TORONTO, Aug. 14 /PRNewswire-FirstCall/ - Tm Bioscience Corporation , a leader in the commercial genetic testing market, today announced its financial and operational results for the second quarter ended June 30, 2006.
For the second quarter of 2006, Tm Bioscience generated revenue of $3.1 million compared to $2.0 million for the second quarter of the previous year, an increase of 55%. For the first six months of 2006, the Company generated revenue of $6.0 million compared to $3.1 million for the first six months of the previous year, an increase of 95%.
“During the second quarter, our efforts were focused on securing regulatory clearance in the U.S. and Europe for our next wave of genetic tests. Supporting this regulatory effort and highlighting the quarter, our Company successfully underwent its first audit by the FDA, resulting in only a few observations which we have already corrected,” said Mr. Greg Hines, President and CEO of Tm Bioscience. “At the same time, we continued to realize revenue during the quarter from sales of our established menu of genetic tests, with initial sales of our ID-Tag(TM) Respiratory Viral Panel (RVP) contributing to top-line growth this quarter.”
Product Updates:
The ID-Tag(TM) Respiratory Viral Panel (RVP)
The ID-Tag(TM) Respiratory Viral Panel (RVP) is a comprehensive assay for the detection of various strains of viruses and subtypes, including Avian Flu. During the quarter, Tm made significant progress toward FDA and CE mark clearances for this product. The Company anticipates clearances in each of these jurisdictions in the second half of 2006 in anticipation of flu season.
In anticipation of regulatory clearance, over the past six months the Company signed a number of distribution agreements for the RVP for Northern Europe and Turkey. Tm plans to strengthen and expand this distribution network globally over the coming quarters while its U.S. based sales force targets customers in North America directly. Tm has also enrolled more than 25 leading healthcare institutions and laboratories across North America, Europe and Asia in its Early Access Program, which enables key customers and thought leaders to gain experience with the RVP and provide Tm with feedback prior to IVD approval. Tm has started to generate initial sales of the RVP as a result of these efforts.
Warfarin - The Tag-It(TM) PGx CYP2C9+VKORC1 Mutation Detection Kit
The Company invested significant resources during the quarter into preparing for the imminent launch of its companion test for Warfarin, a common oral anti-coagulant that is prescribed more than 20 million times annually in the U.S., yet frequently causes adverse drug events. Tm’s test is designed to assist physicians in determining the correct dosing regimen for Warfarin and will be available initially as an IUO (Investigational Use Only) product in the third quarter of 2006, with FDA clearance as an IVD expected late in 2006 or early 2007. During the second quarter, Tm initiated an Early Access Program (EAP) for this product as well.
Sepsis - The Tag-It(TM) Severe Sepsis Test
During the second quarter, Tm’s Research and Product Development group completed the first prototype of the Tag-It(TM) Severe Sepsis Test. The Company intends to submit this product for regulatory clearance with clearance anticipated for the second half of 2007.
P450 - The Tag-It(TM) PGx Mutation Detection Kits for P450-2D6, P450-2C9
and P450-2C19
The Company intends to submit all three of its PGx P450 products to the FDA in 2006 with clearance as IVDs anticipated for late 2006 or early 2007.
Financial Results
For the second quarter ended June 30, 2006, Tm Bioscience generated revenue of $3.1 million, an increase of 55% over revenue of $2.0 million generated in the second quarter of 2005. For the first six months of 2006, the Company generated revenue of $6.0 million compared to $3.1 million for the corresponding period in 2005. Product sales for the second quarter of 2006 were $2.9 million, an increase of 80% over second quarter 2005 product sales of $1.6 million. This growth was driven primarily by sales of Tag-It(TM) CF70 reagents, increased demand from Genzyme since their mid-2005 launch of the CFplus(TM) test and market uptake of the Tag-It(TM) Ashkenazi Panel (AJP). Luminex instrument placements continued in the quarter through direct customer purchases and via the Company’s reagent rental programs. Instrument sales were $0.1 million for the second quarter of 2006 as compared with $0.3 million in all of 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.
Cost of goods sold for the second quarter of 2006 were $1.8 million compared with $1.2 million for the same period in 2005. For the first six months of 2006, cost of goods sold were $3.3 million compared to $1.8 million for the corresponding period in 2005.
