TORONTO, March 29 /PRNewswire-FirstCall/ - Tm Bioscience Corporation , a leader in the commercial genetic testing market, today announced its financial and operational results for the year and fourth quarter ended December 31, 2005.
Highlights: - Generated revenue of $7.7 million, an increase of 99% over the previous year. - Secured multi-year supply agreements with the two largest clinical laboratories in the world, Quest Diagnostics and LabCorp(R). - Acquired its 34th customer in the highly consolidated U.S. clinical laboratory market. - Received first of its kind FDA approval on its flagship Tag-It(TM) Cystic Fibrosis test, followed in January 2006 by European CE mark (European equivalent to in vitro diagnostic (IVD)) on the same test. - In concert with Genzyme Genetics, commercially launched what the Company believes to be the most complex commercial genetic test on the market, their CFplus(TM) assay. - Developed the innovative ID-Tag(TM) Respiratory Viral Panel, which Tm launched worldwide and for Investigational Use Only in the U.S. in January 2006 - Secured an agreement for the development, manufacturing and supply of reagents to InterGenetics for Breast Cancer risk testing. - Sourced exclusive genetic patents for use in its tests, culminating in March 2006 with an agreement in the field of systemic infections (sepsis), a market which the Company expects will generate $100M in revenue in the first three years after the launch of its test, slated for the second half of 2007. - Secured a co-exclusive license, subsequent to the end of the year, to a genetic patent associated with the second most frequent variation in a drug metabolization gene in Caucasians implicated in the metabolism of 25% of the most commonly prescribed drugs.
“During 2005, we made substantial progress in fortifying our position as an industry leader in genetic testing,” said Mr. Greg Hines, President and CEO of Tm Bioscience. “Our footprint is well established and we have proven our ability to commercialize genetic tests. This ability has allowed us to secure, for the first time in the Company’s history, rights to novel genetic content vaulting us into significantly larger markets with tests able to command premium prices. We are extremely excited about the growth of these markets and Tm’s enviable position in them.”
“We have now secured as customers all significant U.S. reference laboratories. These customers currently have recurring purchases of $10 million in products from Tm on an annualized basis. This revenue base reflects an estimated 30% - 35% U.S. market share in our flagship cystic fibrosis product line. Our sales objective remains to ensure that each of our customers enjoys the benefit of our entire portfolio of products ,” said Mr. Jim Pelot, CFO of Tm Bioscience. “We have to allocate our limited resources to a carefully selected number of product opportunities in any given period. At the same time, we face a genetic testing market that is highly dynamic as it grows and evolves. In order to pursue the best opportunities as they emerge, Tm must remain flexible - an advantage we have over larger multinational competitors. We advanced a number of exciting products in 2005, electing to defer the development of certain others, choosing to seize those products we believe will maximize shareholder value both by their market potential and the speed with which we can secure revenue from them.”
Product Update
Tm Bioscience continued to advance products in each of its three target markets:
Human Genetics:
Tm Bioscience’s strategy within the Human Genetics market segment is foremost to dominate the Cystic Fibrosis market. In the U.S., this market is currently estimated at 1.3 million tests annually and is expected to peak at approximately 2.5 million tests in the next five years, a growth rate of 15% per annum. The Company now estimates that on an annualized basis, it has secured approximately 30% - 35% market share of the U.S. CF testing market. Along with a strong established customer base in the CF market, the Company believes that its uniquely comprehensive CF product line combined with the IVD status of its Tag-It(TM) Cystic Fibrosis kit place the Company in a strong competitive position to capture additional CF market share. Improvements to the Tag-It(TM) platform with respect to automation and assay streamlining will provide Tm’s CF tests further competitive leverage with the largest reference laboratories.
The Company’s Human Genetics sales program will continue to promote the adoption of the Company’s remaining human genetics products to its existing customer base. To date over 40% of the customers have adopted two or more products from the Company’s menu.
Beyond North America, the Company intends to secure a distribution partner for its CF products. With its Tag-It(TM) Cystic Fibrosis (CF) Kit now having the CE Mark (“Conformite Europeene”), the genetic test can be marketed for diagnostic purposes in the European Union and other countries that recognize the CE Mark, a cornerstone to the process of securing a distributor.
