EDMONTON, March 9 /CNW/ - Biomira Inc. (Nasdaq:BIOM) (TSX:BRA) today
reported financial results for the fiscal year ended December 31, 2005.
Results are reported in Canadian dollars with a December 31, 2005 rate of
$1.00 Canadian equaling $0.86 U.S.
Highlights:
- In January 2006, we announced the signing of a letter of intent to
amend the agreements governing the collaboration between Biomira and
Merck for L-BLP25. Under the letter of intent, approved by the Boards
of both Companies, Merck will take over administrative and financial
responsibility for the development and commercialization of L-BLP25,
including the planned phase 3 trial in NSCLC. Merck also plans to
investigate the use of L-BLP25 to treat other types of cancer. All
future development, regulatory, commercialization and marketing costs
for L-BLP25 (including the planned phase 3 trial, but excluding the
Canadian territory) will be borne exclusively by Merck effective
March 1, 2006.
- Biomira conducts a phase 2, single-arm, multi-centre, open label study
of L-BLP25. The trial assessed the safety of the formulation of
L-BLP25 that is expected to be used in the upcoming phase 3 study,
finding there were no safety concerns with the reformulated vaccine.
- The start of the planned L-BLP25 phase 3 study is delayed to address
an accelerated stability issue discovered during the manufacturing
process. This issue has now been addressed.
- Biomira arranges a U.S. $16.07 million financing, which closed at the
end of January, 2006
- Dr. Christopher S. Henney join's Biomira's Board of Directors.
- Biomira exercises its put option in relationship to Prima BioMed,
acquiring a 1.62 per cent equity stake in the Company.
Financial Update
Consolidated net losses for the years 2005, 2004, and 2003 were
$19.0 million, $12.2 million, and $19.0 million, respectively. The increase in
net loss in fiscal 2005, as compared to fiscal 2004, was primarily
attributable to lower revenues as a result of the recognition into income in
2004 of the remaining deferred revenue balance related to Theratope(R) vaccine
due to the return of development and commercialization rights for this product
candidate by Merck KGaA announced in June 2004. In addition, we experienced an
increase in research and development expenditures, as compared to fiscal 2004,
due to increased spending associated with the L-BLP25 phase 2 safety study
commenced in the second quarter of this year, and the planned L-BLP25 phase 3
clinical trial that is expected to commence in mid 2006. We anticipate this
increase in clinical trial expenditures experienced in the current year to
reverse in the second half of 2006 as a result of the recently announced
amendment to the license agreements for L-BLP25.
Results for 2005 indicate a $6.8 million or 56% increase in the year over
year loss resulting from lower revenues of $4.5 million, and higher research
and development expenditures of $3.5 million, offset by lower general and
administrative expenses of $0.3 million, reduced marketing and business
development expenses of $0.4 million, higher investment and other income of
$0.4 million, and reduced other operating expenditures of $0.1 million.
As at December 31, 2005, Biomira's cash and cash equivalents and
short-term investments were $21.4 million compared to $38.6 million at the end
of 2004, a decrease of $ 17.2 million or 45%. Major contributors to the net
change included $1.0 million in warrant and stock option exercises, offset by
$17.7 million used in operations, $0.4 million used for the purchase of
capital assets, and $0.1 million related to payment of accrued share issuance
costs related to the December 2004 financing. In January of 2006, we were able
to secure an additional U.S. $16.07 million, before issue costs, which should
provide sufficient funding to operate well into the latter half of 2007 and
potentially into early 2008.
The following is selected annual consolidated financial information from
our audited annual financial statements for each of the three most recently
completed years ending December 31, 2005.
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(expressed in 000's
except per share data) 2005 2004 2003(1)
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Statement of Operations
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Total revenues $4,377 $8,941 $3,416
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Total expenses $24,543 $21,935 $22,326
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Other income (expense) $1,141 $769 $(64)
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Net loss $(19,025) $(12,225) $(18,974)
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Basic and diluted loss per share ($0.24) $(0.17) $(0.31)
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Weighted average number of common
shares outstanding 78,660 72,941 62,498
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Balance Sheet
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Working capital $19,925 $37,107 $37,810
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Total assets $24,263 $40,821 $43,065
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Total long-term liabilities $1,147 $1,271 $6,701
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Shareholders' equity $20,063 $36,963 $31,750
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Common shares outstanding 78,817 78,340 72,545
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(1) Certain of the comparative figures from 2003 have been reclassified
to conform to the current period's presentation.
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For a further discussion of the Company's complete financial results for
the fiscal year ended December 31, 2005, please refer to the Company's
Management Discussion & Analysis of Financial Condition and Results of
Operations included in this news release. The Company's Financial Package,
including audited consolidated financial statements, is filed separately on
SEDAR at www.sedar.com.
Corporate Update
Biomira made important progress on the development of our lead product
candidate, L-BLP25, during 2005, continuing to move the vaccine forward
towards an extensive phase 3 clinical trial and working to secure the best
possible financial framework in which to ensure its timely development.
The highlight of the year was the announcement in October of compelling
survival data from our phase 2b study, which showed that patients with
Stage IIIb locoregional non-small cell lung cancer who received the vaccine
had a median survival of 30.6 months compared to 13.3 months for the
unvaccinated group. Ensuring that these highly encouraging results can be
fully tested in a phase 3 study has been the overriding focus of Biomira and
Merck.
During the course of our regular discussions with Merck, we came to the
conclusion, towards the end of 2005, that there would be considerable benefit
for both sides in Merck's taking developmental and financial control of
L-BLP25 in exchange for assuming most of the costs associated with L-BLP25. We
were pleased to announce, on January 26, 2006 that a letter of intent had been
signed whereby Merck would take full control of the development, regulatory
and marketing costs related to L-BLP25. In return, Biomira has given up its
U.S. co-marketing rights in exchange for a royalty arrangement which fully
reflects the current stage and promise of the vaccine. The co-promotion
arrangement in Canada remains unchanged, with, where appropriate, Biomira
handling responsibility for a small specialized oncology sales force and Merck
covering 50 per cent of the costs and receiving 50 per cent of sales.
We believe this is a significant and positive development for the
progress of this important product candidate, for our patients and for the
future of Biomira. By taking financial responsibility for the development and
commercialization program, Merck has shown its strong and continued commitment
to cancer vaccines and to L-BLP25 in particular. This new arrangement greatly
facilitates the timely initiation of the phase 3 trial for L-BLP25 in NSCLC.
The revised arrangement with Merck has greatly reduced the financial risk
to Biomira while retaining upside potential from a successful product
candidate. It has also freed Biomira to focus on bringing our next vaccine,
BGLP40, through the development process, and to concentrate on filling our
pipeline with additional product candidates.
To this end, we were able to secure a U.S. $16.07 million financing at
the end of January 2006. This money in our Treasury should provide sufficient
funding to begin further development of BGLP40 and assessing in-licensing
opportunities.
Biomira/Merck KGaA L-BLP25 Supply and Licensing Agreement
Pursuant to the letter of intent, Merck has now taken over most of the
financial and administrative responsibility for L-BLP25 effective March 1,
2006. This includes the planned phase 3 study which is expected to get
underway with patient enrolment commencing in mid 2006. Merck also intends to
explore potential phase 2 studies of the vaccine in additional cancers, which
will maximize both its clinical and commercial potential.