Standard reagent product margins were 59% for the quarter ended June 30, 2006 as compared with 61% for the same period in 2005. Standard reagent product margin is calculated by subtracting standard reagent cost of goods sold and genetic content and bead 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 3% year-to-date comparative decline is due in part to non-recurring favourable adjustments in the first quarter of 2005 to royalties which had been overpaid in 2004 and in part to an increased royalty rate payable to Luminex in accordance with the revised supply agreement concluded at the end of the first quarter of 2006. Total margins were 43% for the second quarter of 2006 compared with 41% for the second quarter of 2005. Total margins were 44% for the first half of 2006 compared with 42% for the second half of 2005.
Total expenses, excluding cost of goods sold, for the second quarter of 2006 were $5.6 million compared to $3.8 million for the same period in 2005. Total expenses, excluding cost of goods sold, for the first six months of 2006 were $10.2 million compared to $7.0 million for the same period in 2005. Research and development expenses for the second quarter of 2006 were $1.1 million compared with $1.1 million for the same period in 2005. Sales, general and administration (SG&A) for the second quarter of 2006 were $4.5 million compared to $2.7 million for the same period in 2005, driven primarily by headcount growth in the medical and regulatory, marketing and business development and quality assurance functions, as well as in the intellectual property and human resources functions. This was driven by the Company’s growing customer base, 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.
Interest expense from long-term debt was $0.7 million for the second quarter of 2006 compared with $0.7 million for the second quarter of 2005. For the first six months ended June 30, 2006, interest expense from long-term debt was $1.4 million compared with $1.2 million for the first six months of 2005. The six-month increased interest expense of $147,000 reflects the increased debt resulting from additional funds advanced from TPC, which grew by 93% year over year. Of the increase, approximately $24,000 related to cash interest paid.
Net loss for the quarter ended June 30, 2006 was $4.6 million or ($0.09) per share, compared with a net loss of $3.7 million or ($0.09) per share for the corresponding period in 2005. For the six months ended June 30, 2006 and 2005, the net loss was $8.8 million and $7.1 million and ($0.18) and ($0.18) per share, respectively.
Working capital as at June 30, 2006 was $1.3 million including cash and cash equivalents and short-term investments of $2.8 million, compared to $12.8 million and $16.0 million respectively as at December 31, 2005.
Funds of $0.6 million were received from Technology Partnerships Canada (TPC) in the second quarter of 2006 (2005 - $nil) bringing the outstanding balance of the TPC funds advanced to $3.7 million. In the second quarter of 2006, the Company submitted a claim for reimbursements of approximately $0.7 million to TPC which will bring the program current up to March 31, 2006.
Under the terms of the agreement the Company signed with Sirius Genomics for an exclusive commercial license to patents from Sirius for specific biomarkers related to drugs used to treat severe sepsis and risk of sepsis, the Company will pay a license fee advance of $4,000,000 to be provided in two equal instalments. The first $2,000,000 was paid on April 3, 2006, and the second instalment is due in the third quarter of 2006.
In order to pursue its expanded regulatory drive, submit products for FDA certification in 2006, as well as open new markets for its RVP and sepsis tests, all the while continuing to serve its growing customer base, the Company foresees a need for growth capital in the future. Management remains responsive to market conditions and will seek additional capital from traditional sources or through strategic partnerships as opportunities arise.
Notice of Conference Call
Tm Bioscience will be holding a conference call on August 15, 2005 at 8:00am (EST) where Mr. Greg Hines, President and CEO, and Mr. Jim Pelot, COO and CFO, will discuss the Company’s second 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 at those sites for 90 days.
About Tm Bioscience - Putting the Human Genome to Work(TM)
Tm Bioscience is a Toronto-based diagnostics company developing a suite of DNA-based tests for genetic disorders, drug metabolism (pharmacogenetics) and infectious diseases.
Tm Bioscience has developed and commercialized Analyte Specific Reagents(x) and a series of Tag-It(TM)(xx) tests for a variety of genetic disorders. These tests are based on Tm Bioscience’s proprietary Tag-It(TM) Universal Array platform, which utilizes a proprietary universal tag system that allows for easy optimization, product development and expansion.
