TORONTO, July 11 /CNW/ - ARIUS Research Inc., (TSX: ARI), a biotechnology company discovering and developing the next wave of antibody therapeutics, today announced its financial and operational results for the second quarter, ended May 31, 2007.
"During our second quarter, we initiated manufacturing for our lead drug candidate in anticipation of commencing human clinical trials in 2008. We also continued to produce positive pre-clinical data for a number of our antibody candidates, added a new member to our Board and, more recently, strengthened our management team," said Dr. David Young, President and CEO. "We remain focused on advancing ARIUS-originated antibodies towards clinical development while pursuing partnering opportunities for several candidates in our pipeline."
Program Updates:
CD44 Cancer Stem Cell Program
ARIUS has transferred its lead drug candidate, a functional antibody identified from its CD44 cancer stem cell program, to its contract manufacturer, Avid Bioservices Inc. Avid has now successfully scaled-up the manufacturing process and will be producing a supply of drug for toxicology studies. ARIUS expects to perform preclinical toxicology studies in the second half of calendar 2007 in preparation for filing a Phase I IND application in 2008.
Trop-2 Signal Transduction Program
An antibody targeting Trop-2 was selected for preclinical development based on efficacy in a human pancreatic cancer model. The Company through Antitope Limited has successfully humanized the molecule which retains its binding characteristics. The Company expects to initiate process development and manufacturing under cGMP in 2007. The Company also expects to perform pre-clinical toxicology studies in 2008 in preparation for filing a Phase I IND application in 2008.
CD59 Complement Inhibitor Program
The Company selected an antibody to the CD59 target for preclinical development based on potent tumor growth inhibition in several cancer types. The Company through Antitope Limited has successfully humanized the molecule which retains its binding characteristics. The Company expects to initiate process development and manufacturing under cGMP in 2007. The Company expects to perform preclinical toxicology studies in 2008 in preparation for filing a Phase I IND application.
CD63 Antibody Program
Genentech Inc. reported positive progress on the CD63 antibody program licensed in March 2006, including pre-clinical studies, in a variety of cancer indications as part of a program to move the lead antibody towards the clinic.
Takeda Collaboration
ARIUS developed and delivered novel antibodies to Takeda Pharmaceutical Company Limited for evaluation under the research agreement, and successfully met its year one obligations. ARIUS received all scheduled research payments from Takeda.
Additional Product Updates
Currently, ARIUS has additional antibody programs targeting the MCSP antigen, 37LRP, and several other undisclosed targets.
Board and Management Changes:
During the quarter, the Company appointed Mr. Joseph Zakrzewski to its Board of Directors. Mr. Zakrzewski has a tremendous depth of industry experience and ARIUS anticipates that he will contribute significantly as ARIUS advances to the next level.
Subsequent to quarter-end, ARIUS appointed Dr. Robert Gundel to Chief Scientific Officer. Dr. Gundel brings to ARIUS more than 25 years of experience in the biotechnology and pharmaceutical industry. His strong leadership background and extensive experience in product development is expected to make significant contributions in the advancement of ARIUS' lead programs into human clinical trials.
Financial Results:
All amounts are in Canadian dollars unless otherwise indicated.
For the six-month period ended May 31, 2007, the Company recorded a net loss of $5,342,827 ($0.12 per share) compared to a net loss of $1,350,734 ($0.05 per share) for the six-month period ended May 31, 2006. For the three-month period ended May 31, 2007, the Company recorded a net loss of $3,036,132 ($0.07 per share) compared to a net loss of $428,830 ($0.01 per share) for the three-month period ended May 31, 2006. This increase in net loss is primarily due to (i) higher research and development expenses, offset partially by lower interest expense and higher interest income; and (ii) higher licensing fee revenue recorded during 2006.
Revenue decreased to $129,846 for the six-month period ended May 31, 2007, compared to $2,441,300 for the six-month period ended May 31, 2006. For the three-month period ended May 31, 2007, the Company's revenue decreased to $21,392 compared to $2,425,266 for the three-month period ended May 31, 2006. The decreases were primarily the result of the recognition of licensing fee revenue from Genentech in the fiscal 2006 periods.
Interest income increased to $381,407 for the six-month period ended May 31, 2007, compared with $121,437 for the same period in fiscal 2006. For the three-month period ended May 31, 2007, the Company's interest income increased to $181,484 compared with $121,109 for the same period in fiscal 2006. The increases were primarily the result of higher average cash balances and higher interest rates.
Research and development costs amounted to $4,059,931 for the six-month period ended May 31, 2007, compared to $1,872,575 for the same period in fiscal 2006. For the three-month period ended May 31, 2007, the Company's research and development costs increased to $2,102,603 compared to $1,270,764 for the same period in fiscal 2006. The increases were primarily the result of increased product development activity, including process development and scale-up, as the Company prepares several of its programs for the clinic as well as an increase in staffing levels and stock option remuneration expense.
