TORONTO, Aug. 14 /PRNewswire-FirstCall/ - Predictive medicine company PreMD Inc. today announced results for the second quarter of fiscal 2007 ended June 30, 2007 (“Q2 2007").
Recent Significant Highlights - Completed a U.S. marketing and distribution partnership with AstraZeneca Pharmaceuticals for PREVU(x). - Submitted a 510(k) application to U.S. Food and Drug Administration (FDA) for an expanded regulatory claim for PREVU(x) POC. - Completed a manufacturing and supply agreement with Fisher Diagnostics (a subsidiary of ThermoFisher Scientific) for the manufacturing and assembly of PREVU(x) POC test kits and PREVU(x) LT reagents. - The American Stock Exchange accepted continued listing plan. - Received Notice of Allowance for a United States patent on PREVU(x) LT from United States Patent and Trademark Office (USPTO). - Granted approval by the Canadian Intellectual Property Office for two patents titled: ‘Screening Test for Early Detection of Colorectal Cancer’ and ‘Screening Test for Early Detection of Colorectal Neoplasia.’ - Awarded registered trademarks for the name ‘PreMD’ as well as the corporate slogan ‘Predict to Prevent’ by the Canadian Intellectual Property Office. - Completed two scientific submissions based on findings from PREPARE and PASA studies. - Acceptance of PASA abstract for presentation at the American Heart Association Scientific Sessions 2007.
“Last Fall we outlined several significant company milestones that we wanted to achieve during 2007. We are pleased with the progress we have made to date, especially with the recent announcements regarding our agreement with AstraZeneca, our submission to the FDA for an expanded regulatory claim for PREVU(x) POC, and our recent acceptance of our PASA abstract by the American Heart Association,” said Brent Norton, president and chief executive officer of PreMD. “Signing an agreement with AstraZeneca for the marketing and distribution of PREVU(x) in the U.S. is an important milestone and we are confident that they are the right partner for the product. It is anticipated that PREVU(x) will be partnered for distribution within other territories in 2007 as well. Our business development efforts are also focused on other products in our pipeline, specifically seeking potential partnerships for our PREVU(x) LT test to the life-insurance industry and our line of oncology products. In the interim, we anticipate hearing from the FDA regarding our 510 (k) application for PREVU(x) POC, which will strengthen the value of PREVU(x).”
“In signing a manufacturing and supply agreement with Fisher Diagnostics, we believe that their expertise could greatly benefit our strategic product initiatives. Through extensive industry research, we determined that they were best suited to address PreMD’s impending growing supply chain needs, driven by our recent partnership with AstraZeneca and anticipated partnerships with other organizations. Also, Fisher Diagnostics is a leading organization that currently supplies several of the world’s leading medical companies.”
Dr. Norton continued, “As we look to continually expand our product platform, our newly allowed patents provide broad protection to our colorectal cancer screening portfolio and enhance the value of the company’s intellectual property. We continue to initiate and execute clinical trials in our targeted areas, thereby building a strong foundation for our future in predictive medicine. We look forward to reporting the achievement of additional milestones during the remainder of 2007.”
Financial Review
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The consolidated net loss for the three months ended Q2 2007 was $1,341,000 or $(0.05) per share compared with a loss of $2,115,000 or $(0.10) per share for the quarter ended Q2 2006, primarily due to a decrease in clinical trial expenses and unrealized foreign exchange gains on the revaluation of the convertible debentures.
Total product sales were $8,000 for Q2 2007 compared with $5,000 for Q2 2006. License revenue was nil for Q2 2007, compared to $80,000 for Q2 2006.
During Q2 2007, the Company focused on managing the cancer clinical trial program and on preparing the submission to the FDA requesting an expanded claim for PREVU(x) POC. Most of the skin cholesterol clinical trials were completed at the end of 2006. As a result, research and development expenditures for the quarter decreased by $739,000 to $731,000 from $1,470,000 in Q2 2006. The variance for the period reflects:
- a decrease of $686,000 in spending on clinical trials for PREVU(x), following the completion of most of the trials; - a decrease of $152,000 in spending on the cancer clinical trials; - an increase of $95,000 on product development in support of manufacturing validation for the new cordless reader and for general product improvements; and - a decrease of $15,000 in legal fees on intellectual property.
General and administration expenses amounted to $911,000 for Q2 2007 compared with $689,000 in Q2 2006, an increase of $222,000. The increase for the quarter includes:
- a decrease in stock-based compensation, a non-cash expense, of $51,000 to $123,000 for Q2 2007 compared with $174,000 for Q2 2006; - an increase of $239,000 in professional fees for legal, audit and consulting related to business development; and - an increase of $46,000 in expenses related to investor communications.