Personalized Medicine (PGx):
Tm Bioscience’s objective within the Personalized Medicine market segment is to establish the Company as the leader in PGx. The Company has developed a comprehensive strategy for achieving this goal:
1. Drive the growth of the PGx market by encouraging physician adoption of PGx testing. In 2005, Tm initiated programs focused on supporting the creation of consensus guidelines for certain clinical application of PGx. The first of these guidelines, targeting warfarin therapy, is slated for publication mid 2006. Tm is also developing resources for physicians to learn more about PGx and plans to conduct opinion leader events in 2006 to establish the importance and potential of PGx among physicians. 2. Offer the most comprehensive PGx menu available. In particular, Tm is focused on commercializing novel and proprietary PGx products which address unmet medical needs and differentiate it from its competitors. 3. Gain IVD regulatory status for the Company’s PGx products. The Company believes that regulatory clearance is essential for the widespread clinical application of PGx. 4. Gain market share with Contract Research Organizations and large pharmaceutical companies. These customers are at the “ground floor” for PGx - they develop and conduct clinical trials on new drugs. By embedding Tm tests at this level, there is the increased potential for the same tests to be integrated into the dosing and prescribing process once a drug reaches market.
During 2005, Tm Bioscience made significant progress towards expanding its PGx menu with novel products. Subsequent to the end of the year, the Company announced it had signed an agreement with EPIDAUROS Biotechnologie AG (Bernried, Germany) for a co-exclusive commercial license to EPIDAUROS’ patents on the most prevalent biomarker in Caucasians related to the P450-CYP2D6 gene, which is associated with an enzyme that metabolizes approximately 25% of all prescription drugs. Only one other company, Roche, has a license to this genetic marker. Tm and EPIDAUROS have negotiated an agreement whereby no other licenses for this variant will be granted in the future.
Also in 2006, following significant marketing and business development efforts through 2005, Tm signed an agreement with Sirius Genomics (Vancouver, Canada) for an exclusive commercial license to patents from Sirius for specific biomarkers related to two drugs used to treat severe sepsis, Xigris(R) and vasopressin. Tm Bioscience will incorporate these markers into a companion diagnostic for use by critical care physicians in order to treat patients with severe sepsis more effectively.
Tm Bioscience is also developing a companion test for Warfarin which it expects to launch in 2006. The FDA’s Clinical Pharmacology Subcommittee of the Advisory Committee on Pharmaceutical Science voted in November 2005 in favor of changing Warfarin’s label to reflect the fact that genetic information from two genes, CYP450 2C9 and VKORC1, can be useful in deciding a patient’s individual dose. The market for such a test is very significant; more than 30 million prescriptions are written for Warfarin each year in the U.S.
Infectious Disease:
During 2005, Tm Bioscience collaborated with Dr. Jim Mahony of McMaster University to develop the ID-Tag(TM) RVP (Respiratory Viral Panel) kit, a comprehensive assay for the detection of various strains of viruses and subtypes, including H5 (Avian Flu). The Company expects that it will serve as a cornerstone diagnostic and screening product in the public health setting for the more efficient management and treatment of patients during flu season. The product could also play a key role in managing the potential threat posed by the Avian Flu and the Company is actively promoting its adoption within the global public health community.
In January 2006, the Company made the ID-Tag(TM) RVP commercially available outside the U.S. and for evaluation purposes within the U.S. To drive sales, Tm is establishing market presence by enabling key customers and thought leaders to gain experience with the test through an Early Access Program. The Company is also focused on gaining regulatory clearance for the test as an IVD and is undertaking validation studies to generate data for a FDA submission in the first half of 2006. Tm’s sales force expects to focus on marketing the test to hospital based laboratories in the U.S. The Company is also in discussion with potential distributors for selling the product outside of the US.
Financial Results
For the year ended December 31, 2005 Tm Bioscience generated revenue of $7.7 million, effectively doubling our prior year revenue of $3.9 million. For the fourth quarter of 2005, Tm recognized revenue of $2.4 million compared to $1.4 million for the fourth quarter of 2004, an increase of 71%.
