Mar. 17, 2010 (Filing Services Canada) --
MIGENIX Reports Third Quarter Fiscal 2010 Financial Results
Vancouver, BC, CANADA - March 17, 2010 - MIGENIX Inc. (the "Company" or "MIGENIX") (TSX: MGI; OTC: MGIFF),reports financial results for the three and nine months ended January 31, 2010 and provides a corporate update:
* Non-dilutive Financing Transaction: On February 16, 2010 the Company announced that it had entered into an investment agreement (the "Agreement") in respect of a plan of arrangement (the "Arrangement") with Madison Pacific Properties Inc. to reorganize MIGENIX and provide it with non-dilutive funding in the amount of $4 million. The non-dilutive transaction involves a corporate reorganization of MIGENIX to be completed under a court supervised plan of arrangement pursuant to the provisions of the Business Corporations Act (British Columbia). Under the terms of the Agreement, Completion of the Arrangement is subject to customary conditions, including, among others, receipt of required regulatory approvals, court approvals and, subject to the court's approval, approval of the Arrangement at a special meeting being held on March 18, 2010 of holders of MIGENIX common shares.
* Omiganan 1% gel (OmigardTM; topical cationic peptide; prevention of catheter-related infections): We continue to investigate a range of opportunities for the OmigardTM program. Our objective in these interactions is to find a viable path forward for OmigardTM and resume activities to advance OmigardTM to commercialization.
* MX-2401 (IV lipopeptide; treatment of gram-positive bacterial infections): MX-2401, an injectable lipopeptide antibiotic, is targeted for the treatment of serious gram-positive bacterial infections, including highly publicized treatment resistant hospital bacteria such as MRSA. During the first quarter of Fiscal 2010 we entered into contract and collaboration agreements with three researchers to further support the MX-2401 program and the work under these agreements continued during the third quarter. Additionally, we continue to pursue strategic options for advancing the development of MX-2401 including licensing MX-2401 to a third party. In December 2009 we completed the termination of the agreement under the former Technology Partnerships Canada ("TPC") program which was funding 26% of eligible MX-2401 development costs; see "FINANCIAL RESULTS" below for additional information on the termination of this agreement.
* Celgosivir (treatment of viral infections): In December 2009 we terminated our license for certain intellectual property in the celgosivir program and as part of this termination we redeemed all of the outstanding Series D preferred shares for total consideration of US$1.
* Facility: We entered into a month to month sub rent agreement for smaller office premises which we relocated to during December 2009. As part of the downsizing our operations we sold substantially all of our laboratory equipment. Net proceeds of property and equipment sales for the period May 1, 2009 to January 31, 2010 were approximately $215,000.
* MIGENIX is utilizing the services of several consultants including former employees to carry out its objectives which include: (i) investigating opportunities for the OmigardTM program; (ii) obtaining additional funds through licensing and non-dilutive financing arrangements; and (iii) continuing to reduce expenses.
FINANCIAL RESULTS
For the three months ended January 31, 2010 ("Q3/10") MIGENIX incurred a loss of $0.6 million (Q3/09: loss $1.3 million) or less than $0.01 (Q3/09: loss $0.02) per common share. For the nine months ended January 31, 2010 ("YTD Fiscal 2010"), the loss is $2.1 million ($0.01 per common share) compared to a loss of $7.3 million ($0.08 per common share) for the nine months ended January 31, 2009 ("YTD Fiscal 2009"). The $5.2 million decrease in the YTD Fiscal 2010 loss compared to the YTD Fiscal 2009 loss consists principally of: an approximate $2.1 million decrease in research and development expenses; an approximate $1.9 million decrease in general and corporate expenses; and an approximate $1.5 million decrease in accretion expense for the convertible royalty participation units.
Expenses in YTD Fiscal 2010 have decreased significantly compared to YTD Fiscal 2009 due to the Company's initiatives to reduce expenses including personnel reductions and focusing on the out-licensing of the Company's un-partnered programs with minimal research and development activities being conducted that are not funded by partners.
