TSX Venture Exchange: ARI
TORONTO, April 28 /CNW/ - ARIUS Research Inc. ("ARIUS" or the "Company")
(TSX-V: ARI) today announced its financial results for the quarter ended
February 28, 2006. All amounts are in Canadian dollars, unless otherwise
indicated.
During the first quarter of fiscal 2006, ARIUS achieved a number of key
corporate objectives and milestones, significantly strengthening the financial
position of the Company, including:
- Completing $24.5 million (US $21.5 million) first tranche of a private
placement;
- Securing US $2 million convertible bridge loan facility;
- U.S. patent No. 7,009,040 issued for ARIUS' lead anti-CD63 antibody,
AR7BD-33-11A; and
- Listed on the 2005 TSX Venture 50, as one of the top 50 public venture
capital companies listed on the TSX Venture Exchange.
Subsequent to the quarter end, ARIUS received significant validation of
its technology and further strengthened its financial position by:
- Completing a $1.7 million (US $1.2 million) second tranche of the
private placement for total gross proceeds raised of approximately
$26.2 million (US $22.7 million);
- Licensing a lead antibody program to Genentech, Inc. ("Genentech")
(NYSE: DNA) for an upfront licensing fee, milestone payments based on
progress through clinical development and royalties on net sales; and
- Signing a three-year collaboration to look for novel cancer treatments
with Takeda Pharmaceutical Company Limited ("Takeda") (Tokyo Stock
Exchange: 4502), for an upfront technology access fee of
US $2.0 million, as well as milestone payments based on progress
through clinical development plus royalties on net sales for any
licensed product.
Convertible Bridge Loan
On December 14, 2005, ARIUS completed a convertible bridge loan facility
in the amount of US $2,000,000 from Xmark Opportunity Fund, L.P. and
affiliated funds ("Xmark"). The loan is convertible at Xmark's option, in
whole or in part, into common shares of ARIUS ("Common Shares") at a price of
$0.80 per Common Share, bears an annual interest rate of 13.25% and is
repayable no later than December 14, 2007. In relation to the loan, ARIUS paid
an upfront structuring fee and issued to Xmark 2,224,125 Common Share purchase
warrants. Each warrant entitles Xmark to purchase one Common Share at a price
of $1.00 per share until December 14, 2007.
Pursuant to the private placement of units, as detailed below, ARIUS
entered into an Investor Rights Agreement with the lead investors, in which it
agreed to certain restrictive covenants, including the requirement to place
funds in the amount of US $2,000,000, from the proceeds of the Offering, into
a restricted account, which is governed by a Cash Collateral Agreement. The
funds shall be used to secure the convertible bridge loan for as long as it
remains outstanding. Should the convertible bridge loan be converted into
equity, the Cash Collateral Agreement shall be extinguished and the funds
shall become unrestricted.
Private Placement
On February 28, 2006, under the terms of an agency agreement (the "Agency
Agreement"), ARIUS completed the first tranche of a private placement of units
(the "Unit") and issued 30,605,764 Units at a price of $0.80 per Unit, for
total gross proceeds of $24,484,611 and net cash proceeds of $22,393,843. Each
Unit consists of one Common Share and one Common Share purchase warrant which
entitles the holder thereof to purchase one Common Share at a price of $1.00
per share until February 28, 2011. In relation to the first tranche of the
private placement, ARIUS paid the agents a cash commission of 7%, excluding
receipts from U.S. retail direct subscribers, and granted the agents, in
aggregate, 1,988,768 non-transferable broker warrants (the "Broker Warrants")
which expire at the end of business on February 28, 2008. Each Broker Warrant
entitles the holder thereof to purchase one Unit at a price of $0.80 per Unit.
On March 3, 2006, ARIUS completed the second tranche of the private
placement, and under the terms of the Agency Agreement, issued 2,123,637 Units
for total gross proceeds of $1,698,909 and net cash proceeds of approximately
$1.5 million. In relation to the second tranche of the private placement,
ARIUS paid the agents a cash commission of 7%, excluding receipts from U.S.
retail direct subscribers, and granted the agents, in aggregate, 133,040
Broker Warrants, which expire at the end of business on February 28, 2008.
The private placement was approved by the written consent of the majority
of the disinterested holders of the Common Shares.
Licensing Agreement
Effective March 21, 2006, the Company licensed rights to one of the
Company's novel anti-cancer antibody programs to Genentech. Under the terms of
the agreement, the Company has received an upfront licensing fee, and may
receive milestone payments based on progress through clinical development, as
well as royalties on net sales. In addition, Genentech will assume all future
costs for the development of the licensed technology.