In return, Biomira's co-promotion interest in U.S. sales will be
converted to a specified royalty rate, which will be higher than what Merck
has agreed to pay on its sales of L-BLP25 in markets outside of North America
(Rest of World (ROW)). The royalty and other arrangements with respect to the
ROW will remain generally unchanged (Merck to assume a specified third party
royalty obligation on behalf of Biomira). Similarly, the milestone payments to
be made by Merck pursuant to the collaboration will remain essentially the
same. The agreed upon royalty rate for the U.S. territory reflects the stage
and promise of L-BLP25.
Biomira will retain the responsibility for manufacturing L-BLP25, both
for clinical trials and following any market approval. Biomira will also
retain the responsibility for marketing the product in Canada.
L-BLP25
In October, 2005 Biomira announced that the median survival for patients
with Stage IIIB locoregional NSCLC who received L-BLP25 in a phase 2b study
had been determined. These results demonstrated a median survival of
30.6 months in the vaccinated group compared with 13.3 months for the
unvaccinated group. A more comprehensive analysis of these data is expected in
the second quarter of this year. In November, 2005 Biomira announced the
interim results of a phase 2 NSCLC single-arm, multi-centre, open label safety
study of L-BLP25. The results showed the new formulation of the vaccine to be
used in the phase 3 clinical trial program is not different from the previous
formulation from a safety perspective.
The reformulated vaccine incorporated manufacturing changes intended to
secure the future commercial supply of the vaccine. Testing has demonstrated
that the steps taken to address the manufacturing issue discovered in late
2005 have been successful. Manufacturing for the phase 3 trial is expected to
resume in the first quarter of this year and vaccine should be available mid
2006 to start the trial.
Next Steps
With the development program of L-BLP25 now in the hands of Merck, we
have the freedom to focus our resources and development skills on filling out
and advancing our pipeline and building additional value for shareholders.
We recently began a limited restructuring process for the Company to
ensure that we have the right people and expertise to carry out the new
mandate of Biomira while we continue to carry out the handover of L-BLP25 to
Merck. We still maintain our expertise in all necessary areas to take
advantage of the opportunities presented to us. We expect further reductions
in staff once we have clarity on how long the Merck handover will take and we
understand more fully what expertise we need for potential new product
candidates that we hope to in-license.
Our immediate focus will be on BGLP40. BGLP40 is a third generation
vaccine program utilizing a liposomal formulation of a vaccine with human MUC1
peptide antigens, carbohydrate antigens and a synthetic adjuvant.
BGLP40 is Biomira's first fully synthetic vaccine. The program offers the
potential to eliminate some of the consistency issues faced in manufacturing
biological products, as well as a large market potential as MUC1 and certain
carbohydrate epitopes are expressed on the majority of solid tumour cancers.
It is our hope that we can now focus our efforts on moving this product
candidate through the pre-clinical process and into clinical trials in late
2007. We plan to also take advantage of our out-licensing expertise to seek,
by the first half of 2007, an appropriate licensing arrangement for the future
development of BGLP40. We decided to suspend an earlier search for an
appropriate arrangement until we could show more data on this product
candidate. We hope to be able to more definitively plan for the future of
BGLP40 by the third quarter of 2006.
Biomira will also focus on exploring the full potential of our Synthetic
Biologics Business Unit (SBBU), headed by Dr. Rao Koganty. This business unit,
set up in 2005, is designed to develop and commercialize specific synthetic
mimics of important biological compounds such as bacterial and viral products,
which interact with various toll like receptors (TLRs) to modulate the immune
system. Our SBBU has already developed an extensive portfolio of synthetic
analogues of Lipid A, a vaccine adjuvant of bacterial origin. These synthetic
adjuvants, which are covered by a portfolio of world-wide patent applications,
are well recognized for their consistency in performance and production.
Significant demand for high performance adjuvants, in a highly competitive
environment, in the vaccine world creates excellent business and out-licensing
opportunities.
The chemistry expertise of our SBBU is further diversified to potentially
assist in pharmaceutical developments for external organizations. The SBBU is
actively seeking collaborations by leveraging its expertise in the area of
design and synthesis of new chemical entities of biological origin for the
development of stand alone therapeutic products that address the unmet needs
of immune disorders.
We hope to conclude our first SBBU licensing agreement sometime in 2006
or early next year and we are excited about the growth and prospects for this
business unit.
For the Company, now that Merck has the responsibility for moving L-BLP25
forward, we are in a position to take advantage of several promising
in-licensing opportunities. Due diligence is already underway on a number of
promising projects and we look forward to sharing these with you if we decide
to move to an in-licensing agreement. We want to develop a program that builds
on our core competencies in synthetic immunotherapy, but also in other
targeted approaches in treating human cancers.
We also have a controlling interest in our spin-off company, Oncodigm
BioPharma Inc. This company was created to fully exploit Liposomal
Interleukin-2 (L-IL-2) technology that Biomira did not have the resources to
fully develop. We are now well positioned to re-evaluate the strategy for the
future of L-IL-2.
With Merck assuming the ongoing development and costs of L-BLP25, the
future of L-BLP25 is now secure and our financial risk has been greatly
reduced. We can now begin the restructuring process to meet the challenges of
seeking new business and development opportunities. With the U.S.
$16.07 million we raised at the end of January, we are also in a position to
focus on bringing our next vaccine, BGLP40, through development and look at
exploring our promising in-licensing and out-licensing opportunities. We face
the future with renewed confidence and energy and will concentrate on building
shareholder value through the development of a pipeline for the future of the
Company. We appreciate your continued support for the Company and your
dedication to moving with us in our new developments.
Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Management's Discussion and Analysis of Financial Condition and
Results of Operations (MD&A), prepared as at February 28, 2006, should be read
in conjunction with the audited consolidated financial statements and
accompanying notes for the year ended December 31, 2005. These financial
statements, which follow the MD&A, have been prepared in accordance with
generally accepted accounting principles in Canada (Canadian GAAP) that differ
in some respects from those of the United States (U.S. GAAP). Unless otherwise
indicated, all amounts shown are in Canadian dollars.
Overview of the Business
Biomira Inc. is an international biotechnology company headquartered in
Canada which is engaged primarily in the research and development of
innovative therapeutic approaches to cancer management. Our research and
development efforts are currently focused on our core competency in
immunotherapeutics, particularly developing synthetic vaccines and novel
strategies for cancer immunotherapy. Our strategic mission is to build a
sustainable and profitable company by bringing patients innovative, targeted
therapeutics that extends quality and duration of life.
BLP25 Liposome Vaccine (L-BLP25)
Corporate resources during 2005 were primarily directed towards the
ongoing development of our lead product candidate L-BLP25. L-BLP25 is a
synthetic MUC1 peptide vaccine incorporating a 25-amino acid sequence of the
MUC1 cancer mucin that is encapsulated in a liposomal delivery system and is
designed to induce an immune response to cancer cells. This product candidate
has completed phase 2b clinical testing with the Company first releasing
survival analysis data in April 2004. In October 2005 we provided an update to
the survival data from our phase 2b study, which showed that patients with
Stage IIIb locoregional non-small cell lung cancer (NSCLC) who received the
vaccine had a median survival of 30.6 months compared to 13.3 months for the
unvaccinated group, a difference of 17.3 months. Ensuring that these highly
encouraging results can be fully tested in a phase 3 study has been the
overriding focus of Biomira and Merck KGaA (Merck) of Darmstadt, Germany.
In September, Biomira and Merck, announced completion of enrolment of a
phase 2 single arm, multi-centre open label safety study. This trial enrolled
a total of 22 patients with NSCLC from eight clinical trial sites in Canada.