Product sales for 2005 were $6.7 million, an increase of approximately 94% over 2004 product sales of $3.5 million while instrument sales were $0.8 million for 2005 as compared with $0.2 million in 2004. The balance of revenue in both years was comprised of licensing and development fees received in the form of royalties on the sales by Luminex of “FlexMap beads"(TM) and contract research and development fees reflecting the on-going pro-rata recognition of deferred milestone revenue. Product sales included all of the Company’s commercial products. The growth in sales was due primarily to the mid-year launch of the CFplus(TM) test by Genzyme and to organic growth where Tm’s growing customer base adopted additional products from our menu, primarily AJP and CF70 reagents. Luminex instrument placements continued in 2005 through direct customer purchases and the Company’s reagent rental programs.
Standard reagent product margins were 55% for the year ended December 31, 2005 as compared with approximately 60% for the same period in 2004. Standard reagent product margin is calculated by subtracting standard reagent cost of goods sold and genetic content royalties costs from reagent product sales. The result is then divided by reagent product sales for the period. The 5% decline is due to the expansion of the Company’s reagent rental program to the next tier of smaller customers and the impact of amortizing the Abbott license. The measure of standard reagent product margins provides information on the margins of the Company excluding inefficiencies and yield volatility associated with the early stages of the Company’s manufacturing and revenue scale-up. The measure excludes the impact of overhead underabsorption and material costs associated with initial production yield. It also excludes the impact of instrument sales which at $830,000 and 11% of total revenue for 2005 vs $242,000 and 6% for 2004 are expected to decrease in importance as growth in sales of the Company’s tests and reagent make greater use of the installed base of instruments. Overall margins were 44% for 2005, compared to 27% for 2004.
For 2005, total expenses were $19.1 million compared with $14.8 million for the previous year an increase of 29%. Of the $19 million in 2005, cost of goods sold represented $4.3 million accounting for approximately 35% of the year-over-year increase. SG&A was $11.0 million or 65% of the increase with R&D at $3.8 million slightly lower than 2004 as a result of tax credits received in the year. Total expenses for the fourth quarter of 2005 were $5.8 million compared with $4.2 million for the corresponding period in 2004.
The year-over-year growth in functional expense is a result of investment in the final implementation stages of the Company’s commercialization engine in accordance with its five-year business plan. Notably, compensation costs (56%), related facility and travel costs (9%) and professional services fees (21%) account for the majority of the increase. On a functional basis, in sales, general and administration (SG&A) the increase was driven largely by headcount growth and personnel related expenditures, increased marketing program expenditures, increased professional costs related to the corporate reorganization, and increased professional costs associated with clinical trial designs. In research and development (R&D), the Company invested in the areas of product development and bioinformatics, expanding the team by 50% from 2004 levels. This was offset by Scientific Research and Experimental Development (SR&ED) tax credits of approximately $354,000 (2004 - $200,000).
Interest expense from long-term debt increased to $3.3 million in 2005 compared to $880,000 in 2004, however most of this amount reflected the non- cash interest charges associated with increased borrowings from TPC and the debenture financing completed in November 2004. Cash interest expense was $928,000 in 2005 vs $442,000 in 2004 as the Company more than doubled its borrowings late in 2004.
Depreciation and amortization was $1,244,000 for the year ended December 31, 2005 (2004 - $987,000), an increase of 26% over 2004. This increase corresponds to capital expenditures related to the expansion of the premises as well as the investment in R & D and technical support capital expenditures.
Net loss for the year ended December 31, 2005 was $15.2 million or $0.37 per share, compared to a net loss of $11.8 million or $0.34 per share for the year ended December 31, 2004. For the quarter ended December 31, 2005, the Company reported a net loss of $5.0 million or $0.12 per share, compared with a net loss of $3.3 million or $0.09 per share for the corresponding period in 2004.
The Company completed the year 2005 with working capital of $12.8 million as compared to $6.1 million at the end of 2004. In 2005, the Company raised $10.5 million of gross funds by way of a convertible debenture which matures in November of 2008. Of the amount from the convertible debenture, $8.6 million was used to repay the principal outstanding on the previous debentures secured in November of 2004. In addition in 2005, the Company received an aggregate of $1.2 million from the TPC program. On December 19, 2005, the Company concluded a public offering yielding gross proceeds of $10.1 million.