General and administrative expenses decreased to $1,672,243 for the six-month period ended May 31, 2007, compared to $1,691,401 for the same period in fiscal 2006. For the three-month period ended May 31, 2007, the Company's general and administrative expenses decreased to $1,082,154 compared to $1,515,036 for the same period in fiscal 2006. The decreases were primarily the result of decreased consulting and legal costs, partially offset by an increase in the number of employees.
As at May 31, 2007, the Company's cash and cash equivalents, short-term investments and working capital position were $7,421,109, $8,715,078 and $14,867,256, respectively compared with November 30, 2006 balances of $4,077,065, $16,135,490 and $20,263,807, respectively. The Company believes that it has adequate financial resources for anticipated expenditures for the next year.
As at July 10, 2007, the Company had: 44,750,964 Common Shares outstanding; 34,953,526 Warrants; 2,121,808 Compensation Warrants; and 4,235,705 Stock Options.
About ARIUS
ARIUS is a biotechnology company discovering and developing the next wave of antibody therapeutics. Established in 1999, ARIUS has built a proprietary technology platform, FunctionFIRST(TM), that rapidly identifies and selects antibodies based on their functional ability to affect disease. This antibody generation engine has enabled ARIUS to assemble a portfolio of more than 400 antibody candidates. In addition to the antibodies it is developing in-house, ARIUS has ongoing partnerships with key biotechnology and drug development companies. ARIUS is listed on the TSX under the symbol "ARI". For further information, visit www.ariusresearch.com
Forward-Looking Statements
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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ARIUS RESEARCH INC.
(a Development Stage Company)
INTERIM BALANCE SHEETS
(Unaudited)
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May 31, November 30,
2007 2006
$ $
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Assets
Current assets:
Cash and cash equivalents 7,421,109 4,077,065
Short-term investments 8,715,078 16,135,490
Receivables 649,139 716,727
Refundable tax credits 600,000 400,000
Prepaid expenses 537,027 340,695
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17,922,353 21,669,977
Property and equipment, net 1,890,611 1,539,536
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19,812,964 23,209,513
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities 1,587,163 1,211,528
Current portion of capital lease obligation 24,828 29,630
Current portion of unearned revenue
and contract advances 1,443,106 165,012
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3,055,097 1,406,170
Leasehold inducements 297,518 318,261
Capital lease obligation 15,303 27,934
Unearned revenue and contract advances 2,159,196 2,263,091
Shareholders' equity:
Share capital:
Common shares 28,644,454 28,644,454
Warrants 9,603,644 9,603,644
Compensation warrants 912,377 912,377
Contributed surplus 1,944,796 1,510,176
Deficit (26,819,421) (21,476,594)
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14,285,850 19,194,057
Guarantees
Commitments
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19,812,964 23,209,513
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ARIUS RESEARCH INC.
(a Development Stage Company)
INTERIM STATEMENTS OF OPERATIONS, COMPREHENSIVE LOSS AND DEFICIT
(Unaudited)
-----------------------------------------------------------
-----------------------------------------------------------
Six-month Six-month
period period
ended ended
May 31, May 31,
2007 2006
$ $
-----------------------------------------------------------
Revenue:
Product 56,486 -
Licensing fees - 2,383,477
Research grant payments 73,360 57,823
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129,846 2,441,300
Expenses:
Research and development,
net of tax credits 4,059,931 1,872,575
General and administrative 1,672,243 1,691,401
Interest expense 1,646 349,495
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5,733,820 3,913,471
---------------------------------------------------------
Loss before the undernoted (5,603,974) (1,472,171)
Interest income 381,407 121,437
Loss on extinguishment of debt - -
-----------------------------------------------------------
Loss before income taxes (5,222,567) (1,350,734)
Income taxes:
Current (120,260) -
-----------------------------------------------------------
Loss and comprehensive loss
for the period (5,342,827) (1,350,734)
Deficit, beginning of period (21,476,594) (15,032,405)
-----------------------------------------------------------
Deficit, end of period (26,819,421) (16,383,139)
-----------------------------------------------------------
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Loss per share - basic
and diluted (0.12) (0.05)
-----------------------------------------------------------
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Weighted average common
shares outstanding 44,750,964 27,143,367
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Three-month Three-month Cumulative
period period since
ended ended inception on
May 31, May 31, August 11,
2007 2006 1999
$ $ $
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Revenue:
Product 21,392 - 56,486
Licensing fees - 2,383,477 3,119,691
Research grant payments - 41,789 273,663
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21,392 2,425,266 3,449,840
Expenses:
Research and development,
net of tax credits 2,102,603 1,270,764 20,852,166
