TORONTO, March 29 /PRNewswire-FirstCall/ - Predictive medicine company PreMD Inc. today announced audited financial results for the year ended December 31, 2006 and provided investors with an operating update and outlook for fiscal 2007.
“Last year, we made tremendous in-roads with the PREVU(x) product line of skin cholesterol tests including the expansion into new retail pharmacy chains; the Canadian and European approval of our second PREVU(x) test, PREVU(x) LT; and the compilation of data to support a new regulatory claim for PREVU(x) as a cardiovascular risk assessment test for future heart attacks and stroke,” said Dr. Brent Norton, President and Chief Executive Officer of PreMD. “The transition of PREVU(x), since reacquiring the rights at the end of December, has gone smoothly. We established relationships with customers, suppliers and other key contacts and have made considerable progress on the implementation of third party logistics. Importantly, we are building momentum with our direct sales, specifically into the retail pharmacy segment. In this regard, we have further developed the relationship with Wal-Mart Quebec and advanced the collaboration with Medivon LLC who has been instrumental in expanding the affiliation with Costco while bringing PREVU(x) POC into additional retailers Winn-Dixie and Publix.”
Dr. Norton continued, “looking ahead, we are in advanced discussions with potential marketing partners for PREVU(x) and are focused on increasing the market opportunity for the technology. In that regard, we plan to work closely with the FDA to provide the information the agency suggested surrounding our 510(k) submission for PREVU(x) LT. The life insurance segment of the market provides us with a tremendous opportunity. In addition, expanding the regulatory claim for PREVU(x) as a risk assessment test for risk of a future heart attack and stroke is another catalyst for growth. To this end, the investigators involved in the PASA study are analyzing the data and have prepared a manuscript for publication in a leading medical journal. The PASA data will also form the basis for a submission to the FDA for the expanded claim. We anticipate filing this submission during the second quarter.”
Fiscal 2007 Objectives ---------------------- PREVU(x) Technology (1) Expand the market for PREVU(x) - Utilizing the data from the PASA study, seek a new regulatory claim that would approve PREVU(x) as a risk assessment tool for risk of future heart attack and stroke - this would be the first cost-effective, non-invasive test on the market for such an indication. - Leverage the technology for utility beyond cardiovascular disease; in conjunction with a potential partner, a clinical assessment is under evaluation regarding skin testing for use in the cosmetics market. (2) Achieve regulatory clearance in the U.S. for PREVU(x) LT - PreMD plans to work closely with the FDA regarding its 510(k) application for PREVU(x) LT for use in the life insurance industry. PreMD is preparing its response to information the FDA suggested. - Relationships with insurance companies are progressing and both internal and consultant actuaries are assessing the technology. (3) Enter into a marketing partnership for PREVU(x) - Discussions are in advanced stages and continuing with potential partners. - PreMD likely to manage the life insurance and retail markets directly. Oncology Pipeline (1) Continue to advance cancer clinical program - The LungAlert(TM) I-ELCAP study has enrolled over 2,500 patients to date. Interim data is encouraging. - Enrollment in the ColorectAlert(TM) EDRN study sponsored by the U.S. National Cancer Institute is progressing well with one-third of the patients enrolled. A reportable interim analysis is possible. - The breast cancer test study at the University of Louisville has enrolled 42 patients. While the timing is slower than initially anticipated, the study is expected to be completed by the end of the second quarter. This study is intended to confirm and extend earlier published findings that show a positive relationship between the breast cancer test and stage I breast cancer. (2) Conclude a strategic partnership for the complete line of PreMD’s oncology products - Partnership discussions are underway.
“The data collected so far from the various on-going cancer studies is promising. These studies will define the performance characteristics of the technology in the early detection of lung, colorectal and breast cancer, three of the most common causes of cancer,” said Dr. Norton. “Our portfolio of cancer screening products is attracting attention from potential partners and we believe there is an opportunity to capture great value from the work we have done in this area.”