The Company’s year-end balance sheet is the strongest and most liquid it has ever been. In order to pursue its expanded regulatory drive, submit products for FDA certification in 2006, fund the $4,000,000 acquisition of the sepsis biomarkers, as well as open new markets for its RVP and sepsis tests, while continuing to serve its growing customer base, the Company foresees a need for additional growth capital. The Company is seeking to secure this growth capital primarily from a strategic partner in one of its target market segments. In general, the Company expects future funding to be provided through public and private equity financing, debt and convertible instruments, government agency agreements, development contract financing from partners and product sales.
Notice of Conference Call
Tm Bioscience will be holding a conference call on March 29th, 2006 at 8:00am (EST) where Mr. Greg Hines, President and CEO, and Mr. Jim Pelot, CFO will discuss the Company’s 2005 year-end results. A live audio webcast of the call will be available at www.financialdisclosure.ca and www.tmbioscience.com. Webcast attendees are welcome to listen to the conference in real-time or on- demand at their convenience. A replay of the call will be archived at those sites for 90 days.
AGM Announcement
Tm Bioscience’s Annual and Special Meeting of Shareholders will be held on May 30th, 2006 at 2:00 p.m. in the auditorium of the TSX Broadcast & Conference Centre, The Exchange Tower, 130 King Street West, Toronto, Ontario.
About Tm Bioscience - Putting the Human Genome to Work(TM)
Tm Bioscience is a DNA-based diagnostics company developing a suite of genetic tests. Tm Bioscience’s product pipeline includes tests for genetic disorders, drug metabolism, and infectious diseases. Tm Bioscience is located in Toronto, Ontario. Additional information about Tm Bioscience can be found at www.tmbioscience.com.
Forward-Looking Statements
This press release contains forward-looking statements, which by their nature necessarily involve risk and uncertainties that could cause the actual results to differ materially from those contemplated by such statements. Tm Bioscience considers the assumptions on which these forward-looking statements are based to be reasonable at the time they were prepared, but cautions readers that these assumptions may ultimately prove to be incorrect due to certain risks and uncertainties including, without limitation, the difficulty of predicting regulatory approvals, market acceptance and demand for new products, the availability of appropriate genetic content and other materials required for Tm Bioscience’s products, Tm Bioscience’s ability to manufacture its products on a large scale, the protection of intellectual property connected with genetic content, the impact of competitive products, currency fluctuations, risks associated with Tm Bioscience’s manufacturing facility and any other similar or related risks and uncertainties. If any of these risks or uncertainties were to materialize, or if assumptions underlying the forward- looking statements of management were to prove incorrect, actual results of Tm Bioscience could vary materially from those that are expressed or implied by these forward-looking statements. Tm Bioscience disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Tm Bioscience Corporation CONSOLIDATED BALANCE SHEETS (see Basis of Presentation, note 1) As at December 31 2005 2004 $ $ ------------------------------------------------------------------------- ASSETS Current Cash and cash equivalents 8,972,594 1,333,228 Short-term investments 7,042,035 3,679,932 Trade accounts receivable 1,245,333 1,020,966 Other accounts receivable 613,680 120,872 Inventory 3,619,714 1,855,456 Prepaid expenses 46,305 84,381 ------------------------------------------------------------------------- Total current assets 21,539,661 8,094,835 ------------------------------------------------------------------------- Capital assets, net 4,340,712 3,434,821 Intangible assets, net 2,765,363 699,495 Deferred financing costs, net 777,901 535,405 Other asset 1,438,347 - ------------------------------------------------------------------------- 30,861,984 12,764,556 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS’ EQUITY Current Accounts payable and accrued liabilities 6,049,940 1,875,583 Current portion of deferred revenue 123,805 79,243 Current portion of long-term debt 2,476,582 - Income taxes payable 82,273 21,000 ------------------------------------------------------------------------- Total current liabilities 8,732,600 1,975,826 ------------------------------------------------------------------------- Deferred leasehold inducement 348,118 240,913 Deferred revenue 123,970 144,127 Deferred share units 301,075 127,896 Long-term debt 9,033,181 8,126,057 ------------------------------------------------------------------------- Total liabilities 18,538,944 10,614,819 ------------------------------------------------------------------------- Shareholders’ equity Capital stock 66,871,280 43,265,955 Contributed surplus 9,937,955 8,202,511 Deficit (64,486,195) (49,318,729) ------------------------------------------------------------------------- Total