TORONTO, March 28 /PRNewswire-FirstCall/ - Predictive medicine company PreMD Inc. today announced audited financial results for the year ended December 31, 2007.
“During 2007, PreMD faced many significant changes and challenges,” said Brent Norton, president and CEO. We made tremendous progress on several fronts, including a License, Development and Supply Agreement with AstraZeneca Pharmaceuticals LP for the marketing and distribution of our point-of-care (POC) skin cholesterol test in the United States. We also successfully penetrated the cosmetics industry as we recently signed an agreement with one of the world’s leading cosmetics company, which will enable us to further explore the potential our technology holds in other viable markets. In addition, we continue to achieve several clinical and scientific validations related to both our cardiovascular and cancer franchises, including the publication of our ‘Increased Skin Cholesterol Identifies Individuals at Increased Cardiovascular Risk: The Predictor of Advanced Subclinical Atherosclerosis (PASA) Study’ this week in the American Journal of Cardiology, April 2008 edition.”
Dr. Norton continued, “despite these critical achievements, the company faced difficulties, as we received a non-substantially equivalent (NSE) letter from the US Food and Drug Administration (FDA) regarding our 510(k) submission. We have appealed the FDA decision, including submitting a detailed brief and meeting with them to present our case. We are pleased to have the support of AstraZeneca Pharmaceuticals LP, as well as several leading consultants, through the internal agency review process and we expect to hear from the FDA with the next steps in the next 30 days. We also recently completed a financing, which will enable us to move forward with our business development initiatives, pending FDA clearance and the subsequent commercialization of our products. We appreciate the patience and support of our stakeholders, as we determine the most effective steps toward enhancing shareholder value while evaluating the opportunities before us.”
Financial Review (All amounts are in Canadian dollars)
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The consolidated loss for the year ended December 31, 2007 was $6,316,000 or $(0.26) per share compared with a loss of $5,949,000 or $(0.27) per share for the year ended December 31, 2006, an increase of $367,000.
Total product sales of PREVU(x) Skin Cholesterol tests amounted to $41,000 in 2007 compared with $7,000 in 2006. License revenue was $53,000 in 2007 compared to $3,329,000 in 2006, a decrease of $3,276,000. License revenue consists primarily of the upfront cash payments received in accordance with the respective licensing agreements, which have been deferred and recognized into income on a straight-line basis over the terms of the agreements. For 2007, the license revenue represents the amortization of the $533,000 (US$500,000) received upon signing of the license agreement with AstraZeneca on July 13, 2007.
Research and development expenses for the year decreased by $1,996,000 to $2,778,000 from $4,774,000 in 2006. The variance for the year reflects:
General and administration expenses amounted to $3,213,000 compared with $3,025,000 in 2006, an increase of $188,000. The variance primarily reflects:
Interest on convertible debentures (issued on August 30, 2005) amounted to $663,000 in 2007 compared to $678,000 in 2006. The debentures bear interest at an annual rate of 7%, payable quarterly in either cash or stock. In 2007, $543,000 of the interest expense was paid in stock, rather than cash, compared with $281,000 in 2006. Imputed interest of $1,002,000 (compared with $820,000 in 2006) represents the expense related to the accretion of the liability component at an effective interest rate of 15%.
Amortization expenses for equipment and acquired technology for 2007 amounted to $166,000 compared with $180,000 in 2006. The reduction in 2007 reflects the reduced amortization on the disposal of equipment related to skin cholesterol clinical trials. Amortization of deferred financing fees amounted to $139,000 in 2006.
The gain on foreign exchange was $1,313,000 for 2007 compared to a loss of $98,000 in 2006. The major reason for the increase was the impact of foreign exchange rates on the convertible debentures which are repayable in US dollars. This resulted in an unrealized gain of $1,355,000 on the convertible debenture.
Recoveries of provincial scientific investment tax credits (“ITCs”) amounted to $140,000 for 2007 compared with $200,000 in 2006. The lower accrual is based on the reduced spending on clinical trials in 2007.
As at December 31, 2007, PreMD had cash, cash equivalents and short-term investments totaling $1,190,000 ($3,276,000 as at December 31, 2006). To date, we have financed our activities through product sales, license revenues, the issuance of shares and convertible debentures and the recovery of provincial ITCs. The Company reported a loss of $6,316,000 for the year ended December 31, 2007, has a shareholders’ deficiency of $4,420,000 as at December 31, 2007 and has experienced significant operating losses and cash outflows from operations since its inception. The Company has operating and liquidity concerns due to its significant net losses and negative cash flows from operations.
On March 12, 2008, the Company issued, by way of private placement, $1,435,294 senior unsecured debentures maturing on September 12, 2009 and 5,072,395 common share purchase warrants for gross proceeds of approximately $1,220,000. Each common share purchase warrant expires in March 2013 and entitles the holder to acquire one common share at a price of $0.2759 per share.
Financial statements are attached to this press release. PreMD’s complete fiscal 2007 annual report is available at www.sedar.com
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 include a line of non-invasive skin cholesterol tests. PreMD’s other skin cholesterol products include PREVU(x) LT, a skin cholesterol test designed for use in the life insurance industry. 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 more information about PreMD, 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.
CONTACT: Michelle Rabba, Manager, Corporate Communications, Tel: (416)
222-3449 ext. 25, Email: mrabba@premdinc.com; Ron Hosking, Vice President
Finance and CFO, Tel: (416) 222-3449 ext. 24, Email: rhosking@premdinc.com