“In addition to the progress we have made with our technology and products, we have also engaged in discussions with the law firm that was previously responsible for managing our patent portfolio. Our discussions center around the U.S. Patent and Trademark Office’s findings that two patents surrounding the skin tissue cholesterol technology lapsed as a result of the law firm’s failure to use its established docketing procedures regarding payment of the maintenance fees. We have entered into talks and look forward to a resolution resulting in receiving a monetary settlement.”
Financial Review (All amounts are in Canadian dollars)
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For the year ended December 31, 2006, PreMD reported total revenue of $3,335,000, consisting of $7,000 in product sales to McNeil, the Company’s licensee through December 28, 2006, and $3,329,000 in license revenue. Upon termination of the agreements on December 28, 2006, the balance of the deferred revenues, representing the unamortized portion of the up-front payments received from the licensee, was recognized as license revenue. The revenue for the full year ended December 31, 2005 was $1,579,000, which consisted of $426,000 in product sales to McNeil and $1,153,000 in license revenue.
The consolidated loss for the year was $5,949,000 or $(0.27) per share compared with a loss of $4,990,000 or $(0.23) for the year ended December 31, 2005.
Research and development expenditures for the year increased by $1,654,000 to $4,774,000 from $3,120,000 in 2005. The increase is related to:
- an increase of $1,673,000 in spending on clinical trials, particularly related to the completion of several large trials for skin cholesterol in support of additional regulatory submissions, as well as advancement of the lung cancer trial (the “I-ELCAP” study); - an increase of $77,000 in product liability insurance; - a decrease of $173,000 in subcontract research due to the completion of the development of the second-generation color reader for PREVU(x) POC - a decrease in compensation of $41,000.
General and administration expenses amounted to $3,025,000 in 2006, compared with $2,691,000 in 2005, an increase of $334,000. The variance primarily reflects:
- a payment of $175,000 upon settlement of litigation and completion of an amendment to the ColorectAlert License Agreement on January 5, 2007; and related legal expenses of approximately $330,000; - an increase in market research expenses of $46,000; - a reduction of $44,000 in expenses (from $44,000 to nil) relating to a prior year’s unsolicited offer to acquire the shares of another company; - a reduction in compensation of $105,000 and lower investor relations and annual report costs; - a reduction of $38,000 in stock-based compensation for options for administrative personnel and consultants resulting in a non-cash expense of $384,000 compared with $422,000 in 2005.
Interest on convertible debentures (issued on August 30, 2005) amounted to $678,000 in 2006 compared to $228,000 in 2005. The debentures bear interest at an annual rate of 7%, payable quarterly in either cash or stock. In 2006, $281,000 of the interest expense was paid in stock, rather than cash, compared with nil in 2005. Imputed interest of $820,000 (compared with $256,000 in 2005) represents the expense related to the accretion of the liability component at an effective interest rate of 12.75%.
Amortization expenses for equipment and acquired technology for 2006 amounted to $180,000 compared with $210,000 in 2005. Leasehold improvements in the research facilities and purchases of equipment to support administration, clinical trials and manufacturing amounted to $25,000 in 2006 and $130,000 in 2005. In addition, the PREVU(x) trademark was purchased from the former licensee of the skin cholesterol technology for $150,000. Amortization of deferred financing fees amounted to $139,000 for 2006 compared to $43,000 in 2005. The financing fees are amortized over the four-year life of the convertible debentures.
Recoveries of provincial scientific investment tax credits (ITCs) amounted to $200,000 compared with $198,923 in 2005. Interest income amounted to $265,369 compared with $173,130 for 2005.
At December 31, 2006, PreMD had cash, cash equivalents and short-term investments totaling $3,276,000. On March 28, 2007, PreMD announced that it had raised $3.9 million in a private placement with existing institutional investors. The Company believes that its current financial resources will be sufficient to meet the Company’s current operating and capital requirement through 2008.
Financial statements are attached to this press release. PreMD’s complete fiscal 2006 annual report is available at www.sedar.com.