shareholders’ equity 12,323,040 2,149,737 ------------------------------------------------------------------------- 30,861,984 12,764,556 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Tm Bioscience Corporation CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT Years ended December 31 2005 2004 $ $ ------------------------------------------------------------------------- Revenue 7,674,170 3,850,013 ------------------------------------------------------------------------- Expenses Cost of goods sold 4,306,742 2,816,684 Research and development, net 3,770,027 3,816,180 Sales, general and administrative 10,980,247 8,165,723 ------------------------------------------------------------------------- 19,057,016 14,798,587 ------------------------------------------------------------------------- Loss before the undernoted (11,382,846) (10,948,574) Interest expense from long-term debt (3,317,320) (882,376) Other financial (expenses) income, net (385,345) 13,452 ------------------------------------------------------------------------- Loss before income taxes (15,085,511) (11,817,498) Income tax expense (81,955) (21,000) ------------------------------------------------------------------------- Net loss for the year (15,167,466) (11,838,498) Deficit, beginning of year (49,318,729) (37,480,231) ------------------------------------------------------------------------- Deficit, end of year (64,486,195) (49,318,729) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted loss per common share $(0.37) $(0.34) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted average number of common shares outstanding Basic and diluted 40,644,715 34,766,222 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Tm Bioscience Corporation CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31 2005 2004 $ $ ------------------------------------------------------------------------- OPERATING ACTIVITIES Net loss for the year (15,167,466) (11,838,498) Add (deduct) items not involving cash: Depreciation and amortization 1,244,294 987,291 Loss (gain) on disposal of capital assets 30,380 (6,936) Loss on impairment of intangible assets 131,559 - Amortization of deferred leasehold inducement (61,475) (59,367) Accretion of loan discount 1,184,865 198,671 Loss on settlement of debt 870,017 - Accretion of convertible debenture discount 92,135 - Amortization of deferred financing costs 380,235 105,013 Stock option compensation expense and deferred share units 661,241 455,400 Government loan interest accrual 300,313 110,291 (Gain) loss on foreign exchange (76,367) 10,515 ------------------------------------------------------------------------- (10,410,269) (10,037,620) Changes in non-cash working capital balances related to operations: Increase in trade accounts receivable (224,367) (302,777) (Increase) decrease in other accounts receivable (492,808) 192,450 Increase in inventory (1,764,258) (755,877) Decrease in prepaid expenses 38,076 6,940 Increase (decrease) in deferred revenue 24,405 (21,177) Increase in accounts payable and accrued liabilities 2,888,757 95,226 Increase in income taxes payable 61,273 21,000 ------------------------------------------------------------------------- Cash used in operating activities (9,879,191) (10,801,835) ------------------------------------------------------------------------- INVESTING ACTIVITIES Purchase of capital assets (1,920,071) (2,047,155) Purchase of intangible assets (1,285,021) (392,679) Purchase of short-term investments (32,393,800) (15,936,426) Sale of short-term investments 29,031,697 20,288,609 ------------------------------------------------------------------------- Cash (used in) provided by investing activities (6,567,195) 1,912,349 ------------------------------------------------------------------------- FINANCING ACTIVITIES Increase in deferred leasehold inducement 168,680 13,063 Proceeds from long-term debt 11,753,126 10,536,450 Repayment of long-term debt (8,641,550) (3,525,345) Share issuance costs (1,923,543) - Increase in deferred financing costs (933,687) (587,287) Issuance of common shares 23,662,726 1,053,039 ------------------------------------------------------------------------- Cash provided by financing activities 24,085,752 7,489,920 ------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents during the year 7,639,366 (1,399,566) Cash and cash equivalents, beginning of year 1,333,228 2,732,794 ------------------------------------------------------------------------- Cash and cash equivalents, end of year 8,972,594 1,333,228 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Supplemental cash flow information Income taxes paid 23,531 - Interest paid 927,709 442,274 ------------------------------------------------------------------------- -------------------------------------------------------------------------
Tm Bioscience
CONTACT: INVESTOR RELATIONS CONTACTS: Tm Bioscience, James Smith, TheEquicom Group, Tel.: (416) 815-0700, Email: jsmith@equicomgroup.com; Torequest a free copy of this organization’s annual report, please go tohttp://www.newswire.ca and click on Tools for Investors.