Tm Bioscience’s Cystic Fibrosis (CF) test is the first multiplexed human disease genotyping test to be cleared by the FDA as an in vitro device (IVD) for diagnostic use in the U.S. It has also received CE mark certification, allowing the test to be marketed for diagnostic purposes in the European Union. Tm Bioscience is developing the ID-Tag(TM) Respiratory Viral Panel, a comprehensive assay for the detection of various strains and subtypes of respiratory viruses. In addition, the Company is developing a companion test for the blood-thinning drug Warfarin and a test for patients under treatment for sepsis.
For more information, visit tmbioscience.com. (x) Analyte Specific Reagent. Analytical and performance characteristics are not established. (xx) For Investigational Use Only. The performance characteristics of these products have not been established. Forward-Looking Statements
This quarterly results press release and the corresponding conference call for the interim period ended June 30, 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 in 2006 (and in the case of the sepsis test, possibly 2007), that it will receive the necessary regulatory approvals from the FDA and European 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. Additional 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. Tm Bioscience Corporation Interim Report (Unaudited) CONSOLIDATED BALANCE SHEETS As at As at June 30, December 31, 2006 2005 $ $ ------------------------------------------------------------------------- ASSETS Current Cash and cash equivalents 2,809,564 8,972,594 Short-term investments 35,000 7,042,035 Trade accounts receivable 2,792,104 1,245,333 Other accounts receivable 573,116 613,680 Inventory 3,567,737 3,619,714 Prepaid expenses 289,088 46,305 ------------------------------------------------------------------------- Total current assets 10,066,609 21,539,661 ------------------------------------------------------------------------- Capital assets, net 4,806,080 4,340,712 Intangible assets, net 2,663,383 2,765,363 Deferred financing costs, net 644,694 777,901 Other asset 1,249,516 1,438,347 License fee advances 2,000,000 - ------------------------------------------------------------------------- 21,430,282 30,861,984 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS’ EQUITY Current Accounts payable and accrued liabilities 5,171,868 6,049,940 Current portion of deferred revenue 166,873 123,805 Current portion of long-term debt 3,320,517 2,476,582 Current portion of obligation under capital lease 21,252 - Income taxes payable 37,559 82,273 ------------------------------------------------------------------------- Total current liabilities 8,718,069 8,732,600 ------------------------------------------------------------------------- Deferred leasehold inducement 315,922 348,118 Deferred revenue 91,704 123,970 Deferred share units 418,075 301,075 Long-term debt 7,997,158 9,033,181 Obligation under capital lease 62,463 - ------------------------------------------------------------------------- Total liabilities 17,603,391 18,538,944 ------------------------------------------------------------------------- Shareholders’ equity Capital stock 66,871,280 66,871,280 Contributed surplus 10,179,847 9,937,955 Deficit (73,224,236) (64,486,195) ------------------------------------------------------------------------- Total shareholders’ equity 3,826,891 12,323,040 ------------------------------------------------------------------------- 21,430,282 30,861,984 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Tm Bioscience Corporation Interim Report (Unaudited) CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT Three Months Ended Six Months Ended June 30, June 30, --------------------------------------------------- 2006 2005 2006 2005 $ $ $ $ ------------------------------------------------------------------------- Revenue 3,074,786 1,989,906 5,982,860 3,065,188 ------------------------------------------------------------------------- Expenses Cost of goods sold 1,750,651 1,169,944 3,343,744 1,764,211 Research and development, net 1,107,176 1,094,007 2,089,994 2,133,890 Sales, general and administrative 4,467,770 2,652,045 8,123,645 4,885,951 ------------------------------------------------------------------------- 7,325,597 4,915,996 13,557,383 8,784,052 ------------------------------------------------------------------------- Loss before the undernoted (4,250,811) (2,926,090) (7,574,523) (5,718,864) Interest expense on long-term debt (681,631) (672,095) (1,393,156) (1,246,643) Gain on foreign exchange 266,721 9,568 240,842 11,179 Other financial income (expense), net 33,030 (77,266) 11,269 (148,007) ------------------------------------------------------------------------- Loss