TORONTO, July 27 /CNW/ - ARIUS Research Inc. ("ARIUS" or the "Company")
(TSX: ARI), today announced its financial results for the quarter ended
May 31, 2006. All amounts are in Canadian dollars, unless otherwise indicated.
During the six-month period ended May 31, 2006, ARIUS strengthened its
financial position, received significant validation of its technology and
expanded its management team by:
<<
- Completing a $26.2 million (US $22.7 million) private placement;
- 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;
- 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, research support payments and milestone payments
based on progress through clinical development plus royalties on net
sales for any licensed product;
- Securing a US $2 million convertible bridge loan facility;
- Hiring a Chief Medical Officer and an Interim Chief Financial
Officer;
- Receiving notice that U.S. patent No. 7,009,040 has been issued for
ARIUS' lead anti-CD63 antibody, AR7BD-33-11A; and
- Being selected as one of the 2005 TSX Venture 50.
>>
Subsequent to the quarter end, ARIUS achieved a key corporate milestone
through its graduation to the Toronto Stock Exchange ("TSX").
Graduation to the TSX
On July 24, 2006, ARIUS' common shares (the "Common Shares") began
trading on the TSX. Graduation to the TSX represents the achievement of a key
milestone in ARIUS' corporate strategy and reflects the Company's achievements
in recent months. The move will also allow ARIUS to raise the Company's
profile and access a broader base of investors.
Private Placement
On February 28, 2006 and March 3, 2006, under the terms of an agency
agreement (the "Agency Agreement"), the Company completed a private placement
of units (the "Offering"). Under the Offering, the Company agreed to issue
units (the "Units") at a price of $0.80 per Unit. Each Unit consisted of one
Common Share and one Common Share purchase warrant (the "Purchase Warrant").
Each Purchase Warrant entitles the holder thereof to purchase one Common Share
at a price of $1.00 per share until February 28, 2011.
Under the Agency Agreement, the Company issued 32,729,401 Units, for
total gross proceeds of $26,183,521 and net cash proceeds of $23,685,661. In
relation to the Offering, the Company paid the agents a cash commission of 7%
of the gross proceeds, excluding receipts from U.S. retail direct subscribers,
and granted the agents, in aggregate, 2,121,808 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. 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 has received an upfront technology access fee of US $2.0 million,
consisting of US $1.0 million in cash and equity, respectively. The Company
will also be entitled to research funding over 3 years, 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) and net proceeds of $1,122,467.
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 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 Offering of Units, the Company entered into an Investor
Rights Agreement with the lead investors, in which it agreed to certain
restrictive covenants, including the requirement to place funds sufficient to
repay the convertible bridge loan, 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. The balance in the restricted cash account at
May 31, 2006 is $2,209,083 (US $2,012,832).
Financial Strength
The Company's cash and cash equivalents were $23,765,590 at May 31, 2006,
not including the restricted cash of $2,209,083, and the net working capital
position was $23,361,782. The Company believes that it has adequate financial
resources for anticipated expenditures through the end of the 2008 fiscal year
and beyond.
All of the Company's research and development expenditures to date have
been devoted to the discovery and pre-clinical development of monoclonal
antibodies. ARIUS intends to continue to dedicate resources to refining and
building additional capabilities into the FunctionFIRST(TM) platform and the
discovery of new antibodies, but its primary focus will be to advance
ARIUS-originated antibodies into clinical development. ARIUS has selected the
first programs to advance to the clinic and expects to have one of these into
the clinic by 2008.
Financial Review
For the six-month period ended May 31, 2006, the Company recorded a net
loss of $1,350,734 ($0.05 per share) compared to a net loss of $1,559,232
($0.15 per share) for the six-month period ended May 31, 2005. For the
three-month period ended May 31, 2006, the Company recorded a net loss of
$428,830 ($0.01 per share) compared to a net loss of $753,341 ($0.07 per
share) for the three-month period ended May 31, 2005. The lower fiscal 2006
losses are primarily the result of higher revenues and interest income
partially offset by higher research and development expenditures and general
administrative expenses.
For the six-month period ended May 31, 2006, the Company recorded revenue
of $2,441,300 compared to $31,490 for the six-month period ended May 31, 2005.