Interest on convertible debentures (issued on August 30, 2005) amounted to $165,000 in Q2 2007 compared with $173,000 in Q2 2006. The debentures bear interest at an annual rate of 7%, payable quarterly in either cash or stock. Imputed interest of $255,000 and $173,000 in Q2 2007 and 2006 respectively, represents the expense related to the accretion of the liability component, at an effective interest rate of 14.8% (12.75% in 2006), effective January 1, 2007. Amortization of the deferred financing fees is included in imputed interest whereas it was included in amortization expenses in 2006.
Amortization expenses for capital assets and intangible assets for Q2 2007 amounted to $41,000 compared with $110,000 for Q2 2006.
The gain on foreign exchange was $671,000 for Q2 2007, compared with a gain of $278,000 for Q2 2006. The major contributing factor for the increase was the impact of foreign exchange rates on the convertible debentures which are repayable in U.S. dollars.
Interest income amounted to $37,000 for Q2 2007 compared with $70,000 for Q2 2006 as a result of lower cash balances. Refundable scientific investment tax credits (“ITCs”) accrued for Q2 2007 amounted to $26,000 versus $70,000 for Q2 2006. This decrease was due to the reduced spending on clinical trials in 2007.
Accounts payable at June 30, 2007 amounted to $352,000 compared with $964,000 at December 31, 2006. The large decrease resulted from the payment of expenses related to clinical trials that were completed near the end of 2006.
As at June 30, 2007, PreMD had cash, cash equivalents and short-term investments totaling $3,539,000 ($3,276,000 as at December 31, 2006). The Company invests its funds in short-term financial instruments and marketable securities. Cash used to fund operating activities during Q2 2007 amounted to $1,264,000 compared with $1,835,000 in Q2 2006.
To date, the Company has financed its activities through product sales, license revenues, the issuance of shares and convertible debentures and the recovery of investment tax credits (ITCs). Management believes that, based on our reduced cash expenditures and the current expectation of further revenues from product sales, royalties and license revenues, its existing cash resources together with the proceeds of the private placement on March 27, 2007 and the ITC receivable of $248,000 will be sufficient to meet its current operating and capital requirements.
About PreMD Inc.
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, to be marketed and distributed by AstraZeneca. 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. For more information about PREVU(x), please visit www.prevu.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 success of a plan for regaining compliance with certain continued listing standards of the American Stock Exchange, 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) Unaudited As at As at June 30, December 31, 2007 2006 $ $ ------------------------------------------------------------------------- ASSETS Current Cash and cash equivalents 2,515,438 112,577 Short-term investments 1,023,987 3,163,482 Accounts receivable 8,443 11,221 Inventory 178,004 179,219 Prepaid expenses and other receivables 537,650 570,773 Investment tax credits receivable 248,000 200,000 ------------------------------------------------------------------------- Total current assets 4,511,522 4,237,272 ------------------------------------------------------------------------- Deferred financing fees, net of accumulated amortization of $174,863 in 2006 - 347,589 Capital assets, net of accumulated amortization of $883,699 (2006 - $841,611) 268,589 312,410 Intangible assets, net of accumulated amortization of $953,250 (2006 - $915,027) 344,007 382,229 ------------------------------------------------------------------------- 5,124,118 5,279,500 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS’ DEFICIENCY Current Accounts payable 352,106 963,990 Accrued liabilities 716,590 932,372 ------------------------------------------------------------------------- Total current liabilities 1,068,696 1,896,362 ------------------------------------------------------------------------- Convertible debentures 5,704,665 6,350,680 ------------------------------------------------------------------------- Total liabilities 6,773,361 8,247,042 ------------------------------------------------------------------------- Shareholders’ deficiency Capital stock 28,883,949 25,263,480 Contributed surplus 2,758,169 2,521,915 Equity component of convertible debentures 2,239,385 2,239,385 Warrants 1,562,154 1,170,020 Deficit (37,092,900) (34,162,342) ------------------------------------------------------------------------- Total shareholders’ deficiency (1,649,243) (2,967,542) ------------------------------------------------------------------------- 5,124,118 5,279,500 ------------------------------------------------------------------------- ------------------------------------------------------------------------- PreMD Inc. CONSOLIDATED STATEMENTS OF LOSS, COMPREHENSIVE