The trial is designed to assess the safety of the formulation of L-BLP25 that
is intended to be used in the planned phase 3 study. The new formulation
incorporates manufacturing changes intended to secure the future commercial
supply of the vaccine. In November, we announced the comparability results
showing that the new formulation of the vaccine is not different from the
previous formulation from a safety perspective.
In September, Biomira and Merck also announced a change to the
anticipated timetable for the start of the planned L-BLP25 phase 3 study in
the treatment of NSCLC. The change was to address an accelerated stability
issue discovered during the manufacturing of the vaccine to be used in the
phase 3 trial. An investigation with the contract manufacturer indicated that
excess moisture in the product may have been the cause of the instability.
Further testing has demonstrated that the corrective actions taken to resolve
the stability issue have been successful. However, as a result of this delay,
the start of the trial, which was planned for the end of 2005, is now expected
to commence in mid 2006.
Biomira/Merck L-BLP25 Collaboration
In January 2006, we announced the signing of a letter of intent to amend
the agreements governing the collaboration between Biomira and Merck for
L-BLP25. Under the letter of intent, approved by the Boards of both Companies,
Merck will take over administrative and financial responsibility for the
development and commercialization of L-BLP25, including the planned phase 3
trial in NSCLC. Merck also plans to investigate the use of L-BLP25 to treat
other types of cancer. All future development, regulatory, commercialization
and marketing costs for L-BLP25 (including the planned phase 3 trial, but
excluding the Canadian territory) will be borne exclusively by Merck effective
March 1, 2006.
In return, our co-promotion interest in U.S. sales will be converted to a
specified royalty rate, which will be higher than what Merck has agreed to pay
on its sales of L-BLP25 in markets outside of North America (the Rest of World
(ROW)). The royalty and other arrangements with respect to the ROW will remain
generally unchanged (Merck to assume a specified third party royalty
obligation on behalf of Biomira). Similarly, the milestone payments to be made
by Merck pursuant to the collaboration will remain essentially the same. The
agreed upon royalty rate for the U.S. territory reflects the stage and promise
of L-BLP25.
We will retain responsibility for manufacturing L-BLP25, both for
clinical trials and following any marketing approval. The existing
arrangements for Canada remain in place with Biomira responsible for the
Canadian territory.
Under the terms of the letter of intent, the parties have agreed to use
commercially reasonable efforts to execute the amendments to the agreements
governing the collaboration within 60-90 days of the effective date of January
26, 2006.
As a result of the signing of the letter of intent with Merck, we began a
limited restructuring process for the Company to ensure that we have the right
people and expertise to carry out the business of the Company, while we
continue to carry out the transition of L-BLP25 responsibilities to Merck.
Initially we will be reducing our workforce by 14 employees at an estimated
severance cost of approximately $1.1 million; however we will continue to
maintain our core expertise in all necessary areas to take advantage of the
opportunities presented to us. We expect further reductions in staff once we
have clarity on how long the Merck transition will take and we understand more
fully what expertise we need for potential new product candidates that we hope
to in-license.
Business Development
With the development program of L-BLP25 now in the hands of Merck, we can
focus our efforts and direct more of our resources to fill out and advance our
pipeline to build additional value for our shareholders.
Our immediate focus will be on gathering more data and advancing our
follow-on vaccine, BGLP40, a third generation vaccine. It is a completely
synthetic MUC1 based liposomal, multiple target cancer vaccine, which we
believe may provide benefit in several cancer indications. BGLP40 is a vaccine
designed to evoke both a cellular and humoral immune response against major
cancer-associated target epitopes expressed on adenocarcinomas. We anticipate
being able to more definitively plan for the future of BGLP40 by the third
quarter of 2006, with the hope that we can move this product through the
pre-clinical process and into clinical trials in late 2007.
In April 2005, we created a Synthetic Biologics Business Unit which
continues to focus on exploring the full potential of chemically synthesized
biologicals for use in protective and therapeutic vaccines. We have developed
technologies that can be used by other companies developing non-competing
vaccine technology. Our expertise in this area complements our current
programs and provides new upside business potential as we continue to actively
seek licensing opportunities for our synthetic adjuvants.
Now that Merck has the responsibility for moving L-BLP25 forward, we can
also focus on taking advantage of several potential in-licensing
opportunities. Due diligence is already underway on a number of encouraging
projects as we work towards developing a program that builds on our core
competencies in synthetic immunotherapy, but also in other targeted approaches
in treating human cancers.
We also have a controlling interest in our spin-off company, Oncodigm
BioPharma Inc. This company was created to fully exploit Liposomal
Interleukin-2 (L-IL-2) technology that Biomira did not have the resources to
fully develop. We are now well-positioned to re-evaluate the strategy for the
future of L-IL-2.
Corporate Update
In February we announced the resignation from the Board of Directors of
Dr. Sheila Moriber Katz and the subsequent appointment of Christopher S.
Henney, PhD, DSc. Dr. Henney is a co-founder of three major publicly held
U.S. biotechnology companies, Immunex Corporation, ICOS (Nasdaq:ICOS) and
Dendreon Corporation (Nasdaq:DNDN). Dr. Henney was also the Chairman and Chief
Executive Officer of Dendreon Corporation. He serves on the Board of Directors
of Bionomics Ltd. (ASX:BNO; OCT:BMICY), in Adelaide, South Australia, and as
Chairman of SGX Pharmaceuticals, Inc. (Nasdaq:SGXP) (formerly Structural
Genomix), in San Diego, CA. In March of 2005, Dr. Henney was appointed as
Chairman of Xcyte Therapies Inc. (Nasdaq:XCYT).
In July we exercised our right to acquire a 1.62% equity position in
Prima BioMed Ltd. (ASX: PRR) ("Prima"), an Australian biotech company. In
March 2004, we announced a technology licensing and commercial agreement with
Cancer Vac Pty. Ltd. (Cancer Vac), a subsidiary of Prima, acquiring a
10 percent equity stake in Cancer Vac. Biomira had the right to convert this
stake to shares in Prima, which we have now exercised.
In January 2006, we completed a financing totaling U.S. $16.07 million,
before issue costs, with Rodman & Renshaw, LLC of New York acting as exclusive
placement agent. The Company issued 10,572,368 units, each consisting of one
common share and 0.25 of a warrant, at an issue price of U.S. $1.52. Each
warrant entitles the holder thereof to purchase one common share at an
exercise price of U.S. $2.50. The warrants have a 42-month term, from the date
of closing, and a no-exercise period of six months. The financing closed at
the end of January and was fully subscribed.
2006 - Moving forward
With this additional money in our treasury and the development program of
L-BLP25 now in the hands of Merck, we are well positioned to begin further
development of BGLP40 and assessing potential in-licensing opportunities. We
are excited about the challenges of seeking new business and development
opportunities and we face the future with renewed confidence and energy. In
2006 we will move forward with focusing on building additional shareholder
value through the development of a pipeline for the future of the Company.
Results of Operations
Consolidated net losses for the years 2005, 2004, and 2003 were
$19.0 million, $12.2 million, and $19.0 million, respectively. The increase in
net loss in fiscal 2005, as compared to fiscal 2004, was primarily
attributable to lower revenues as a result of the recognition into income in
2004 of the remaining deferred revenue balance related to Theratope(R) vaccine
due to the return of development and commercialization rights for this product
candidate by Merck announced in June 2004. In addition, we experienced an
increase in research and development expenditures, as compared to fiscal 2004,
due to increased spending associated with the L-BLP25 phase 2 safety study
commenced in the second quarter of 2005 and the planned L-BLP25 phase 3
clinical trial that is expected to commence in mid 2006. We anticipate this
increase in clinical trial expenditures experienced in the current year to
reverse in the second half of 2006 as a result of the recently announced
amendment to the licensing agreement for L-BLP25.