General and administrative 1,082,154 1,515,036 9,358,765
Interest expense 771 189,405 903,169
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3,185,528 2,975,205 31,114,100
Loss before the undernoted (3,164,136) (549,939) (27,664,260)
Interest income 181,484 121,109 1,747,242
Loss on extinguishment of debt - - (782,143)
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Loss before income taxes (2,982,652) (428,830) (26,699,161)
Income taxes:
Current (53,480) - (120,260)
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Loss and comprehensive loss
for the period (3,036,132) (428,830) (26,819,421)
Deficit, beginning of period (23,783,289) (15,954,309) -
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Deficit, end of period (26,819,421) (16,383,139) (26,819,421)
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Loss per share - basic
and diluted (0.07) (0.01)
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Weighted average common
shares outstanding 44,750,964 43,144,668
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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,
2007 2006
$ $
-----------------------------------------------------------
Cash provided by (used in):
Operating activities:
Loss for the period (5,342,827) (1,350,734)
Items not involving cash:
Amortization of:
Property and equipment 166,479 112,539
Deferred costs - -
Leasehold inducements (20,743) -
Loss on disposal of equipment - -
Write-off of leasehold
improvements - -
Leasehold inducement - -
Non-cash stock-based
compensation 434,620 71,004
Accretion of convertible
debentures - 103,174
Loss on extinguishment of debt - -
Services received for
common shares - -
Write-off of investment - -
Interest expense paid in
common shares - -
---------------------------------------------------------
(4,762,471) (1,064,017)
Change in non-cash operating
working capital items 1,221,090 480,054
---------------------------------------------------------
(3,541,381) (583,963)
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)
Repayment of convertible
bridge loan, including costs - -
Exercise of compensation
warrants - -
Draw of bank line of credit - -
Repayment of bank line
of credit - (85,000)
Bridge loan - -
Repayment of bridge loan - (300,000)
Repayment of capital lease
and equipment financing
obligations (17,433) (46,947)
---------------------------------------------------------
(17,433) 24,347,307
Investing activities:
Purchase of short-term
investments (10,240,605) -
Maturity of short-term
investments 17,661,017 -
Leasehold inducements - -
Long-term investment - -
Acquisition of property
and equipment (517,554) (150,721)
Disposal of equipment - -
---------------------------------------------------------
6,902,858 (150,721)
Increase in cash & cash
equivalents 3,344,044 23,612,623
Cash & cash equivalents,
beginning of period 4,077,065 152,967
-----------------------------------------------------------
Cash & cash equivalents,
end of period 7,421,109 23,765,590
-----------------------------------------------------------
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Three-month Three-month Cumulative
period period since
ended ended inception on
May 31, May 31, August 11,
2007 2006 1999
$ $ $
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Cash provided by (used in):
Operating activities:
Loss for the period (3,036,132) (428,830) (26,819,421)
Items not involving cash:
Amortization of:
Property and equipment 85,064 78,259 1,055,637
Deferred costs - - 55,055
Leasehold inducements (10,371) - (35,410)
Loss on disposal of equipment - - 23,532
Write-off of leasehold
improvements - - 86,349
Leasehold inducement - - 89,148
Non-cash stock-based
compensation 224,036 31,862 1,220,019
Accretion of convertible
debentures - 57,230 429,905
Loss on extinguishment of debt - - 782,143
Services received for
common shares - - 400,024
Write-off of investment - - 20,000
Interest expense paid in
common shares - - 140,032
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(2,737,403) (261,479) (22,552,987)
Change in non-cash operating
working capital items 549,700 1,334,842 3,403,299
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(2,187,703) 1,073,363 (19,149,688)
Financing activities:
Issue of shares, warrants and
units, net of issuance costs - 23,876,341 38,281,778
Issuance of convertible
bridge loan, net - (126,981) 2,196,619
Restricted cash - (2,209,083) -
Repayment of convertible
bridge loan, including costs - - (2,408,886)
Exercise of compensation
warrants - - 8,581
Draw of bank line of credit - - 655,000
Repayment of bank line
of credit - - (655,000)
Bridge loan - - 300,000
Repayment of bridge loan - - (300,000)
Repayment of capital lease
and equipment financing
obligations (5,941) (25,684) (278,234)
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(5,941) 21,514,593 37,799,858
Investing activities:
Purchase of short-term
investments (2,577,726) - (26,376,095)
Maturity of short-term
investments 7,662,879 - 17,661,017
Leasehold inducements - - 243,780
Long-term investment - - (20,000)
Acquisition of property
and equipment (295,296) (150,721) (2,746,749)
Disposal of equipment - - 8,986
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4,789,857 (150,721) (11,229,061)
Increase in cash & cash
equivalents 2,596,213 22,437,235 7,421,109
Cash & cash equivalents,
beginning of period 4,824,896 1,328,355 -
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Cash & cash equivalents,
end of period 7,421,109 23,765,590 7,421,109
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%SEDAR: 00013708E