------------------------------------------------------------------------- Conference Call and Webcast PreMD will hold a conference call and webcast today, March 29, 2007, at 10:30 a.m. ET. To access the conference call, please dial 416-915-5651 or 1-800-588-4942. A live audio webcast will be available at www.premdinc.com, and will be subsequently archived for three months. To access the replay via telephone, which will be available until April 5, 2007, please dial 416-640-1917 or 1-877-289-8525 and enter the passcode 21225267 followed by the number sign. ------------------------------------------------------------------------- About PreMD
PreMD Inc. is a leader in predictive medicine, dedicated to developing rapid, non-invasive tests for the early detection of life-threatening diseases. PreMD’s cardiovascular products are branded as PREVU(x) Skin Cholesterol Test. The company’s cancer tests include ColorectAlert(TM), LungAlert(TM) and a breast cancer test. PreMD’s head office is located in Toronto, Ontario and its research and product development facility is at McMaster University in Hamilton, Ontario. For further information, please visit www.premdinc.com.
This press release contains forward-looking statements. These statements 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 successful development or marketing of the Company’s products, the competitiveness of the Company’s products if successfully commercialized, the lack of operating profit and availability of funds and resources to pursue R&D projects, the successful and timely completion of clinical studies, product liability, reliance on third-party manufacturers, the ability of the Company to take advantage of business opportunities, uncertainties related to the regulatory process, and general changes in economic conditions.
In addition, while the Company routinely obtains patents for its products and technology, the protection offered by the Company’s patents and patent applications may be challenged, invalidated or circumvented by our competitors and there can be no guarantee of our ability to obtain or maintain patent protection for our products or product candidates.
Investors should consult the Company’s quarterly and annual filings with the Canadian and U.S. securities commissions for additional information on risks and uncertainties relating to the forward-looking statements. Investors are cautioned not to rely on these forward-looking statements. PreMD is providing this information as of the date of this press release and does not undertake any obligation to update any forward-looking statements contained in this press release as a result of new information, future events or otherwise.
(x)Trademark (Tables Follow) PreMD Inc. Incorporated under the laws of Canada CONSOLIDATED BALANCE SHEETS (In Canadian dollars) As at December 31 2006 2005 $ $ ------------------------------------------------------------------------- ASSETS Current Cash and cash equivalents 112,577 773,199 Short-term investments 3,163,482 7,905,883 Accounts receivable 11,221 881,891 Inventory 179,219 36,306 Prepaid expenses and other receivables 570,773 317,264 Investment tax credits receivable 200,000 200,000 ------------------------------------------------------------------------- Total current assets 4,237,272 10,114,543 ------------------------------------------------------------------------- Deferred financing fees, net of accumulated amortization of $174,863 (2005 - $43,059) 347,589 477,725 Capital assets, net 312,410 410,636 Intangible assets, net of accumulated amortization of $915,027 (2005 - $856,970) 382,229 290,286 ------------------------------------------------------------------------- 5,279,500 11,293,190 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIENCY) Current Accounts payable 963,990 291,125 Accrued liabilities 932,372 655,113 Current portion of deferred revenue - 311,915 ------------------------------------------------------------------------- Total current liabilities 1,896,362 1,258,153 ------------------------------------------------------------------------- Convertible debentures 6,350,680 5,893,340 Deferred revenue - 2,297,400 ------------------------------------------------------------------------- Total liabilities 8,247,042 9,448,893 ------------------------------------------------------------------------- Shareholders’ equity (deficiency) Capital stock 25,263,480 24,449,826 Contributed surplus 2,521,915 1,840,979 Equity component of convertible debentures 2,239,385 2,393,145 Warrants 1,170,020 1,373,718 Deficit (34,162,342) (28,213,371) ------------------------------------------------------------------------- Total shareholders’ equity (deficiency) (2,967,542) 1,844,297 ------------------------------------------------------------------------- 5,279,500 11,293,190 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT (In Canadian dollars) Years ended December 31 