Results for 2005 indicate a $6.8 million or 56% increase in the year over
year loss resulting from lower revenues of $4.5 million, and higher research
and development expenditures of $3.5 million, offset by lower general and
administrative expenses of $0.3 million, reduced marketing and business
development expenses of $0.4 million, higher investment and other income of
$0.4 million, and reduced other operating expenditures of $0.1 million.
Revenues
Revenues from operations for the years ended 2005, 2004, and 2003 were
$4.4 million, $8.9 million, and $3.4 million, respectively. The 2005 year over
year decrease of $4.5 million or 51% primarily stems from lower licensing
revenues recognized into income as a result of the return of Theratope
development and commercialization rights by Merck announced in June 2004.
Revenues from contract research and development for fiscal 2005, totaling
$3.8 million compared to $2.1 million for the same period in 2004, represents
contract research and development funding received from Merck associated with
L-BLP25 and Theratope. The increase in funding received from Merck in 2005 is
primarily attributable to increased clinical expenditures incurred by Biomira
in relation to the L-BLP25 phase 2 safety study commenced in the second
quarter of this year, and in preparation of the planned phase 3 clinical trial
expected to commence in mid 2006.
Licensing revenues from collaborative arrangements for fiscal 2005 of
$0.2 million compared to $6.5 million for fiscal 2004, represents the
amortization of upfront payments received from Merck and an upfront
sublicensing fee from Cancer Vac upon commencement of the respective
collaborations. The decreased revenue primarily results from return of the
Theratope development and commercialization rights by Merck in June 2004 and
the immediate recognition into income of the remaining related deferred
revenues totalling $5.9 million.
Licensing, royalties and other revenue for fiscal 2005, totalling
$0.3 million, was similar to the same period in 2004. Licensing, royalties and
other revenue relates to contract manufacturing activities utilizing various
Biomira patented technologies and compounds for external customers.
Operating revenues are not expected to increase significantly until
certain milestone payments tied to clinical advancement/success have been
earned, and commercialization of one or more of our products has occurred.
Under the terms of the recently signed letter of intent with Merck we will be
eligible for milestone payments upon execution of the amendments to the
licensing agreement, and upon enrolment of the first patient into the planned
phase 3 pivotal study in NSCLC. These payments may occur in fiscal 2006
depending on the timing of the triggering events. In addition to the potential
outcomes related to our lead technology, we will continue to explore licensing
opportunities and collaborative alliances for emerging technologies in our
pipeline that may contribute to future revenue generation. The extent and
timing of such additional licensing fees and contract revenue, if any, will be
dependent upon the overall structure, terms, and conditions of any future
arrangements.
Operating Expenses
Research and Development
We are a development company that dedicates the majority of our cash
resources to product and clinical development activities. The majority of our
costs are associated with our clinical development programs. In order to align
our cash and other resources on activities that have a higher probability of
generating product commercialization opportunities, we do not perform
discovery research activities. Rather, we have adopted a defined strategy to
capitalize on pre-clinical and clinical product opportunities via in-licensing
and collaborative arrangements with third parties.
For the three years ended 2005, 2004, and 2003, we incurred
$16.9 million, $13.6 million, and $14.7 million respectively in direct
research and development costs. The increase in research and development
expenditures is attributable to increased spending associated with the L-BLP25
phase 2 safety study commenced in the second quarter of 2005 and the planned
L-BLP25 phase 3 clinical trial that is expected to commence in mid 2006.
Expenditures for fiscal 2005 include development of clinical protocols and
procurement and manufacturing of clinical materials along with ongoing costs
associated with clinical site wrap up expenses of existing clinical trials.
We anticipate product development expenditures to decrease in 2006 now
that the development program for L-BLP25 is in the hands of Merck effective
March 1, 2006. Further, we anticipate that the majority of the expenditures in
2006 and beyond will be concentrated towards two primary areas of focus:
1) manufacturing and related process development expenditures related to
ensuring adequacy of clinical drug supply and related manufacturing activities
for the planned large multi-national L-BLP25 phase 3 trial, and 2) advancement
of other promising products in our pipeline including BGLP40 and L-IL-2. The
manufacturing and related process development expenditures will be partially
offset by funding revenues received from Merck under the terms of the supply
agreement.
General and Administrative
General and administrative expenses for 2005, 2004, and 2003 were
$6.3 million, $6.6 million, and $5.4 million, respectively. The 2005
expenditures represent a decrease of $0.3 million (5%) over the previous year
and are primarily attributable to incremental costs incurred in the first half
of 2004 relating to the settlement of an outstanding litigation.
For 2006, our general and administrative expenses are anticipated to
remain at similar levels compared to 2005 in order to adequately support the
continued advancement of our product candidates and the continued
implementation of corporate governance compliance initiatives.
Marketing and Business Development
Marketing and business development expenses for 2005, 2004, and 2003 were
$1.0 million, $1.4 million, and $1.8 million respectively and represent
corporate administrative expenses associated with these functions, as well as
costs associated with licensing activities related to pre-clinical and early
stage technologies. Expenditures in 2003 included pre-commercialization
activities related to Theratope that were subsequently discontinued following
the June 30, 2003 phase 3 final analysis.
For 2006, we anticipate our business development expenditures to remain
at similar levels compared to 2005 in order to adequately support our renewed
focus on exploring potential in-licensing and out-licensing opportunities.
Amortization
Amortization expense relates to facility leaseholds and equipment,
certain licensing rights, and other assets. Amortization expense for fiscal
2005 of $0.4 million was similar to the same periods in 2004 and 2003. We
anticipate amortization expense to remain constant in 2006.
Investment and Other Income (Expense)
Investment revenue for 2005, 2004, and 2003 were $0.8 million,
$0.7 million, and $1.0 million respectively. The 2005 investment revenue
represent an increase of $0.1 million (14%) over the previous year and is
primarily attributable to a modest improvement in the interest rate
environment coupled with comparable average investment balances year over
year. Other expense primarily consists of a net foreign exchange loss of nil
(2004 - $0.3 million, 2003 - $1.3 million) on U.S. dollar holdings
attributable to significant fluctuations of the Canadian dollar against the
U.S. dollar in 2003 and to a much lesser extent in 2004 and 2005.
With the additional U.S. $16.07 million, before issue costs, in financing
that we were able to secure at the end of January 2006, coupled with ongoing
redemption of investments and analyst expectations of continuing low market
yields relative to Canadian dollar denominated investments for 2006 we
anticipate that, in the coming year, investment income will be at
approximately the same level of return as in 2005.
Income Tax Benefit
The income tax benefit of $0.3 million recorded in 2005 compared to
$0.4 million and $0.3 million in 2004 and 2003 respectively, is due to
proceeds of $0.3 million realized in the fourth quarter from the sale of
New Jersey State tax losses attributable to Biomira's U.S. subsidiary. The
$0.1 million decrease in 2005 is due to a lower level of proceeds received
from the sale of New Jersey State tax losses.