Research and development costs in Q3/10 were approximately $0.2 million (Q3/09: $0.5 million) and for YTD Fiscal 2010 were approximately $0.8 million (YTD Fiscal 2009: $3.0 million).The decrease in the research and development costs in YTD Fiscal 2010 compared with YTD Fiscal 2009 is principally due to reductions in salaried personnel, less research activity and lower patent costs. Personnel costs (excluding former employees who are now consultants and charged to programs) were less than $0.1 million in YTD Fiscal 2010 (YTD Fiscal 2009: $1.7 million). As at October 31, 2009 the Company recorded government assistance repayable of approximately $0.2 million pursuant to the pending termination of the TPC agreement (see "MX-2401" above). This expense reflects the Company's estimate of the fair value of $0.3 million in payments during the period commencing December 2009 and ending in March 2018.
General and corporate expenses in Q3/10 were approximately $0.25 million (Q3/09: $0.3 million) and for YTD Fiscal 2010 were approximately $0.7 million (YTD Fiscal 2009: $2.5 million). The decrease in general and corporate expenses for YTD Fiscal 2010 compared to YTD Fiscal 2009 is principally due to: reduced personnel costs; reduced legal costs; reduced rent expense including closing of the San Diego office; and reduction in external investor relations services. Personnel costs for YTD Fiscal 2010 were approximately $0.45 million (YTD Fiscal 2009: $1.6 million).
The loss on disposal and write-down of property and equipment in YTD Fiscal 2010 was approximately $0.2 million (YTD Fiscal 2009: <$0.1 million). The loss on disposal/write-down of property and equipment for YTD Fiscal 2010 reflects the downsizing of the Company's operations including the sale of substantially all of the Company's lab equipment.
Accretion expense related to the convertible royalty participation units for Q3/10 and YTD Fiscal 2010 was less than $0.1 million (Q3/09: $0.5 million; YTD Fiscal 2010: $1.5 million). The decrease in YTD Fiscal 2010 accretion expense compared to YTD Fiscal 2009 is principally due to the Q4/09 adjustment of the carrying amount of the debt component of the convertible royalty participation units resulting from the Company's lower estimate of the probable royalties payable to the unit holders over the royalty payment term (estimate was reduced from the maximum royalties payable of approximately $29.5 million to approximately $7.3 million). The Company as at December 31, 2009 reduced its estimate of the probable royalties payable to the unit holders over the royalty payment term to approximately $5.6 million. As a result of the Company's reduced estimate of the probable royalties payable to the unit holders the Company, using the effective interest method, adjusted the carrying amount of the debt component of the convertible royalty participation units at December 31, 2009 to approximately $0.15 million from $0.25 million and recorded an approximate $0.1 million gain in net income for Q3/10 and YTD Fiscal 2010.
On December 31, 2009 the Company repurchased 100% of the outstanding convertible royalty participation units and recorded a loss on settlement of the units of approximately $0.15 million.
As of January 31, 2010, the Company had cash, cash equivalents and short-term investments of approximately $0.8 million (April 30, 2009: $2.1 million) and the Company's net working capital was approximately $0.2 million (April 30, 2009: $1.5 million).
MIGENIX believes that its funds on hand at January 31, 2010, combined with ongoing cost reduction measures, are sufficient to provide for operations into approximately the second quarter of calendar 2010 before funds received, if any, from the current $4 million non-dilutive financing initiative, existing or new license agreements, new financings, or the exercise of warrants and options.
The Company's ability to advance its programs is constrained due to the Company's current financial and personnel resources. The Board and management have worked to reduce our financial commitments and, where necessary, rationalize certain programs through controlled spending and increased out-licensing efforts. The Company currently plans to operate within an annual burn rate of under $1.2 million. The magnitude of future spending in the Company's programs will be dependent on: the Company's financial resources, personnel resources, business strategies and the licensing status of our programs. We may need to increase or decrease our annual burn rate in response to such matters. MIGENIX will need to raise additional funds in support of its operations and there is no assurance that such funds can be obtained on satisfactory terms, or at all.