For the three-month period ended May 31, 2006, the Company recorded revenue of
$2,425,266 compared to $31,490 for the three-month period ended May 31, 2005.
The increases were the result of the upfront payments from the Genentech
licensing agreement as well as financial contributions from the National
Research Council's Industrial Research Assistance Program ("IRAP") and the
recognition of unearned revenue from a collaboration agreement with PDL
Biopharma Inc. (formerly Protein Design Labs, Inc.).
Interest income amounted to $121,437 for the six-month period ended
May 31, 2006, compared with $47,782 for the same period in fiscal 2005.
Interest income amounted to $121,109 for the three-month period ended May 31,
2006, compared with $17,829 for the same period in fiscal 2005. The increases
primarily resulted from higher average cash balances, due to the completion of
the Offering and the receipt of upfront payments from Genentech and Takeda.
Research and development ("R&D") expenditures, before tax credits and
grants, amounted to $2,035,804 for the six-month period ended May 31, 2006,
compared with $1,287,871 in the same period in fiscal 2005. R&D expenditures,
before tax credits and grants, amounted to $1,370,374 for the three-month
period ended May 31, 2006, compared with $674,352 in the same period in fiscal
2005. These increases in R&D expenses are primarily the result of: 1) the
resumption of normal operating activities following an extended austerity
period, which ended in December following the convertible debt financing; 2)
an increase in R&D staffing levels and 3) activities associated with the
completion of the Genentech and Takeda agreements.
During the six-month and three-month periods ended May 31, 2006, the
Company accrued OITCs in the amount of $159,956 and $97,399, respectively
compared to $135,816 and $67,547 for the same periods in fiscal 2005. The
increase in the OITCs is the result of higher R&D expenditures.
General and administrative expenses, excluding amortization expense,
amounted to $1,992,622 in the six-month period ended May 31, 2006, compared
with $411,212 during the same period in fiscal 2005. General and
administrative expenses, excluding amortization expense, amounted to
$1,665,217 in the three-month period ended May 31, 2006, compared with
$160,024 during the same period in fiscal 2005. The increases are primarily
the result of: 1) resumption of normal operating activities following an
extended austerity period; 2) an increase in staffing levels; 3) an increase
in interest expenses as a result of the convertible bridge loan; 4) an
increase in business development, investor relations and other related
expenses; and 5) legal fees associated with the completion of the Genentech
and Takeda agreements.
On July 20, 2006, the Company issued 890,157 Common Shares for the
exercise of 3,400,000 Class E Warrants.
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 under the symbol "ARI".
Financial Information to follow:
<<
ARIUS RESEARCH INC.
(A DEVELOPMENT STAGE COMPANY)
Interim Balance Sheets
(Unaudited)
-------------------------------------------------------------------------
May 31, November 30,
2006 2005
-------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 23,765,590 $ 152,967
Receivables 59,310 9,904
Refundable tax credits 359,956 200,000
Prepaid expenses 206,569 61,664
-----------------------------------------------------------------------
24,391,425 424,535
Restricted cash 2,209,083 -
Deferred financing costs 88,568 -
Property and equipment, net 649,972 585,460
-------------------------------------------------------------------------
$ 27,339,048 $ 1,009,995
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Bank indebtedness $ - $ 85,000
Accounts payable and accrued liabilities 716,348 940,690
Bridge loan - 300,000
Current portion of capital lease obligation 60,795 89,465
Current portion of unearned revenue
and contract advances 252,500 175,752
-----------------------------------------------------------------------
1,029,643 1,590,907
Capital lease obligation 40,841 59,118
Convertible bridge loan 1,363,174 -
Unearned revenue and contract advances 1,311,552 329,637
Shareholders' equity:
Share capital:
Common shares 27,770,031 12,926,275
Warrants 10,306,716 901,285
Compensation warrants 912,377 43,106
Equity component of convertible bridge loan 527,111 -
Contributed surplus 460,742 192,072
Deficit (16,383,139) (15,032,405)
-----------------------------------------------------------------------
23,593,838 (969,667)
Guarantees
Subsequent event
-------------------------------------------------------------------------
$ 27,339,048 $ 1,009,995
-------------------------------------------------------------------------
-------------------------------------------------------------------------
ARIUS RESEARCH INC.