Liquidity and Capital Resources
Liquidity
As at December 31, 2005, Biomira's cash and cash equivalents and
short-term investments were $21.4 million compared to $38.6 million at the end
of 2004, a decrease of $ 17.2 million or 45%. Major contributors to the net
change included $1.0 million in warrant and stock option exercises, offset by
$17.7 million used in operations, $0.4 million used for the purchase of
capital assets, and $0.1 million related to payment of accrued share issuance
costs related to the December 2004 financing. In January of 2006, we were able
to secure an additional U.S. $16.07 million, before issue costs, in financing
which should provide sufficient funding to begin further development of BGLP40
and assessing in-licensing opportunities.
Working capital, defined as current assets less current liabilities,
decreased by $17.2 million from 2004, to $19.9 million from $37.1 million and
is primarily attributable to the $17.2 million decrease in cash reserves
coupled with an increase of $0.8 million in accrued liabilities, offset by an
increase of $0.5 million in accounts receivable and a decrease of $0.3 million
in the current portion of deferred revenue. The increase in both current
liabilities and accounts receivable is attributable to the increased clinical
development expenditures associated with activities for the planned large
multi-national L-BLP25 phase 3 trial.
We believe that we have taken prudent measures relative to managing our
cash reserves and operating expenditures. We have focused the majority of our
planned activities and expenditures towards advancing our lead product
candidate L-BLP25 while continuing to build a pipeline of technologies through
in-licensing activities. Now that the development program for L-BLP25 is in
the hands of Merck effective March 1, 2006, coupled with the additional
U.S. $16.07 million, before issue costs, in financing which we were able to
secure in January 2006, we believe that sufficient cash reserves are in place
to operate well into the latter half of 2007 and potentially into early 2008.
Additional capital resources may be required depending on the outcomes
associated with activities related to the in-licensing of new product
candidates, and activities associated with the further development of other
products in our pipeline including BGLP40 and L-IL-2. Such additional capital
resources could be derived from future financings under our current Base Shelf
Prospectus, which expires in the third quarter of 2006, or receipt of
milestone payments from Merck.
Financing
Anticipating future funding requirements to further our product pipeline
and in-licensing activities, we registered a U.S. $100 million Base Shelf
Prospectus with the applicable regulatory authorities in Canada and the U.S.
in July 2004. This financing mechanism, unless fully exhausted prior to
expiry, will remain in place into the third quarter of 2006. Thereafter, it is
our current expectation that we will register a new Base Shelf Prospectus to
ensure that a financing mechanism remains in place to allow us to take
advantage of future favorable financing opportunities in a timely manner.
In January 2006, following the announcement to amend the licensing
agreement for L-BLP25, we were able to raise gross U.S. $16.07 million by
issuing 10,572,368 units, each unit consisting of one common share and 0.25 of
a warrant, at an issue price of U.S. $1.52. Each warrant entitles the holder
thereof to purchase one common share at an exercise price of U.S. $2.50. The
warrants have a 42 month term and a no-exercise period of six months.
Capital Resources
Under the U.S. $100 million Base Shelf Prospectus, just over
U.S. $71 million is still available for future financings. In addition, at
December 31, 2005 there were 1.1 million warrants outstanding, at a
weighted-average exercise price of U.S. $3.45. Based on our NASDAQ closing
share price of $1.40 on December 31, 2005, the warrants outstanding are
currently not in the money. Assuming continuing investor support for our
equity offerings, and the successful registration of a new Base Shelf
Prospectus in the third or fourth quarter of 2006, this form of financing
mechanism should allow us to pursue financing opportunities in the foreseeable
future.
From inception, we have financed our research and development,
operations, and capital expenditures primarily through public and private
sales of our equity securities, licensing and collaborative arrangements, and
investment income. To maximize value from our capital resources and ensure
overall financial stability, we maintain a comprehensive financial planning,
budgeting, monitoring, and governance system that imposes a disciplined
approach to fiscal management. Our investment guidelines focus on capital
preservation and security of income and restrict the portfolio to holding only
liquid, investment-grade securities with maturities aligned to projected cash
requirements.
To meet future requirements, we intend to raise cash or improve liquidity
through some or all of the following methods: public or private equity or debt
financing; capital leases; achievement of milestone payments on existing
collaborative agreements; and the execution of new collaborative and licensing
agreements related to our proprietary technologies. However, there is no
assurance of obtaining additional financing through these arrangements on
acceptable terms, if at all. The dynamics of the biotechnology sector, and in
particular the uncertainty inherent in our clinical programs, may make it
difficult to raise significant new capital at reasonable cost. Consequently,
our ability to generate additional cash is contingent on many external factors
beyond our control, as described in "Risks and Uncertainties." Should
sufficient capital not be raised, we may have to delay, reduce the scope of,
eliminate, or divest our technologies, programs and related personnel, any of
which could impair the current and future value of the business.
Contractual Obligations and Contingencies
In our operations, we have entered into long-term contractual
arrangements from time to time for our facilities, debt financing, the
provision of goods and services, and acquisition of technology access rights,
among others. The following table presents contractual obligations arising
from these arrangements currently in force over the next ten years.
-------------------------------------------------------------------------
Payments Due by Year
---------------------------------------
2007- 2009- 2011-
(expressed in $000's) Total 2006 2008 2010 2015
-------------------------------------------------------------------------
Operating leases - premises 864 679 185 - -
Operating leases - equipment 15 13 2 - -
Capital lease obligations 134 50 84 - -
Licensing fees and royalties 299 91 123 24 61
Other long-term obligations 56 21 35 - -
-------------------------------------------------------------------------
Total contractual obligations 1,368 854 429 24 61
-------------------------------------------------------------------------
We have exercised our right to renew the corporate facilities lease for a
further 2 year term and expect the renewal rates to be similar to the previous
term. As well, we have entered into new 3 year capital lease agreements for
computer equipment and renewed our software licensing agreement for a further
3 years.
With the exception of capital leases, the obligations described above are
non-cancellable operating leases or commitments that do not meet the criteria
for accounting recognition of an asset and an obligation under the Canadian
Institute of Chartered Accountants ("CICA") Handbook section 3065 Leases. The
contractual terms provide for periodic lease payments and return of the
equipment at the end of the lease. For the current fair values of the capital
leases, refer to Note 16 Financial Instruments in the notes to the 2005
consolidated financial statements.
Under certain licensing arrangements for technologies incorporated into
our product candidates, we are contractually committed to payment of ongoing
licensing fees and royalties, as well as contingent payments when certain
milestones as defined in the agreements have been achieved.
With respect to our contingent liabilities, we have no new items to
report in 2005. For a discussion of our current contingencies, commitments,
and guarantees, refer to Note 15 Contingencies, Commitments, and Guarantees in
the notes to the 2005 consolidated financial statements.
Off-Balance Sheet Arrangements
As at December 31, 2005, we have not entered into any off-balance sheet
arrangements except as disclosed in Note 15 Contingencies, Commitments, and
Guarantees in the notes to the 2005 consolidated financial statements.
Transactions with Related Parties
In 2005, we did not enter into any material transactions with related
parties. In order to effectively execute our business strategy, we expect to
continue outsourcing various functions to the expertise of third parties such
as contract manufacturing organizations, and other research organizations.
These relationships are with non-related third parties and occur at arm's
length and on normal commercial terms.
