the sale of the Company’s Dental Healthcare Business to Periowave Dental Technologies Inc. (PDT) that occurred on June 5, 2009. The Company recognized a gain of $683,000 on the sale during the second quarter of 2009. In addition, for the First Nine Months of 2009 the Company recorded consulting fees revenue of $215,000 in connection with a management services agreement with PDT, $159,000 of which relates to the Third Quarter 2009. Subsequent to the closing of the sale all of the Company’s sales were made to the purchaser, PDT, under a manufacturing agreement. As part of the sale PDT acquired an inventory of Periowave™ laser base systems and treatment kits.

The $1.67 million decrease in loss for the Third Quarter 2009, when compared to the Third Quarter 2008, was primarily due to expense reductions, as further described below, in research and development (40%), general and administration (59%), and marketing and sales expenses (96%), which were partially offset by a $0.63 million loss on sale and write-down of the Company’s investment in the Grafton Fund as described above.

The Company intends to focus its resources on new product development of a selective number of applications of its platform PDD technology, including the MRSAid™ product for decolonization of MRSA in the anterior nares. During the Third Quarter 2009, the Company continued to invest in research and development including, among other things, the tasks required to enable the Company to file a premarket approval (“PMA”) submission with the United States Food and Drug Administration (“FDA”) to market Periowave ™ in the United States, which is now expected to be filed in the fourth quarter of 2009, and the continued development of our MRSAid™ product. The Company believes that it is nearing completion of the FDA submission. The experience gained in the preparatory work required for the PMA submission, including extensive development of the quality management system and the worldwide clinical study work done to date, is expected to be of benefit in obtaining regulatory approval for the new PDD products currently under development. Research and development expenses for the Third Quarter 2009 were $0.68 million, a decrease of $0.45 million when compared to $1.13 million incurred during the Third Quarter 2008. The bulk of the reduction of R&D expenses related to activities no longer required in the Third Quarter 2009.

General and administration expenses for the Third Quarter 2009 were $0.45 million, a decrease of $0.66 million when compared to $1.11 million incurred during the Third Quarter 2008. Marketing and sales expenses for the Third Quarter 2009 were $0.02 million, a decrease of $0.45 million when compared to $0.47 million incurred during the Third Quarter 2008. The reduction in general and administration expenditures were primarily due to decreases in personnel, consulting, and support activities resulting from our restructuring efforts. The reduction in marketing and sales expenses was primarily due to the sale of the Company’s Dental Healthcare Business that occurred in June of 2009.

As at September 30, 2009 the Company had cash and cash equivalents totaling $0.95 million compared with $1.03 million as at December 31, 2008. During the First Nine Months of 2009 the Company used approximately $2.61 million of cash for its operating activities, received an interest free loan of $0.4 million from Carolyn Cross that was repaid during the period and received cash proceeds of $1.29 million, net of issue costs, and an investment in the Grafton fund of $1.78 million from the issuance of an aggregate 31,866,693 common shares in three non-brokered private placements. Carolyn Cross participated in each of the cash private placements completed during the First Nine Months of 2009 to the maximum allowed under the rules of the Toronto Stock Exchange without shareholder approval. In September 2009, the Company liquidated 21,000 shares of its investment in the Grafton fund raising net cash proceeds of $0.62 million. The Company may elect to liquate the balance of its investment in Grafton fund consisting of 18,042 shares, prior to the end of 2009 to raise additional funds to finance the Company’s operations. The Grafton Fund is listed on the Irish Stock Exchange (ISE); however, the shares have not traded on that exchange and financial liquidity can not be assured.

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 if it is not able to liquidate its investment in the Grafton fund in the manner described above. Although there has been some improvement in market conditions in the capital marketplace, 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.

As at September 30, 2009 the Company had 93,225,869 common shares outstanding.

Additional analysis of the Company’s financial results for the Third Quarter 2009 is included in our management’s discussion and analysis of financial condition and results of operations (MDA) for the quarter ended September 30, 2009, which will be available on the Company’s website and on www.sedar.com.