2006 2005 2004 $ $ $ ------------------------------------------------------------------------- REVENUE Product sales 6,513 425,730 183,258 License revenue 3,328,827 1,153,308 302,080 ------------------------------------------------------------------------- 3,335,340 1,579,038 485,338 Cost of product sales, including amortization of nil (2005 - $3,456; 2004 - $6,600) 36,824 428,650 190,214 ------------------------------------------------------------------------- Gross profit 3,298,516 1,150,388 295,124 ------------------------------------------------------------------------- EXPENSES Research and development 4,773,762 3,120,276 2,612,770 General and administration 3,024,811 2,690,790 3,346,720 Interest on convertible debentures 677,723 228,481 - Imputed interest on convertible debentures 819,609 255,529 - Amortization 319,205 252,804 224,428 Loss (gain) on foreign exchange 97,746 (35,734) 8,731 ------------------------------------------------------------------------- 9,712,856 6,512,146 6,192,649 ------------------------------------------------------------------------- RECOVERIES AND OTHER INCOME Investment tax credits 200,000 198,923 205,000 Interest 265,369 173,130 123,626 ------------------------------------------------------------------------- 465,369 372,053 328,626 ------------------------------------------------------------------------- Net loss for the year (5,948,971) (4,989,705) (5,568,899) Deficit, beginning of year (28,213,371) (23,223,666) (17,654,767) ------------------------------------------------------------------------- Deficit, end of year (34,162,342) (28,213,371) (23,223,666) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted loss per share $ (0.27) $ (0.23) $ (0.26) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted average number of common shares outstanding 21,663,698 21,487,008 21,276,497 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS (In Canadian dollars) Years ended December 31 2006 2005 2004 $ $ $ ------------------------------------------------------------------------- OPERATING ACTIVITIES Net loss for the year (5,948,971) (4,989,705) (5,568,899) Add (deduct) items not involving cash Amortization 319,205 256,260 231,028 Stock-based compensation costs included in Research and development expense 156,920 147,085 123,925 General and administration expense 383,767 421,812 476,164 Loss (gain) on sale of capital asset (1,743) - 6,098 Imputed interest on convertible debenture 819,609 255,529 - Interest on convertible debenture paid in common shares 281,462 - - Loss (gain) on foreign exchange 97,748 (35,734) 8,731 Net change in non-cash working capital balances related to operations 1,422,730 (1,061,397) 535,284 Increase (decrease) in deferred revenue (2,609,315) (301,885) 2,818,100 ------------------------------------------------------------------------- Cash used in operating activities (5,078,588) (5,308,035) (1,369,569) ------------------------------------------------------------------------- INVESTING ACTIVITIES Short-term investments 4,589,356 (3,065,568) 1,678,190 Purchase of trademark (150,000) - - Purchase of capital assets (24,965) (130,310) (164,789) Sale of capital assets 3,000 - 628 ------------------------------------------------------------------------- Cash provided by (used in) investing activities 4,417,391 (3,195,878) 1,514,029 ------------------------------------------------------------------------- FINANCING ACTIVITIES Issuance of convertible debentures - 9,827,616 - Financing fees (51,399) (861,328) - Issuance of capital stock, net of issue costs - 198,400 33,373 ------------------------------------------------------------------------- Cash provided by (used in) financing activities (51,399) 9,164,688 33,373 ------------------------------------------------------------------------- Effect of exchange rate changes on cash and cash equivalents 51,974 (127,034) - ------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents during the year (660,622) 533,741 177,833 Cash and cash equivalents, beginning of year 773,199 239,458 61,625 ------------------------------------------------------------------------- Cash and cash equivalents, end of year 112,577 773,199 239,458 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Represented by Cash 112,577 773,199 173,302 Cash equivalents - - 66,156 ------------------------------------------------------------------------- 112,577 773,199 239,458 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Supplemental cash flow information Cash paid during the year for interest 396,261 228,481 - ------------------------------------------------------------------------- -------------------------------------------------------------------------
PreMD Inc.
CONTACT: Brent Norton, President and CEO, Tel: (416) 222-3449 ext. 22,Email: bnorton@premdinc.com; Ron Hosking, Vice President Finance and CFO,Tel: (416) 222-3449 ext. 24, Email: rhosking@premdinc.com