(A DEVELOPMENT STAGE COMPANY)
Interim Statements of Operations and Deficit
(Unaudited)
-----------------------------------------------------------
Six-month Six-month
period period
ended ended
May 31, May 31,
2006 2005
-----------------------------------------------------------
Revenue:
Licensing fees $ 2,383,477 $ 31,490
Research grant payments 57,823 -
---------------------------------------------------------
2,441,300 31,490
Expenses:
Research and development, net
of tax credits 1,875,848 1,152,055
General and administrative 2,037,623 486,449
---------------------------------------------------------
3,913,471 1,638,504
---------------------------------------------------------
Loss before the undernoted (1,472,171) (1,607,014)
Interest income 121,437 47,782
-----------------------------------------------------------
Loss for the period (1,350,734) (1,559,232)
Deficit, beginning of period:
As originally presented (15,032,405) (12,020,279)
Impact of change in accounting
for stock-based compensation - (97,670)
-----------------------------------------------------------
As restated (15,032,405) (12,117,949)
-----------------------------------------------------------
Deficit, end of period $(16,383,139) $(13,677,181)
-----------------------------------------------------------
-----------------------------------------------------------
Loss per share - basic
and diluted $ 0.05 $ 0.15
-----------------------------------------------------------
-----------------------------------------------------------
Weighted average common
shares outstanding 27,143,367 10,260,058
-----------------------------------------------------------
-----------------------------------------------------------
-------------------------------------------------------------------------
Three-month Three-month Cumulative
period period since
ended ended inception on
May 31, May 31, August 11,
2006 2005 1999
-------------------------------------------------------------------------
Revenue:
Licensing fees $ 2,383,477 31,490 $ 2,825,081
Research grant payments 41,789 - 88,452
-----------------------------------------------------------------------
2,425,266 31,490 2,913,533
Expenses:
Research and development, net
of tax credits 1,272,975 606,805 12,414,638
General and administrative 1,702,230 195,855 7,642,998
-----------------------------------------------------------------------
2,975,205 802,660 20,057,636
-----------------------------------------------------------------------
Loss before the undernoted (549,939) (771,170) (17,144,103)
Interest income 121,109 17,829 760,964
-------------------------------------------------------------------------
Loss for the period (428,830) (753,341) (16,383,139)
Deficit, beginning of period:
As originally presented (15,954,309) (12,826,170) -
Impact of change in accounting
for stock-based compensation - (97,670) -
-------------------------------------------------------------------------
As restated (15,954,309) (12,923,840) -
-------------------------------------------------------------------------
Deficit, end of period $(16,383,139) $(13,677,181) $(16,383,139)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Loss per share - basic
and diluted $ 0.01 $ 0.07
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted average common
shares outstanding 43,144,668 10,260,058
-------------------------------------------------------------------------
-------------------------------------------------------------------------
ARIUS RESEARCH INC.
