TORONTO, May 15 /PRNewswire-FirstCall/ - Tm Bioscience Corporation , a leader in the commercial genetic testing market, today announced its financial and operational results for the first quarter ended March 31, 2006. The vision of Tm Bioscience is to revolutionize healthcare through genetic testing by commercializing products for three major segments of the genetic testing market: Human Genetics, Personalized Medicine and Infectious Diseases.
“We have now secured 30%-35% market share in the U.S. for our Cystic Fibrosis (CF) products, which generate a significant recurring revenue stream for our Company. With further market share in the CF market being dependent on the purchasing decisions of the two largest reference laboratories, for 2006 we have dedicated the majority of our resources to the commercialization of products within our other target markets, Personalized Medicine and Infectious Diseases,” said Mr. Greg Hines, President and CEO of Tm Bioscience. “The market opportunities for these products are expected to each exceed that of the CF market; by volume of tests performed because within these markets, significantly more patients present with symptoms requiring a diagnosis; by revenue potential because for two of these products, Tm has obtained proprietary genetic content making the products novel to Tm and therefore we expect that they will command higher prices.”
For the first quarter of 2006, the Company generated revenue of $2.9 million, an increase of 21% over the previous quarter and 170% over the first quarter of 2005. During the quarter, Tm expanded its customer footprint, signing supply agreements with a number of new regional and hospital based laboratories and contract research organizations (CROs). The Company also signed a multi-year extension of its partnership agreement with Luminex. An update on specific products within each of Tm’s target markets is provided below:
Human Genetics (Tag-It(TM))
During the quarter, Tm’s flagship Tag-It(TM) Cystic Fibrosis test received European CE mark, the European equivalent to in vitro diagnostic (IVD). The Company has significantly penetrated the Human Genetics segment with its menu of CF products, which currently generates the majority of Tm’s recurring revenue. For Tm to increase its current 30-35% share of the CF market to 70% and beyond, the Company must secure additional market share with the two largest reference laboratories, LabCorp and Quest. In the fourth quarter of 2005, LabCorp adopted the Tag-It(TM) reagents, which LabCorp has commercialized into an expanded panel for testing 70 mutations in the CFTR gene to supplement a competing product they offer. LabCorp has seen significant growth in the use of Tag-It(TM) reagents since that time. Quest does not purchase CF products from Tm but does purchase the Tag-It(TM) AJP reagents.
Personalized Medicine (Tag-It(TM) PGx)
P450 - The Tag-It(TM) PGx Mutation Detection Kits for P450-2D6, P450-2C9 and P450-2C19
During the quarter, Tm announced it had signed an agreement with EPIDAUROS Biotechnologie AG (Bernried, Germany) for a co-exclusive commercial license to EPIDAUROS’ patents on the second 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 including codeine and antidepressants. Only one other company has a license to this genetic marker. The Company intends to submit all three of its PGx P450 products to the FDA in 2006 with clearance as IVD’s anticipated for late 2006 or early 2007.
Warfarin - The Tag-It(TM) PGx CYP2C9+VKORC1 Mutation Detection Kit
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, could be useful in deciding a patient’s individual dose.
Tm’s goal is to secure a dominant position in this market subsequent to the predicted relabeling of Warfarin, which the Company anticipates the FDA may implement in Q4, 2006. Subsequent to the end of the quarter, the Company initiated an Early Access Program (EAP) for the Tag-It(TM) PGx CYP2C9+VKORC1 Mutation Detection Kit with key customers and opinion leaders. The Company intends to submit this product for FDA clearance as an IVD in 2006 with clearance anticipated for late 2006 or early 2007.
Sepsis - The Tag-It(TM) Severe Sepsis Test
During the quarter, 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. Given the large market potential of this test as well as its potential importance in the selection of drugs and therapies that impact patient morbidity and mortality, the Company expects this test to achieve notable market penetration across North America and Europe, anticipating revenue that could be in excess of $100 million in the aggregate over the first three years following commercial launch, slated for the second half of 2007. The Company intends to submit this product for regulatory clearance in 2006 with clearance anticipated for the second half of 2007.