LOSS AND DEFICIT (In Canadian dollars) Unaudited Three months ended Six Months Ended June 30 June 30 ------------------------- ------------------------- 2007 2006 2007 2006 $ $ $ $ REVENUE Product sales 8,250 5,015 26,334 5,132 License revenue - 79,624 - 156,675 ------------------------------------------------------------------------- 8,250 84,639 26,334 161,807 Cost of product sales 3,720 4,255 8,566 4,383 ------------------------------------------------------------------------- Gross Profit 4,530 80,384 17,768 157,424 ------------------------------------------------------------------------- EXPENSES Research and development 730,799 1,469,815 1,371,636 2,985,524 General and administration 911,141 688,617 1,552,105 1,265,865 Interest on convertible debentures 165,400 172,623 328,983 338,137 Imputed interest on convertible debentures 231,228 172,720 479,574 404,132 Amortization 41,318 110,110 82,698 154,932 Gain on foreign exchange (670,888) (227,675) (754,441) (215,043) ------------------------------------------------------------------------- 1,408,998 2,336,210 3,060,555 4,933,547 ------------------------------------------------------------------------- RECOVERIES AND OTHER INCOME Investment tax credits 26,000 70,000 48,000 130,000 Interest 37,105 70,394 64,229 156,929 ------------------------------------------------------------------------- 63,105 140,394 112,229 286,929 ------------------------------------------------------------------------- Net loss for the period (1,341,363) (2,115,432) (2,930,558) (4,489,194) Deficit, beginning of period (35,751,537) (30,587,133) (34,162,342) (28,213,371) ------------------------------------------------------------------------- Deficit, end of period (37,092,900) (32,702,565) (37,092,900) (32,702,565) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted loss per share $(0.05) $(0.10) $(0.12) $(0.21) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted average number of common shares outstanding 24,950,579 21,566,994 23,505,688 21,559,121 ------------------------------------------------------------------------- ------------------------------------------------------------------------- PreMD Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (In Canadian dollars) Unaudited Three months ended Six Months Ended June 30 June 30 ------------------------- ------------------------- 2007 2006 2007 2006 $ $ $ $ ------------------------------------------------------------------------- OPERATING ACTIVITIES Net loss for the period (1,341,363) (2,115,432) (2,930,558) (4,489,194) Add items not involving cash Amortization 41,318 110,110 82,698 154,932 Stock compensation costs included in: Research and development expense 35,286 58,904 67,383 94,719 General and administration expense 123,312 173,741 180,605 243,212 Gain on sale of capital asset 143 - 143 - Imputed interest on convertible debentures 231,228 172,720 479,574 404,132 Interest on convertible debentures paid in common shares 133,967 79,702 270,911 79,702 Deduct gain on foreign exchange (670,888) (277,675) (754,441) (215,043) Net change in non-cash working capital Balances related to operations 182,749 44,745 (838,718) 1,296,533 Decrease in deferred revenue - (81,867) - (158,592) ------------------------------------------------------------------------- Cash used in operating activities (1,264,248) (1,835,052) (3,442,403) (2,589,599) ------------------------------------------------------------------------- INVESTING ACTIVITIES Short-term investments 291,768 1,695,094 2,109,459 1,881,904 Sale of capital assets 562 - 1,435 - Purchase of capital assets (484) (2,817) (2,233) (20,915) ------------------------------------------------------------------------- Cash provided by investing activities 291,846 1,692,277 2,108,661 1,860,989 ------------------------------------------------------------------------- FINANCING ACTIVITIES Issuance of capital stock, net of issue costs (49,764) - 3,729,957 - ------------------------------------------------------------------------- Cash provided by financing activities (49,764) - 3,729,957 - ------------------------------------------------------------------------- Effect of exchange rate changes on cash and cash equivalents 3,870 4,145 6,646 46,212 ------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents during the period (1,018,296) (138,630) 2,402,861 (682,398) Cash and cash equivalents - Beginning of period 3,533,734 229,431 112,577 773,199 ------------------------------------------------------------------------- - End of period 2,515,438 90,801 2,515,438 90,801 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Represented by Cash 105,372 90,801 105,372 90,801 Cash equivalents 2,410,066 - 2,410,066 - ------------------------------------------------------------------------- 2,515,438 90,801 2,515,438 90,801 -------------------------------------------------------------------------
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; Michelle Rabba,Manager, Corporate Communications, Tel: (416) 222-3449 ext. 25, Email:mrabba@premdinc.com