About Ondine Biopharma Corporation

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. Photodisinfection provides broad-spectrum antimicrobial efficacy without encouraging the formation and spread of antibiotic resistance. The Company is based 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.ondinebiopharma.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; and 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 Biopharma Corporation Incorporated under the laws of British Columbia CONSOLIDATED BALANCE SHEETS As at (Unaudited - expressed in Canadian dollars) -------------------------------------------------------------------------- September 30, December 31, 2009 2008 $ $ -------------------------------------------------------------------------- ASSETS Current Cash and cash equivalents 953,901 1,033,248 Accounts receivable 107,113 416,352 Inventories 219,442 283,877 Prepaid expenses and deposits 181,892 321,202 -------------------------------------------------------------------------- Total current assets 1,462,348 2,054,679 Investment 534,607 - Capital assets 515,571 651,878 Intangible assets 190,890 239,853 -------------------------------------------------------------------------- 2,703,416 2,946,410 -------------------------------------------------------------------------- -------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS’ EQUITY Current Accounts payable and accrued liabilities 900,763 1,334,572 Income taxes payable 19,558 37,800 Current portion of deferred tenant inducement 49,054 45,276 Deferred revenue 127,188 - Future income tax 43,172 82,355 -------------------------------------------------------------------------- Total current liabilities 1,139,735 1,500,003 Deferred tenant inducement, net of current portion 71,937 109,149 -------------------------------------------------------------------------- Total liabilities 1,211,672 1,609,152 -------------------------------------------------------------------------- Shareholders’ equity Share capital 54,032,487 51,336,368 Contributed surplus 4,914,646 4,087,139 Deficit (57,455,389) (54,086,249) -------------------------------------------------------------------------- Total shareholders’ equity 1,491,744 1,337,258 -------------------------------------------------------------------------- 2,703,416 2,946,410 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Ondine Biopharma Corporation CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS (Unaudited - expressed in Canadian dollars) -------------------------------------------------------------------------- Three months ended Nine months ended September 30, September 30, --------------------- ---------------------- 2009 2008 2009 2008 $ $ $ $ -------------------------------------------------------------------------- REVENUE Product sales 32,532 147,923 542,293 610,338 Cost of sales 19,128 422,066 195,620 562,457 -------------------------------------------------------------------------- Gross margin 13,404 (274,143) 346,673 47,881 Consulting fees 159,317 - 215,495 - -------------------------------------------------------------------------- 172,721 (274,143) 562,168 47,881 -------------------------------------------------------------------------- EXPENSES Research and development 680,256 1,133,621 2,063,890 3,402,048 General and administration 448,923 1,105,039 1,425,833 2,784,696 Marketing and sales 17,548 470,176 454,102 1,707,415 Depreciation and amortization 60,768 69,996 183,077 251,655 Write-down of inventory deposit - 232,000 - 232,000 -------------------------------------------------------------------------- (1,207,495) (3,010,832) (4,126,902) (8,377,814) -------------------------------------------------------------------------- Other income/(expense) Sale of dental business - - 683,388 - Loss on sale and write-down of investment (629,618) - (629,618) - Interest and other income 13,351 23,998 13,712 147,230 Foreign exchange gain 39,810 9,660 98,889 36,167 -------------------------------------------------------------------------- (576,457) 33,658 166,371 183,397 Loss before income taxes (1,611,231) (3,251,317) (3,398,363) (8,146,536) Future income tax recovery 29,223 - 29,223 - -------------------------------------------------------------------------- Loss for the period (1,582,008) (3,251,317) (3,369,140) (8,146,536) Unrealized gain on investments - 66 - 1,014 -------------------------------------------------------------------------- Comprehensive loss for the period (1,582,008) (3,251,251) (3,369,140) (8,145,522) -------------------------------------------------------------------------- -------------------------------------------------------------------------- Basic and diluted loss per common share (0.02) (0.05) (0.04) (0.13) -------------------------------------------------------------------------- -------------------------------------------------------------------------- Weighted