Infectious Disease (ID-Tag(TM))
The ID-Tag(TM) Respiratory Viral Panel (RVP)
In January 2006, the Company made the ID-Tag(TM) RVP commercially available for evaluation purposes. The ID-Tag(TM) RVP is a comprehensive assay for the detection of various strains of viruses and subtypes, including H5 (Avian Flu). The Company expects that the ID-Tag(TM) RVP will address two key markets. First, it is expected to serve as a cornerstone diagnostic product in the clinical setting for the more efficient management and treatment of patients who may be infected by respiratory viruses. The product is also expected to play a key role in managing the potential pandemic threats posed by the Avian Flu and SARS, and the Company is actively promoting its adoption within the global public health community.
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, which was actively securing participants during the quarter. Tm is also planning to raise awareness of the product among clinical and public health labs through tradeshows and public relations and advertising campaigns. The Company is focused on gaining regulatory clearance for the test as an IVD and in conjunction with select EAP partners is undertaking validation studies to generate data for regulatory submission anticipated in the U.S. in the second quarter of 2006 and in Europe and Canada in the third quarter with approvals anticipated in the third and fourth quarters of 2006.
Tm’s sales force will be directly marketing the product to hospital-based laboratories in the U.S. and Canada. The Company is in discussion with distributors for selling the product outside of North America and subsequent to the end of the quarter signed its first distribution agreement with a regional diagnostics distributor to commercialize the product in Turkey.
Financial Results
For the quarter ended March 31, 2006, Tm Bioscience generated revenue of $2.9 million, an increase of 170% over revenue of $1.1 million generated in the first quarter of 2005. Product sales for the first quarter of 2006 were $2.5 million, an increase of 140% over first quarter 2005 product sales of $1.0 million. This growth primarily occurred due to the mid-2005 launch of the CFplus(TM) test by Genzyme and adoption of the Company’s expanded menu selections, primarily Tag-It(TM) Ashkenazi Jewish Panel (AJP) and Tag-It(TM) CF70 reagents, by the Company’s growing customer base. Luminex instrument placements continued in the quarter through direct customer purchases and via the Company’s reagent rental programs. Instrument sales were $0.3 million for the first quarter of 2006 as compared with nil in 2005. The balance of revenue was comprised of licensing and development fees received in the form of royalties on the sales by Luminex of FlexMap(TM) beads and contract research and development fees reflecting the on-going pro-rata recognition of deferred milestone revenue.
Standard reagent product margins were 58% for the quarter ended March 31, 2006 as compared with 63% for the same period in 2005. 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 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 5% decline is due in part to the additional amortization associated with the Abbott fundamental patent licensed in the third quarter of 2005 and in part to non-recurring favourable adjustments in the first quarter of 2005 to royalties that had been overpaid in 2004.
Total expenses, excluding cost of goods sold, for the first quarter of 2006 were $4.6 million compared with $3.3 million for the same period in 2005. Research and development expense for the first quarter of 2006 were $1.0 million compared to $1.0 million for the same period in 2005. Sales, general and administration (SG&A) for the first quarter of 2006 were $3.6 million compared to $2.2 million for the same period in 2005, driven primarily by headcount growth in the medical and regulatory, marketing and business development and technical support functions, as well as in the newly formed intellectual property and human resources functions. This was driven by product line growth, expanded licensing activities, increased marketing program expenditures and the Company’s drive to secure FDA clearance on a large number of products in 2006.
Cost of goods sold for the first quarter of 2006 were $1.6 million compared with $0.6 million for the same period in 2005.