before income taxes (4,632,691) (3,665,883) (8,715,568) (7,102,335) Income tax expense (10,867) (9,900) (22,473) (19,000) ------------------------------------------------------------------------- Net loss for the period (4,643,558) (3,675,783) (8,738,041) (7,121,335) Deficit, beginning of period (68,580,678) (52,764,281) (64,486,195) (49,318,729) ------------------------------------------------------------------------- Deficit, end of period (73,224,236) (56,440,064) (73,224,236) (56,440,064) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted loss per common share (0.09) (0.09) (0.18) (0.18) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted average number of common shares outstanding Basic and diluted 47,715,224 37,997,605 47,715,224 38,786,432 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Tm Bioscience Corporation Interim Report (Unaudited) CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended Six Months Ended June 30, June 30, --------------------------------------------------- 2006 2005 2006 2005 $ $ $ $ ------------------------------------------------------------------------- OPERATING ACTIVITIES Net loss for the period (4,643,558) (3,675,783) (8,738,041) (7,121,335) Add (deduct) items not involving cash: Depreciation and amortization 453,442 291,085 874,641 578,901 Amortization of deferred leasehold inducement (16,098) (14,846) (32,196) (29,693) Amortization of loan discount 479,787 347,020 431,914 605,673 Amortization of deferred financing costs 66,971 98,032 133,207 194,987 Stock option compensation expense and deferred share units 121,355 120,836 358,892 364,199 Government loan interest accrual 179,435 66,539 291,534 126,741 Gain on foreign exchange (266,721) (9,568) (240,842) (11,179) ------------------------------------------------------------------------- (3,625,387) (2,776,685) (6,920,891) 5,291,706) ------------------------------------------------------------------------- Change in non-cash working capital balances related to operations: Increase in trade accounts receivable (482,300) (466,154) (1,546,771) (724,110) Decrease (increase) in other accounts receivable 318,955 51,643 40,564 (57,744) Decrease (increase) in inventory 571,012 (59,253) 51,977 (302,680) Decrease (increase) in prepaid expenses 58,947 (21,924) (242,783) (89,680) Decrease (increase) in deferred revenue 24,044 (1,337) 10,802 (22,674) (Decrease) increase in accounts payable and accrued liabilities (528,442) 1,300,081 (2,964,639) 748,088 (Decrease) increase in income taxes payable (11,606) 9,900 (44,713) 19,000 ------------------------------------------------------------------------- Cash used in operating activities (3,674,777) (1,963,729) (11,616,454) (5,721,506) ------------------------------------------------------------------------- INVESTING ACTIVITIES Purchase of capital assets (505,821) (465,363) (1,043,504) (651,114) Purchase of intangible assets (90,329) (6,155) (110,810) (40,890) Purchase of short-term investments (1,396,458) (8,691,240) (10,769,762) (21,121,229) Sale of short-term investments 6,447,140 8,539,687 17,776,797 15,115,156 ------------------------------------------------------------------------- Cash provided by (used in) investing activities 4,454,532 (623,071) 5,852,721 (6,698,077) ------------------------------------------------------------------------- FINANCING ACTIVITIES Proceeds from long-term debt 551,384 - 551,384 - Repayment of long-term debt (950,681) - (950,681) - Share issuance costs - - - (772,542) Net change in share capital - 3,833,251 - 13,521,022 ------------------------------------------------------------------------- Cash (used in) provided by financing activities (399,297) 3,833,251 (399,297) 12,748,480 ------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents during the period 380,458 1,246,451 (6,163,030) 328,897 Cash and cash equivalents, beginning of period 2,429,106 415,674 8,972,594 1,333,228 ------------------------------------------------------------------------- Cash and cash equivalents, end of period 2,809,564 1,662,125 2,809,564 1,662,125 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Supplemental cash flow information Income taxes paid - - 77,748 - Interest paid 278,698 258,536 538,237 514,229 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Non-cash investing and financing activities related to capital lease (83,715) - (83,715) - ------------------------------------------------------------------------- -------------------------------------------------------------------------
Tm Bioscience
CONTACT: INVESTOR RELATIONS CONTACTS: Tm Bioscience, James Smith, TheEquicom Group, Tel.: (416) 815-0700, Email: jsmith@equicomgroup.com