Multi-Product Collaboration
On March 31, 2006, the Company and Takeda entered into a three-year,
multi-product collaboration using the Company's FunctionFIRST(TM) Platform to
discover novel treatments for human disease. Under the terms of the agreement,
the Company will receive an upfront technology access fee of US $2.0 million,
consisting of US $1.0 million in cash and equity, respectively, and research
funding for three years. The Company will also be entitled to milestone
payments based on progress through clinical development plus royalties on net
sales for any licensed product. Takeda will assume the responsibility and
costs of development and commercialization while the Company will have an
option to co-develop any product.
On April 19, 2006, pursuant to the terms of the collaboration agreement,
the Company completed a private placement with Takeda in which the Company
issued 614,737 Common Shares at a price of $1.90 per share for total gross
proceeds of $1,168,000 (US $1.0 million).
Financial Strength
The Company's cash and cash equivalents were $1,328,355 at February 28,
2006 and the net working capital position was $20,419,207. After receipt of
the subscription receivable, on March 1, 2006, from the first tranche of the
private placement, completion of the second tranche of the private placement,
and receipt of the upfront payments and equity investment from Genentech and
Takeda, the Company believes that it has adequate financial resources for
anticipated expenditures through the end of the 2008 fiscal year and beyond.
Financial Review
For the three-month period ended February 28, 2006, ARIUS recorded a net
loss of $921,904 or $0.09 per share, compared with $805,891 or $0.08 per share
for the three-month period ended February 28, 2005. The loss reflects ongoing
research and development expenditures that biotechnology companies, such as
ARIUS, must incur over a period of years before a product can be marketed for
significant revenues.
Interest income amounted to $328 for the three-month period ended
February 28, 2006, compared with $29,953 for the same period in fiscal 2005, a
decrease of 99%. The decrease primarily resulted from lower average cash
balances.
Research and development ("R&D") expenditures, before tax credits and
grants, amounted to $665,430 for the three-month period ended February 28,
2006, compared with $613,520 in the same period in fiscal 2005, an increase of
8%. This increase in R&D expenses is related to the resumption of normal
operating activities following an extended austerity period, which ended in
December following the convertible debt financing.
General and administrative expenses, excluding amortization expense,
amounted to $301,113 in the three-month period ended February 28, 2006,
compared with $251,188 during the same period in fiscal 2005, an increase of
20%, reflecting an increase in business development, investor relations and
other related activities during the period as compared with last year.
About ARIUS Research
ARIUS Research Inc. is a biotechnology company dedicated to personalizing
cancer therapy through the discovery and development of novel anticancer
monoclonal antibodies (MAbs). Established in 1999, ARIUS has built a
proprietary technology platform, FunctionFIRST(TM), that rapidly identifies
powerful MAbs targeting a variety of cancer indications. This antibody
generation engine has enabled ARIUS to assemble a growing pipeline, which is
used for commercial collaborations and in-house development. ARIUS has ongoing
partnerships with key biotechnology and drug development companies. The
company is listed on the TSX Venture Exchange under the symbol "ARI".
Financial Information to follow:
<<
ARIUS RESEARCH INC.
(A DEVELOPMENT STAGE COMPANY)
Interim Balance Sheets
(Unaudited)
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February 28, November 30,
2006 2005
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Assets
Current assets:
Cash and cash equivalents $ 1 ,328,355 $ 152,967
Subscription receivable 19,186,056 -
Refundable tax credits 262,557 200,000
Prepaid expenses 106,575 71,568
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20,883,543 424,535
Restricted subscription receivable 2,276,000 -
Deferred financing costs 74,177 -
Property and equipment, net 556,026 585,460
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$ 23,789,746 $ 1,009,995
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Liabilities and Shareholders' Equity
Current liabilities:
Bank indebtedness $ - $ 85,000
Accounts payable and accrued liabilities 215,965 940,690
Demand loan - 300,000
Current portion of capital lease obligation 72,619 89,465
Current portion of unearned revenue and
contract advances 175,752 175,752
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464,336 1,590,907
Capital lease obligation 54,701 59,118
Convertible bridge loan 1,305,944 -
Unearned revenue and contract advances 329,637 329,637
Shareholders' equity:
Share capital:
Common shares 25,906,797 12,926,275
Warrants 9,840,005 901,285
Compensation warrants 855,170 43,106
Equity component of convertible
bridge loan 558,585 -
Contributed surplus 428,880 192,072
Deficit (15,954,309) (15,032,405)
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21,635,128 (969,667)
Guarantees
Subsequent events
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$ 23,789,746 $ 1,009,995
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ARIUS RESEARCH INC.