Interest expense from long-term debt increased to $0.7 million for the first quarter of 2006 compared to $0.6 million for the first quarter of 2005. The increased interest expense reflects the increased debt resulting from the Company’s debenture refinancing concluded in November of 2005. Of the increase, cash interest paid accounted for $4,000 while non-cash interest charges related to accretion of related warrant expense constitutes the balance.
Net loss for the quarter ended March 31, 2006 was $4.1 million or ($0.09) per share, compared to a net loss of $3.4 million or ($0.09) per share for the corresponding period in 2005.
Working capital as at March 31, 2006 was $6.2 million including cash and cash equivalents and short-term investments of $7.5 million, compared with $12.8 million and $16.0 million respectively as at December 31, 2005. On March 17, 2006, the Company signed an agreement with Sirius Genomics (“Sirius”) for an exclusive commercial license to patents from Sirius for specific biomarkers related to drugs used to treat severe sepsis and risk of sepsis. Under the terms of the agreement, the Company will pay a license fee advance of $4,000,000 which will be provided in two equal instalments. In addition, the costs of product and market development as well as product launch will be shared equally between the parties. Once commercialized, the Company will remit license fees to Sirius equal to fifty percent of net earnings on the product commercialized under the agreement. The $4,000,000 advance to Sirius is reimbursable out of initial license fee obligations to Sirius and has been accounted for as a license fee advance. The first $2,000,000 was due upon signing of the agreement, and was paid on April 3, 2006, and the second installment is due September 6, 2006. For the quarter ended March 31, 2006, the Company has recorded the first license fee advance as a long-term asset and a current liability. The Company currently forecasts that the license fee advance will be fully recovered from the license fees which will be payable to Sirius by the end of 2007. These transactions are measured at the exchange amount of consideration established and agreed to by the related parties.
On December 12, 2003, the Company entered into an agreement with the Ministry of Industry of the Government of Canada under which the government through Technology Partnerships Canada (TPC) will invest up to $7.3 million of the Company’s $25 million project to establish novel processes, capabilities and facilities relating to the development of several genetic tests. The Company did not receive any funds from TPC in the first quarter (2005 - $nil), however funds of $0.6 million were received in the second quarter bringing the outstanding balance of the TPC funds advanced to $3.7 million. Over the course of 2006, the Company expects to file claims with TPC for reimbursement totalling approximately $2.0 million.
Notice of Conference Call
Tm Bioscience will be holding a conference call on May 15, 2005 at 8:00am (EST) where Mr. Greg Hines, President and CEO, and Mr. Jim Pelot, CFO and COO, will discuss the Company’s first quarter 2006 results. A live audio webcast of the call will be available at 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 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 statement
This Press Release and the corresponding conference call for the interim period ended March 31, 2006 contains certain forward-looking statements with respect to Tm Bioscience Corporation. These include statements about management’s expectations, beliefs, intentions or strategies for the future, which are indicated by words such as “vision”, “may”, “will”, “should”, “plan”, “anticipate”, “believe”, “intend”, “potential”, “estimate”, “forecast”, “project”, “predict” and “expect” or the negative of these terms or other similar expressions concerning matters that are not historical facts. In particular, statements regarding the Company’s future operating results, economic performance and product development efforts are or involve forward-looking statements. More specifically, statements about the planned development of diagnostic genetic tests, including the Company’s ID-Tag(TM) RVP panel and sepsis tests, the potential efficacy of such tests, the anticipated timing of the commercial launch, the approximate revenues and earnings that will be generated by such tests and the market penetration Tm will obtain for such tests, are forward-looking statements.