(A DEVELOPMENT STAGE COMPANY)
Interim Statements of Cash Flows
(Unaudited)
-----------------------------------------------------------
Six-month Six-month
period period
ended ended
May 31, May 31,
2006 2005
-----------------------------------------------------------
Cash provided by (used in):
Operating activities:
Loss for the period $ (1,350,734) $ (1,559,232)
Items not involving cash:
Write-off of investment - -
Services received for
common shares - -
Depreciation and
amortization 112,539 75,237
Gain on disposal of equipment - -
Write-off of leasehold
improvements - -
Non-cash stock-based
compensation 71,004 -
Accretion of convertible
debentures 103,174 -
---------------------------------------------------------
(1,064,017) (1,483,995)
Change in non-cash operating
working capital:
Receivables (49,406) 157
Refundable tax credits (159,956) 741,102
Prepaid expenses (144,905) (10,698)
Deferred financing costs - -
Accounts payable and
accrued liabilities and
unearned revenue 834,321 (215,302)
---------------------------------------------------------
(583,963) (968,736)
Financing activities:
Issue of shares, warrants and
units, net of issuance costs 24,861,718 -
Issuance of convertible bridge
loan, net 2,126,619 -
Restricted cash (2,209,083) -
Redemption of convertible
debentures - -
Exercise of compensation
warrants - -
Draw of bank line of credit - -
Repayment of bank line
of credit (85,000) (570,000)
Bridge loan - -
Repayment of bridge loan (300,000) -
Repayment of capital lease
and equipment financing
obligations (46,947) (35,071)
---------------------------------------------------------
24,347,307 (605,071)
Investing activities:
Long-term investment - -
Acquisition of property
and equipment (150,721) (5,063)
Disposal of equipment - -
---------------------------------------------------------
(150,721) (5,063)
Increase (decrease) in cash 23,612,623 (1,578,870)
Cash, beginning of period 152,967 1,988,652
-----------------------------------------------------------
Cash, end of period $ 23,765,590 $ 409,782
-----------------------------------------------------------
-----------------------------------------------------------
Supplemental cash flow
information:
Interest paid $ 12,714 $ 16,646
Interest received 121,437 47,782
Supplemental disclosure
of non-cash financing and
investing activities:
Shares issued for technology - -
Shares issued for services - -
Compensation warrants 912,377 -
Capital lease obligation - -
Acquisition of laboratory
and office equipment
under capital lease - -
------------------------------------------------------------
------------------------------------------------------------
-----------------------------------------------------------------------
Three-month Three-month Cumulative
period period since
ended ended inception on
May 31, May 31, August 11,
2006 2005 1999
-----------------------------------------------------------------------
Cash provided by (used in):
Operating activities:
Loss for the period $ (428,830) $ (753,341) $(16,383,139)
Items not involving cash:
Write-off of investment - - 20,000
Services received for
common shares - - 400,024
Depreciation and
amortization 78,259 35,831 785,904
Gain on disposal of
equipment - - (7,986)
Write-off of leasehold
improvements - - 86,349
Non-cash stock-based
compensation 31,862 - 263,076
Accretion of convertible
debentures 57,230 - 136,568
---------------------------------------------------------------------
(261,479) (717,510) (14,699,204)
Change in non-cash operating
working capital:
Receivables (40,964) 6,426 (59,310)
Refundable tax credits (97,399) 132,453 (359,956)
Prepaid expenses (118,340) (10,698) (206,569)
Deferred financing costs 32,499 - -
Accounts payable and
accrued liabilities and
unearned revenue 1,559,046 109,410 2,280,400
---------------------------------------------------------------------
1,073,363 (479,919) (13,044,639)
Financing activities:
Issue of shares, warrants
and units, net of issuance
costs 23,876,341 - 38,290,384
Issuance of convertible
bridge loan, net (126,981) - 2,196,619
Restricted cash (2,209,083) - (2,209,083)
Redemption of convertible
debentures - - (70,000)
Exercise of compensation
warrants - - 8,581
Draw of bank line of credit - - 655,000
Repayment of bank line
of credit - (130,000) (655,000)
Bridge loan - - 300,000
Repayment of bridge loan - - (300,000)
Repayment of capital lease
and equipment financing
obligations (25,684) (14,255) (216,729)
---------------------------------------------------------------------
21,514,593 (144,255) 37,999,772
Investing activities:
Long-term investment - - (20,000)
Acquisition of property
and equipment (150,721) (950) (1,178,529)
Disposal of equipment - - 8,986
---------------------------------------------------------------------
(150,721) (950) (1,189,543)
Increase (decrease) in cash 22,437,235 (625,124) 23,765,590
Cash, beginning of period 1,328,355 1,034,906 -
-----------------------------------------------------------------------
Cash, end of period $ 23,765,590 $ 409,782 $ 23,765,590
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Supplemental cash flow
information:
Interest paid $ 2,353 $ 4,403 $ 93,252
Interest received 121,109 17,829 753,889
Supplemental disclosure
of non-cash financing and
investing activities:
Shares issued for technology - - 2
Shares issued for services - - 400,024
Compensation warrants 57,207 - 957,677
Capital lease obligation - - 318,365
Acquisition of laboratory
and office equipment
under capital lease - - (318,365)
-----------------------------------------------------------------------
-----------------------------------------------------------------------
>>
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.
%SEDAR: 00013708E