(A DEVELOPMENT STAGE COMPANY)
Interim Statements of Operations and Deficit
(Unaudited)
Three-month Three-month Cumulative
period period since
ended ended inception on
February 28, February 28, August 11,
2006 2005 1999
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Revenue:
Licensing fees $ - $ - $ 441,604
Research grant payments 16,034 - 46,663
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16,034 - 488,267
Expenses:
Research and development,
net of tax credits
of $62,557 (2005 - $68,270) 602,873 545,250 11,141,663
General and administrative 335,393 290,594 5,940,768
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938,266 835,844 17,082,431
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Loss before the undernoted (922,232) (835,844) (16,594,164)
Interest income 328 29,953 639,855
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Loss for the period (921,904) (805,891) (15,954,309)
Deficit, beginning of period:
As originally reported (15,032,405) (12,020,277) -
Impact of change in
accounting for stock-based
compensation - (97,690) -
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As restated (15,032,405) (12,117,967) -
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Deficit, end of period $(15,954,309) $(12,923,858) $(15,954,309)
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Loss per share - basic
and diluted $ 0.09 $ 0.08
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Weighted average common
shares outstanding 10,640,206 10,260,058
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ARIUS RESEARCH INC.
(A DEVELOPMENT STAGE COMPANY)
Interim Statements of Cash Flows
(Unaudited)
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Three-month Three-month Cumulative
period period since
ended ended inception on
February 28, February 28, August 11,
2006 2005 1999
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Cash and cash equivalents provided by (used in):
Operating activities:
Loss for the period $ (921,904) $ (805,891) $(15,954,309)
Items not involving cash:
Write-off of investment - - 20,000
Services received for
common shares - - 400,024
Depreciation and
amortization 34,280 39,406 707,645
Gain on disposal of
equipment - - (7,986)
Write-off of leasehold
improvements - - 86,349
Non-cash stock-based
compensation 39,142 - 231,214
Accretion of convertible
debentures 45,944 - 79,338
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(802,538) (766,485) (14,437,725)
Change in non-cash operating
working capital:
Refundable tax credits (62,557) 608,648 (262,557)
Prepaid expenses (35,007) (6,269) (106,575)
Deferred financing costs (32,499) - (32,499)
Accounts payable and
accrued liabilities and
unearned revenue (724,725) (324,713) 721,354
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(1,657,326) (488,819) (14,118,002)
Financing activities:
Proceeds from issuance of
units, net 931,787 - 931,787
Issue of shares and warrants,
net of issuance costs - - 13,428,666
Proceeds from issuance of
convertible debenture, net 2,253,600 - 2,323,600
Redemption of convertible
debentures - - (70,000)
Exercise of compensation
warrants - - 8,581
Exercise of warrants 53,590 - 53,590
Draw of bank line of credit - - 655,000
Repayment of bank line of
credit (85,000) (440,000) (655,000)
Demand loan - - 300,000
Repayment of demand loan (300,000) - (300,000)
Repayment of capital lease
and equipment financing
obligations (21,263) (20,817) (191,045)
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2,832,714 (460,817) 16,485,179
Investing activities:
Long-term investment - - (20,000)
Acquisition of property
and equipment - (4,111) (1,027,808)
Disposal of property and
equipment - - 8,986
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- (4,111) (1,038,822)
Increase (decrease) in cash 1,175,388 (953,747) 1,328,355
Cash and cash equivalents,
beginning of period 152,967 1,988,652 -
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Cash and cash equivalents,
end of period $ 1,328,355 $ 1,034,905 $ 1,328,355
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Supplemental cash flow
information:
Interest paid $ 10,361 $ 12,243 $ 90,899
Interest received 328 29,953 632,780
Supplemental disclosure of
non-cash financing and
investing activities:
Shares issued for technology - - 2
Shares issued for services - - 400,024
Compensation warrants 855,170 - 900,470
Capital lease obligation - - 318,365
Acquisition of laboratory
and office equipment under
capital lease - - (318,365)
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The TSX Venture Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of this statement.
Forward-Looking Statement
Certain statements in this news release constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, which involve known and unknown risks, uncertainties and other
factors that may cause our actual results to be materially different from any
future results, performance or achievements expressed or implied by such
statements. Forward-looking statements in this release include, but are not
limited to, ARIUS successfully advancing its new product programs as well as
licensing opportunities. These statements are only predictions and actual
events or results may differ materially. Factors that could cause such actual
events or results expressed or implied by such forward-looking statements to
differ materially from any future results expressed or implied by such
statements include, but are not limited to: early stage of development;
technology and product development; dependence on and management of current
and future corporate collaborations; future capital needs; uncertainty of
additional funding; no assurance of market acceptance; dependence on
proprietary technology and uncertainty of patent protection; intense
competition; manufacturing and market uncertainties; and government
regulation. These and other factors are described in detail in ARIUS' Annual
Report, forthcoming news releases and other filings with Canadian securities
regulatory authorities available at www.sedar.com. Forward-looking statements
are based on our current expectations and ARIUS is not obligated to update
such information to reflect later events or developments.
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