These forward-looking statements are based on certain factors and assumptions. The Company has assumed that it will submit its PGx, sepsis, warfarin and ID-Tag(TM) RVP tests for regulatory approval as disclosed above (and in the case of the sepsis test, possibly 2007), that it will receive the necessary regulatory approvals from the FDA, European and Canadian regulatory authorities within one year of submission, and that as part of such approval the FDA and European regulatory authorities will have reviewed, as required, clinical and analytical validation of the sepsis, RVP, warfarin and PGx tests. The Company has also assumed that it will have sufficient capital to develop and commercially roll-out and manufacture sufficient quantities of its tests and that phamacogenomic testing and genetic testing for infectious diseases including sepsis will become more widespread. With respect to the sepsis test specifically, the Company has assumed that it will be able to successfully develop the sepsis test in two versions, as a real-time assay and in a Tag-It (TM) format. With respect to revenue generation and market penetration of the sepsis test, the Company has assumed that it will launch the sepsis test in the United States in both forms (i.e., as a real-time assay and in a Tag-It (TM) format) following receipt of the necessary regulatory approvals, that it will be able to sell the sepsis test at a price ranging from U.S.$300 to U.S.$500 per test, that there will be reimbursement available for this test by both private and public healthcare insurers, that there will be approximately 750,000 sepsis cases a year in each of the United States and the European Union, that the Company will achieve approximately 20% market penetration in both markets by the third year following launch, that the $U.S./$Cdn. exchange rate and the Euro/$Cdn. exchange rate will remain relatively constant at current rates, that the Company will sell the product directly to hospitals, that there will be no other directly competing technological or competitive advances in the treatment of sepsis, that Xigris(R) and vasopressin will continue to be widely used in the treatment of sepsis, that the Company will continue to enjoy the exclusive use of the patents to be licensed from Sirius, that these patents are and will remain valid and enforceable and that sufficient revenue and earnings will be generated from the sepsis test to recover the $4 million licence fee advance paid to Sirius in the forecast timeframe. While the Company considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.
Forward-looking statements are not guarantees of future performance and by their nature necessarily involve risks and uncertainties that could cause the actual results to differ materially from those contemplated by such statements including, without limitation: the risk that the factors and assumptions underlying the forward-looking statements may prove to be incorrect; the difficulty of predicting regulatory approvals particularly the timing and conditions precedent to obtaining any regulatory approval; market acceptance and demand for new products; the availability of appropriate genetic content and other materials required for the Company’s products; the Company’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 the Company’s manufacturing facility; and any other similar or related risks and uncertainties. Additonal risks and uncertainties affecting the Company can be found in the Company’s 2005 Annual report, available on SEDAR at www.sedar.com. If any of these risks or uncertainties were to materialize, actual results of the Company could vary materially from those that are expressed or implied by these forward-looking statements.
You should not place undue importance on forward-looking statements and should not rely on them as of any other date. Except as may be required by applicable law, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
The TSX Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release. Summary financial statements attached: CONSOLIDATED BALANCE SHEETS As at As at March 31 December 31 2006 2005 $ $ ------------------------------------------------------------------------- ASSETS Current Cash and cash equivalents 2,429,106 8,972,594 Short-term investments 5,085,682 7,042,035 Trade accounts receivable 2,309,804 1,245,333 Other accounts receivable 892,071 613,680 Inventory 4,138,749 3,619,714 Prepaid expenses 348,035 46,305 ------------------------------------------------------------------------- Total current assets 15,203,447 21,539,661 ------------------------------------------------------------------------- Capital assets, net 4,561,845 4,340,712 Intangible assets, net 2,681,195 2,765,363 Deferred financing costs, net 711,665 777,901 Other asset 1,438,347 1,438,347 License fee advances 2,000,000 - ------------------------------------------------------------------------- 26,596,499 30,861,984 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS’ EQUITY Current Accounts payable and accrued liabilities 5,599,619 6,049,940 Current portion of deferred revenue 122,497 123,805 Current portion of long-term debt 3,235,966 2,476,582 Income taxes