Outlook
At the start of 2006, we believe that we have in place several key value
drivers that may increase shareholder value in the future. These include: a
strong corporate alliance with Merck; the planned advancement by Merck of
L-BLP25 into a pivotal phase 3 registration trial; the possible advancement of
clinical programs related to early stage technologies under collaborative
arrangements; and out-licensing opportunities for early stage product
technologies. In addition, we may be able to garner value to our shareholders
from the potential advancement of BGLP40 if we are successful in negotiating a
funding arrangement with a partner for this program. The key value drivers
described above could be negatively impacted by many factors including: a
decision by Merck not to move forward with or abandon the planned L-BLP25
phase 3 registration trial, Merck's inability to successfully complete the
planned L-BLP25 phase 3 registration trial, unfavorable results from the
planned L-BLP25 phase 3 registration trial, and ultimately denial or delay of
regulatory approval.
In our view, other value drivers enable us to exploit our leading
technologies in synthetic cancer vaccines. These competitive advantages
include, among others, our strong intellectual and human capital, a lean and
focused work force, proven management, and well-established financing
relationships and access to risk capital. Our future success will largely
depend on focusing the creative talents and energy of our employees towards
the timely and prudent commercialization of our intellectual property.
Financing is both a key element of our corporate strategy as well as a
critical resource in executing that strategy. We have had demonstrable success
in attracting, and establishing relationships with risk capital providers. To
facilitate timely access to financing opportunities that may emerge, we
registered a U.S. $100 million Base Shelf Prospectus in 2004 in Canada and the
U.S., which expires in the third quarter of 2006, with $33.6 million
(U.S. $28.7 million), before issue costs, in new equity realized to date
through this vehicle. Currently, it is our expectation that we will register a
new Base Shelf Prospectus to ensure that a financing mechanism remains in
place to allow us to take advantage of favorable financing opportunities in a
timely manner.
We expect that clinical development expenses will decline considerably in
the second half of 2006 now that the development program for L-BLP25 is in the
hands of Merck effective March 1, 2006. Coupling this with the U.S.
$16.07 million, before issue costs, in financing we were able to secure in
January 2006 and the expected cash inflows from collaborative funding
arrangements, investment income, and technology licensing efforts; we believe
that our cash and short-term investments in place will be sufficient to meet
operating and capital requirements into the latter half of 2007 and
potentially into early 2008. However, until one of our products receives
regulatory approval and is successfully commercialized we anticipate losses
for at least the foreseeable future as our lead product candidate undergoes
the final stages of clinical development.
Our ability to continue to generate cash to fund the advancement of
clinical programs related to early stage technologies and out-licensing
opportunities for early stage product technologies will depend on several
factors. Among others, these include regulatory support for the Merck-led
phase 3 pivotal L-BLP25 registration trial; the availability of new financing
through private and/or public offerings on acceptable terms; the timely
advancement of clinical studies; the costs in obtaining regulatory approvals
for our products; and the value and timing of securing licensing and
collaborative arrangements in building our pipeline.
The coming year will be critical in shaping our future direction, hinging
on our ability to develop a viable product strategy and to attract ongoing
investment. We remain firmly committed to our long-term goal to deliver value
for our shareholders.
Risks and Uncertainties
Except for historical information, certain matters discussed in this
document are by their nature forward-looking and are therefore subject to many
risks and uncertainties, which may cause actual results to differ materially
from the statements made herein. Some of these risks and uncertainties are
inherent to the biotechnology industry, while others are specific to Biomira;
some of these factors are predictable or within our control, others are not.
These include, but are not limited to: changing market and industry
conditions; clinical trial results; the establishment of new and continuation
of existing corporate alliances; the impact of competitive products and their
pricing; timely development of existing and new products; the difficulty of
predicting regulatory approval and market acceptance for our products;
availability of capital or other funding; the ability to retain and recruit
qualified personnel; and other risks, known or unknown.
Based on an ongoing assessment of our risk profile, we have concluded
that there has been no material change in the nature and magnitude of the
risks described below, except as noted otherwise.
The future performance of Biomira is contingent on a number of critical
factors: our success in bringing new products to the marketplace; our ability
to generate royalty or other revenues from licensed technology; our ability to
generate positive cash flow from operations and equity financing; and our
ability to maintain effective collaborative relationships with corporate
partners. In addition, future success will depend on the efficacy and safety
of our products, timely regulatory approval for new products and new
indications, and the degree of patent protection afforded to particular
products. After overcoming regulatory and patent hurdles, in order to succeed,
we must continue to secure adequate manufacturing capacity to produce
commercial quantities of our products, ensure that the processes and
facilities of our manufacturing partners meet the highest standards of
production quality, and develop an effective distribution and marketing
network. Commercial viability requires widespread acceptance of our products
by the medical community, as well as by a majority of health care plans and
payers in the key markets. Last, but not least, over the long term, operating
effectiveness depends critically on our ability to recruit, retain, and
develop our human resources, which is exposed to the risks and uncertainties
of a tight labour market for unique skills relating to biotechnology research,
development, and management.
There can be no assurance that new competitive products will not be more
efficacious, brought to market sooner and/or marketed more effectively, or at
lower cost, than any that we may develop. Competitors may also be able to
develop non-patent infringing product strategies that may be as good as or
better than our patent-protected products. We believe that we have strong
proprietary and/or patent protection, or the potential for strong patent
protection, for a number of our products currently under development; however,
the ultimate power of patent protection may be determined by the courts and/or
changes in patent legislation in various countries.
As part of our risk management strategy, we transfer some risks through a
general insurance program. In addition to insurance for our standard business
risks, we have obtained aggregate blanket insurance coverage of U.S.
$10 million for potential clinical trial liability. Given the scope and
complexity of the clinical development process, the uncertainty of product
liability litigation, and the shrinking capacity of insurance underwriters, it
is not possible at this time to assess the adequacy of our current clinical
trial insurance coverage, nor the ability to secure continuing coverage at the
same level and at reasonable cost in the foreseeable future.
Our investment earnings are exposed to financial market risks arising
from volatility in interest and foreign currency exchange rates, as well as to
overall market conditions. We also have exposure to exchange risk through our
collaboration revenues, licensing and royalty commitments, product
manufacturing costs, and clinical development expenses. Of our total
expenditures in 2005, a large portion was denominated in U.S. currency. Since
our primary cash flows from collaboration revenues and our equity financings
are likewise denominated, they predominantly offset U.S. cash requirements. We
minimize our exchange risk through prudent cash management to ensure that
foreign currency requirements and surpluses are handled effectively; and, from
time to time, we may engage in hedging or use derivatives to manage specific
financial exposures. However, we do not use derivatives for speculative or
trading purposes.
Interest rate risk is the exposure of interest revenue and expense to
rate fluctuation; inflation risk is loss of purchasing power due to rising
prices. Economic forecasts project a stable outlook for low inflation and
interest rates in the near future; hence, these risks are expected to be
negligible. Furthermore, our debt obligations, primarily capital and operating
leases at this time, have fixed rates over the terms of the commitments.
Due to the intrinsic uncertainty in our business prospects and of the
life sciences sector in general, the equity markets have amplified the company
risk factor for Biomira. Our share price is therefore subject to equity market
price risk, which may result in significant market speculation and volatility
of trading. Given the current low share price and the possibility of further
decline, there is a risk that future issuance of common shares under the
remainder of the U.S. $100 million Base Shelf Prospectus, which expires in the
third quarter of 2006, and the potential exercise or conversion of stock
options, restricted share units and warrants, may result in material dilution
of share value, which may then lead to even lower share prices. Finally, the
investment guidance and decisions of securities analysts and major investors
in response to our financial or scientific results, and/or the timing of such
results and expectations about future prospects, could also have a significant
effect on investor support and future share price.
Critical Accounting Policies and Estimates
All of our accounting policies are in accordance with Canadian GAAP
including some which require management to make assumptions and estimates that
could significantly affect the results of operations and financial position.