average number of common shares outstanding 93,225,869 61,357,727 78,068,042 61,247,653 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Ondine Biopharma Corporation CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited - expressed in Canadian dollars) -------------------------------------------------------------------------- Accum- ulated Other Total Contrib- Compre- Share- Number of Share uted hensive holders’ Common Capital Surplus Deficit Income Equity Shares $ $ $ $ $ -------------------------------------------------------------------------- Balance, December 31, 2007 61,027,675 51,193,823 3,467,847 (43,816,528) (1,204) 10,843,938 Common shares issued for cash during the year for: Exercise of options 331,501 82,875 - - - 82,875 Stock-based compensation - - 678,962 - - 678,962 Reallocation of contributed surplus arising from stock-based compensation on exercise of stock options - 59,670 (59,670) - - - Loss for the year - - - (10,269,721) - (10,269,721) Reclass- ification of unrealized loss on short-term investments - - - - 1,204 1,204 -------------------------------------------------------------------------- Balance, December 31, 2008 61,359,176 51,336,368 4,087,139 (54,086,249) - 1,337,258 Common shares issued for cash during the period for: Private placement (net of issue costs) 8,620,168 497,671 - - - 497,671 Private placement (net of issue costs) 8,395,275 503,054 347,293 - - 850,347 Common shares issued for acquisition of an investment during the period for: Private placement (net of issue costs) 14,851,250 1,695,394 27,870 - - 1,723,264 Stock-based compensation - - 452,344 - - 452,344 Loss for the period - - - (3,369,140) - (3,369,140) -------------------------------------------------------------------------- Balance, September 30, 2009 93,225,869 54,032,487 4,914,646 (57,455,389) - 1,491,744 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Ondine Biopharma Corporation CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited - expressed in Canadian dollars) -------------------------------------------------------------------------- Three months ended Nine months ended September 30, September 30, ---------------------- ---------------------- 2009 2008 2009 2008 $ $ $ $ -------------------------------------------------------------------------- OPERATING ACTIVITIES Loss for the period (1,582,008) (3,251,317) (3,369,140) (8,146,536) Add (deduct) items not affecting cash: Depreciation and amortization 60,768 69,996 183,077 251,655 Gain on sale of assets - - (683,388) - Loss on sale and write-down of investment 629,618 - 629,618 - Stock-based compensation 160,820 204,193 452,344 503,457 Deferred tenant inducement (11,843) (10,583) (33,434) (23,333) Unrealized foreign exchange loss - 3,008 - 4,929 Changes in non-cash working capital items relating to operations: Accounts receivable 307,491 288,929 309,239 327,960 Inventories 23,296 338,095 15,418 282,183 Prepaid expenses and deposits 22,205 128,235 137,115 139,574 Accounts payable and accrued liabilities (449,348) (61,559) (319,748) (722,071) Deferred revenue 127,188 - 127,188 - Income taxes payable (1,686) 1,381 (18,242) 2,262 Future income tax (35,464) - (39,183) - -------------------------------------------------------------------------- Cash used in operating activities (748,963) (2,289,622) (2,609,136) (7,379,920) -------------------------------------------------------------------------- FINANCING ACTIVITIES Issuance of equity securities, net of costs - 4,166 1,289,132 82,875 Loan proceeds - - 400,000 - Repayment of loan - - (400,000) - -------------------------------------------------------------------------- Cash provided by financing activities - 4,166 1,289,132 82,875 -------------------------------------------------------------------------- INVESTING ACTIVITIES Net redemptions of short-term investments - (15,517) - 3,732,143 Purchase of capital assets - (4,031) - (92,009) Proceeds from sale of assets - - 622,732 - Proceeds from sale of investment 617,925 - 617,925 - Acquisition of intangible asset - (172,239) - (172,239) -------------------------------------------------------------------------- Cash provided by (used in) investing activities 617,925 (191,787) 1,240,657 3,467,895 -------------------------------------------------------------------------- Decrease in cash and cash equivalents during the period (131,038) (2,477,243) (79,347) (3,829,150) Cash and cash equivalents, beginning of period 1,084,939 3,188,338 1,033,248 4,540,245 -------------------------------------------------------------------------- Cash and cash equivalents, end of period 953,901 711,095 953,901 711,095 -------------------------------------------------------------------------- -------------------------------------------------------------------------- 

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