payable 49,165 82,273 ------------------------------------------------------------------------- Total current liabilities 9,007,247 8,732,600 ------------------------------------------------------------------------- Deferred leasehold inducement 332,020 348,118 Deferred revenue 112,036 123,970 Deferred share units 357,325 301,075 Long-term debt 8,378,027 9,033,181 ------------------------------------------------------------------------- Total liabilities 18,186,655 18,538,944 ------------------------------------------------------------------------- Shareholders’ equity Capital stock 66,871,280 66,871,280 Contributed surplus 10,119,242 9,937,955 Deficit (68,580,678) (64,486,195) ------------------------------------------------------------------------- Total shareholders’ equity 8,409,844 12,323,040 ------------------------------------------------------------------------- 26,596,499 30,861,984 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT Three Months Ended March 31 -------------------------- 2006 2005 $ $ ------------------------------------------------------------------------- Revenue 2,908,074 1,075,283 ------------------------------------------------------------------------- Expenses Cost of goods sold 1,593,093 594,267 Research and development, net 996,290 1,039,883 Sales, general and administrative 3,642,404 2,233,906 ------------------------------------------------------------------------- 6,231,787 3,868,056 ------------------------------------------------------------------------- Loss before the undernoted (3,323,713) (2,792,773) Interest expense on long-term debt (711,524) (574,548) Other financial expense, net (47,640) (69,131) ------------------------------------------------------------------------- Loss before income taxes (4,082,877) (3,436,452) Income tax expense 11,606 9,100 ------------------------------------------------------------------------- Net loss for the period (4,094,483) (3,445,552) Deficit, beginning of period (64,486,195) (49,318,729) ------------------------------------------------------------------------- Deficit, end of period (68,580,678) (52,764,281) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted loss per common share $(0.09) $(0.09) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted average number of common shares outstanding Basic and diluted 47,715,224 37,674,137 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Three Months Ended March 31 -------------------------- 2006 2005 $ $ ------------------------------------------------------------------------- OPERATING ACTIVITIES Net loss for the period (4,094,483) (3,445,552) Add (deduct) items not involving cash: Depreciation and amortization 421,199 287,816 Amortization of deferred leasehold inducement (16,098) (14,847) Accretion of loan discount - 258,653 Accretion of convertible debenture discount (47,873) - Amortization of deferred financing costs 66,236 96,955 Stock option compensation expense and deferred share units 237,537 243,363 Government loan interest accrual 112,099 60,202 Loss (gain) on foreign exchange 25,880 (1,611) ------------------------------------------------------------------------- (3,295,503) (2,515,021) Changes in non-cash working capital balances related to operations: Increase in trade accounts receivable (1,064,471) (257,956) Increase in other accounts receivable (278,391) (109,387) Increase in inventory (519,035) (243,427) Increase in prepaid expenses (301,730) (67,756) Decrease in deferred revenue (13,242) (21,337) Decrease in accounts payable and accrued liabilities (2,436,197) (551,993) Decrease (increase) in income taxes payable (33,108) 9,100 ------------------------------------------------------------------------- Cash used in operating activities (7,941,677) (3,757,777) ------------------------------------------------------------------------- INVESTING ACTIVITIES Purchase of capital assets (537,683) (185,751) Purchase of intangible assets (20,481) (34,735) Purchase of short-term investments (9,373,304) (12,429,989) Sale of short-term investments 11,329,657 6,575,469 ------------------------------------------------------------------------- Cash provided by (used in) investing activities 1,398,189 (6,075,006) ------------------------------------------------------------------------- FINANCING ACTIVITIES Share issuance costs - (772,542) Issuance of common shares - 9,687,771 ------------------------------------------------------------------------- Cash provided by financing activities - 8,915,229 ------------------------------------------------------------------------- Net decrease in cash and cash equivalents during the period (6,543,488) (917,554) Cash and cash equivalents, beginning of period 8,972,594 1,333,228 ------------------------------------------------------------------------- Cash and cash equivalents, end of period 2,429,106 415,674 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Supplemental cash flow information Income taxes paid 77,748 - Interest paid 259,539 255,693 ------------------------------------------------------------------------- -------------------------------------------------------------------------
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.