The significant accounting policies that we believe are the most critical in
fully understanding and evaluating the reported financial results are
described below. Our significant accounting policies are disclosed in Note 2
Significant Accounting Policies of the notes to the consolidated financial
statements.
Revenue recognition
Licensing, royalty, and contract research revenues are recognized as
services are performed under the terms of the related contractual agreements.
Currently, we also earn revenue from collaborative agreements, which typically
consists of initial technology access or licensing fees and milestone payments
triggered by specified events. Initial lump sum payments for such fees and
licenses are recorded as deferred revenue when received and recognized as
revenue on a straight-line basis over the term of the collaborative agreement
or the related product life cycle, whichever is shorter. Milestone payments
are recognized as revenue upon performance of obligations defined as
milestones in the agreements.
Application of this policy affects primarily the timing, rather than the
amount, of revenue recognition for up-front payments. Such up-front payments
from collaborative agreements are amortized over the estimated product life
cycle, as this is determined to best match the future benefits derived from
such agreements.
Research and development
Research and development costs consist of direct and indirect
expenditures related to our research and development programs that may include
technology access and licensing fees related to the use of proprietary third
party technologies. Research and development costs are expensed as incurred
unless they meet generally accepted accounting criteria for deferral and
amortization. We assess whether any costs have met the relevant criteria for
deferral and amortization at each reporting date. To date, no product research
and development costs have been deferred. Should the regulatory agencies
approve a clinical product, management will determine whether conditions exist
for deferral and amortization of any qualifying development costs. Earnings
will be impacted in the period that such development costs are capitalized,
and also in each subsequent accounting period as they are amortized.
Accounting Policies Changes
Variable Interest Entities
Effective January 1, 2005, we adopted the recommendations of CICA
Handbook Accounting Guideline 15 (AcG-15), Consolidation of Variable Interest
Entities, effective for annual and interim periods beginning on or after
November 1, 2004. Variable interest entities (VIEs) refer to those entities
that are subject to control on a basis other than ownership of voting
interests. AcG-15 provides guidance for identifying VIEs and criteria for
determining which entity, if any, should consolidate them.
We have determined that adoption of AcG-15 does not have an effect on our
financial position, results of operations or cash flows in the current period
or the prior period presented.
Financial Instruments - Disclosure and Presentation
Effective January 1, 2005, we adopted the amended recommendations of CICA
Handbook Section 3860, Financial Instruments - Disclosure and Presentation,
effective for fiscal years beginning on or after November 1, 2004. Section
3860 requires that certain obligations that may be settled at the issuer's
option in cash or the equivalent value by a variable number of the issuer's
own equity instruments be presented as a liability.
We have determined that adoption of Section 3860 does not have a material
effect on the Company's financial position or results of operations in the
current period or the prior periods presented.
Impact of New Accounting Pronouncements
Financial Instruments - Recognition and Measurement
In January 2005, the Accounting Standards Board ("AcSB") of the CICA
issued Handbook Section 3855, Financial Instruments - Recognition and
Measurement. The new accounting standard requires that all financial
instruments, including derivatives are to be included on a company's balance
sheet and measured, either at their fair value or, in limited circumstances
when fair value may not be considered most relevant, at cost or amortized
cost. The standards also specify when gains and losses as a result of changes
in fair values are to be recognized in the income statement.
Comprehensive Income and Equity
In January 2005, the AcSB of the CICA issued new Handbook Section 1530,
Comprehensive Income, and Section 3251, Equity. Section 1530 establishes
standards for reporting and display of comprehensive income. It defines other
comprehensive income to include revenues, expenses, gains and losses that, in
accordance with primary sources of GAAP, are recognized in comprehensive
income, but excluded from net income. The section does not address issues of
recognition or measurement for comprehensive income and its components.
Section 3251 establishes standards for the presentation of equity and changes
in equity during the reporting period. The requirements in this section are in
addition to Section 1530 and recommends that an enterprise should present
separately the following components of equity: retained earnings, accumulated
other comprehensive income, the total for retained earnings and accumulated
other comprehensive income, contributed surplus, share capital and reserves.
Hedges
In January 2005, the AcSB of the CICA issued Handbook Section 3865,
Hedges. The new accounting standard extends existing requirements for hedge
accounting and comprehensively specifies how hedge accounting should be
performed.
The mandatory effective date for the new Sections 1530, 3251, 3855 and
3865 is for interim and annual financial statements relating to fiscal years
beginning on or after October 1, 2006. Earlier adoption is permitted only as
of the beginning of a fiscal year ending on or after December 31, 2004. We are
in the process of evaluating the impact of these recently issued standards on
our financial position and results of operations.
Non-Monetary Transactions
In June 2005, the AcSB issued Handbook Section 3831, Non-Monetary
Transactions, replacing Section 3830 of the same title. The new accounting
standard requires all non-monetary transactions be measured at fair value
unless certain conditions are satisfied. The new requirements are effective
for non-monetary transactions initiated in periods beginning on or after
January 1, 2006.
We are in the process of evaluating the impact of the recently issued
standard on our financial position and results of operations.
Implicit Variable Interests under AcG-15
In October 2005, the Emerging Issues Committee of the CICA (the "EIC")
issued Abstract No. 157, Implicit Variable Interests under AcG-15 (EIC-157),
to address whether a company has an implicit variable interest in a VIE or
potential VIE when specific conditions exist. An implicit variable interest
acts the same as an explicit variable interest except it involves the
absorbing and/or receiving of variability indirectly from the entity (rather
than directly). The identification of an implicit variable interest is a
matter of judgment that depends on the relevant facts and circumstances.
EIC-157 will be effective in the first quarter of 2006.
We do not expect the impact of this abstract to be material.
Supplemental Information
Selected Annual Information
The following is selected annual consolidated financial information from
our audited annual financial statements for each of the three most recently
completed years ending December 31, 2005.
-------------------------------------------------------------------------
(expressed in 000's
except per share data) 2005 2004 2003
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Statement of Operations
-------------------------------------------------------------------------
Total revenues $4,377 $8,941 $3,416
-------------------------------------------------------------------------
Total expenses $24,543 $21,935 $22,326
-------------------------------------------------------------------------
Other income (expense) $1,141 $769 $(64)
-------------------------------------------------------------------------
Net loss $(19,025) $(12,225) $(18,974)
-------------------------------------------------------------------------
Basic and diluted loss per share ($0.24) $(0.17) $(0.31)
-------------------------------------------------------------------------
Weighted average number of common
shares outstanding 78,660 72,941 62,498
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Balance Sheet
-------------------------------------------------------------------------
Working capital $19,925 $37,107 $37,810
-------------------------------------------------------------------------
Total assets $24,263 $40,821 $43,065
-------------------------------------------------------------------------
Total long-term liabilities $1,147 $1,271 $6,701
-------------------------------------------------------------------------
Shareholders' equity $20,063 $36,963 $31,750
-------------------------------------------------------------------------
Common shares outstanding 78,817 78,340 72,545
-------------------------------------------------------------------------
Certain of the comparative figures from 2003 have been reclassified to
conform to the current period's presentation.
Summary of Quarterly Results
The following is selected quarterly consolidated financial information
from our unaudited quarterly financial statements for each of the eight most
recently completed quarters ending December 31, 2005.
-------------------------------------------------------------------------
(expressed in 000's
except per share data) Q1 Q2 Q3 Q4 Annual
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2005
-------------------------------------------------------------------------
Total revenues $804 $1,120 $1,338 $1,115 $4,377
-------------------------------------------------------------------------
Research and development
costs $3,507 $4,320 $4,625 $4,455 $16,907
-------------------------------------------------------------------------
Net loss $(4,358) $(4,803) $(5,476) $(4,388) $(19,025)
-------------------------------------------------------------------------
Basic and diluted loss
per share $(0.06) $(0.06) $(0.07) $(0.05) $(0.24)
-------------------------------------------------------------------------
Common shares
outstanding 78,360 78,817 78,817 78,817 78,817
-------------------------------------------------------------------------
Weighted average number
of common shares
outstanding 78,352 78,500 78,607 78,660 78,660
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2004
-------------------------------------------------------------------------
Total revenues $943 $6,493(1) $531 $974 $8,941
-------------------------------------------------------------------------
Research and development
costs $3,791 $3,358 $3,229 $3,198 $13,576
-------------------------------------------------------------------------
Net (loss) income $(4,852) $1,012 $(4,804) $(3,581) $(12,225)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic and diluted (loss)
income per share $(0.07) $0.01 $(0.06) $(0.05) $(0.17)
-------------------------------------------------------------------------
Common shares
outstanding 72,559 72,562 72,562 78,340 78,340
-------------------------------------------------------------------------
Weighted average number
of common shares
outstanding 72,555 72,558 72,560 72,941 72,941
-------------------------------------------------------------------------
(1) The increased revenues in the second quarter of 2004 resulted from
the recognition into income of the remaining deferred licensing
revenues related to Theratope, totalling $5.9 million, due to the
return of the Theratope development and commercialization rights from
Merck announced in June 2004.
Certain of the comparative figures for Q1, Q2 and Q3, 2004 have been
reclassified to conform to the current period's presentation.
Outstanding Share Data
As at February 28, 2006, the following classes of shares and equity
securities potentially convertible into common shares were outstanding:
-------------------------------------------------------------------------
Class A preference shares (non-voting) 12,500
Class B preference shares (non-voting) nil
Common shares 89,388,932
Convertible equity securities:
Stock options 4,214,565
Restricted share units 114,000
Warrants 3,825,937
-------------------------------------------------------------------------
Upon exercise or conversion, the stock options, restricted share units
and warrants are convertible into an equal number of common voting shares. Had
the outstanding stock options, restricted share units and warrants been fully
exercised or converted, the aggregate number of common shares outstanding
would be 97,543,434 as at December 31, 2005.
For details relating to the stock options, restricted share units and
warrants, please refer to Notes 10 and 11 of the notes to the 2005 audited
consolidated financial statements.
Disclosure Controls
Our Chief Executive Officer and Chief Financial Officer are responsible
for establishing and maintaining Biomira's disclosure controls and procedures,
and intend to so certify, as required by Sections 302 and 906 of the
Sarbanes-Oxley Act of 2002 (the "Act"), and the corresponding SEC rules
implementing these Sections of the Act, as well as Multilateral Instrument
52-109 ("MI 52-109") Certification of Disclosure in Issuers' Annual and
Interim Filings. These officers have evaluated the effectiveness of Biomira's
disclosure controls and procedures and have concluded that they provide
management with a reasonable level of assurance that the information we are
required to disclose on a continuous basis in annual and interim filings and
other reports is recorded, processed, summarized and reported or disclosed on
a timely basis as required. As a cross-border public company we are permitted
to file the annual form of certification filed under Section 302 and 906 of
the Act in lieu of the Canadian form of certification under MI 52-109.
Forward-Looking Statements
This report may contain forward-looking statements. Various factors could
cause actual results to differ materially from those projected in forward-
looking statements, including those predicting the timing or availability of
clinical trial analyses; efficacy, safety and clinical benefit of products;
ability to secure, and timing of, regulatory clearances; timing of product
launches in different markets; ability to retain or secure collaborative
partners; ability to secure and manufacture vaccine supplies; adequacy of
financing and reserves on hand; scope and adequacy of insurance coverage;
retention and performance of contractual third parties, including key
personnel; the achievement of contract milestones; currency exchange rate
fluctuations; changes in general accounting policies; and general economic
factors. Although we believe that the forward-looking statements contained
herein are reasonable, we can give no assurance that our expectations are
correct. All forward-looking statements are expressly qualified in their
entirety by this cautionary statement. For a detailed description of our risks
and uncertainties, you are encouraged to review the official corporate
documents filed with the securities regulators in Canada and the United
States.
Additional Information
Additional information relating to Biomira, including a copy of our
Annual Information Form and Proxy Circular filed annually at the end of March,
can be found on SEDAR at www.sedar.com or U.S. EDGAR at www.sec.gov.
Management Report
The accompanying consolidated financial statements of Biomira Inc., and
all information presented in this annual report, are the responsibility of
management and have been approved by the Board of Directors.
The financial statements have been prepared by management in accordance
with Canadian generally accepted accounting principles, which differ in some
respects from those used in the United States of America. The significant
differences in accounting principles, as they pertain to the financial
statements, are identified in the related notes. The financial statements
include some amounts that are based on best estimates and judgments of
management. Financial information used elsewhere in this annual report is
consistent with that in the financial statements.
To further the integrity and objectivity of data in the financial
statements, the management of the Company has developed and maintains a system
of internal controls over financial reporting, which management believes
provides reasonable assurance that financial records are reliable and form a
proper basis for preparation of financial statements, and that assets are
properly accounted for and safeguarded.
The Board of Directors carries out its responsibility for oversight of
the financial statements in this annual report principally through its Audit
Committee. The Board appoints the Audit Committee and the majority of its
members is comprised of outside and unrelated directors. In addition to being
independent of management, at least one member of the Audit Committee must be
qualified as a financial expert as required under the Sarbanes-Oxley Act of
2002. The committee meets periodically with management as well as quarterly
with the external auditors, to discuss internal controls over the financial
reporting process and financial reporting issues, to satisfy itself that each
party is properly discharging its responsibilities, and to review quarterly
reports, the annual report, the annual financial statements, and the external
auditors' report. The committee reports its findings to the Board for
consideration when approving the financial statements for issuance to the
shareholders. The Company's auditors have full access to the Audit Committee,
with and without management being present.
These financial statements have been audited by the shareholders'
auditors, Deloitte & Touche LLP.
(Signed) (Signed)
T. Alexander McPherson, MD, PhD Edward A. Taylor, CGA
President and Chief Executive Officer Vice President Finance and
Administration and
Chief Financial Officer
Corporate Information
Share Registrar and Transfer Agents
Computershare Investor Services Inc.
Suite 600, 530 - 8 Ave SW
Calgary AB T2P 3S8
Canada
Phone: 1-800-564-6253 (toll free North America)
Phone: 1-514-982-7555 (International)
Fax: 1-888-453-0330 (toll free North America)
Fax: 1-416-263-9394 (International)
E-Mail: service(at)computershare.com
Internet: http://www.computershare.com
Stock Listings and Symbols
Toronto Stock Exchange: BRA
Nasdaq National Market: BIOM
We invite you to visit our web site at www.biomira.com or call our
investor relations department toll free at 1-877-234-0444 Ext. 241.
This release/report may contain forward-looking statements. Various
factors could cause actual results to differ materially from those projected
in such statements, a number of which are set forth under the Management
Discussion and Analysis section above. All forward-looking statements in this
release/report are expressly qualified in their entirety by this cautionary
statement and by the section on Forward-Looking Statements under the
Management Discussion and Analysis section.
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