OUTSTANDING SHARES
There are currently 141,695,723 (April 30, 2009: 141,695,709) common shares outstanding; no convertible royalty participation units (April 30, 2009: 29,465); and 1,250,000 (April 30, 2009: 5,250,000) preferred shares outstanding.
ABOUT MIGENIX
MIGENIX is committed to advancing therapy, improving health, and enriching life by developing and commercializing drugs for the treatment of infectious diseases. The Company's programs include drug candidates for: the treatment and prevention of hospital-acquired and other infections, the treatment of dermatological diseases, and the treatment of hepatitis B infections. MIGENIX is headquartered in Vancouver, British Columbia, Canada. Additional information regarding the Company can be found at www.migenix.com.
For further information, contact Paul Brennan, chief executive officer, at (604) 221-9666.
BALANCE SHEETS
UNAUDITED - IN THOUSANDS OF CANADIAN DOLLARS
January 31, April 30,
2010 2009
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Assets
Cash and cash equivalents $108 $1,646
Short-term investments 690 487
Other current assets 152 317
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Total current assets $950 $2,450
Long-term investments 1 1
Property & equipment 60 588
Intangible assets 268 342
Deferred financing costs 158
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Total assets $1,437 $3,381
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Liabilities and Shareholders'
Equity
Accounts payable and $772 $934
accrued liabilities
Current portion of 11 -
government assistance
repayable
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Total current liabilities $783 $934
Long term portion of 196 -
government assistance
repayable
Convertible royalty - 194
participation units
Preferred shares - -
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Total liabilities $979 $1,128
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Shareholders' equity
Common shares $126,404 $126,404
Equity portion of convertible - 4,554
royalty participation units
Contributed surplus 15,021 9,339
Deficit (140,967) (138,044)
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Total shareholders' equity $458 $2,253
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Total liabilities and $1,437 $3,381
shareholders' equity
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STATEMENTS OF LOSS, COMPREHENSIVE LOSS AND DEFICIT
Unaudited - In Thousands of Canadian dollars (except per share amounts)
Three months ended Nine months ended
January 31, January 31,
2010 2009 2010 2009
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Revenue
Research and development services - 38 - 66
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$- $ 38 $- $66
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Expenses
Research and development 194 424 893 2,970
General and corporate 252 319 683 2,537
Amortization 39 104 201 314
Loss on disposal/
write-down of property and
Equipment 71 1 184 11
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$556 $848 $1,961 $5,832
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-
Loss before other income
(expense) $(556) $(810) $(1,961) $(5,766)
Accretion of convertible
royalty participation units
and amortization of
transaction costs (14) (530) (56) (1,528)
Gain on adjustment royalty
participation units 96 - 96 -
Loss on repurchase royalty
participation units (154) - (154) -
Interest income 4 20 8 75
Foreign exchange gain
(loss) - 11 (8) (56)
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Loss and comprehensive
loss for the period $(624) $(1,309) $(2,075) $(7,275)
Fair value of modification
of warrants (848) - (848) -
Deficit, beginning of period (139,495) (143,448) (138,044) (137,482)
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Deficit, end of period $(140,967) $(144,757) $(140,967) $(144,757)
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Basic, diluted and comprehensive
loss per share $(0.00) $(0.02) $(0.01) $(0.08)
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Weighted average number of common
shares outstanding (000's) 141,696 94,464 141,696 94,464
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STATEMENTS OF CASH FLOWS Three months ended Nine months ended
Unaudited - In Thousands of Canadian dollars
January 31 January 31
2010 2009 2019 2009
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Loss for the period $(624) $(1,309) $(2,075) $(7,275)
Items not affecting cash:
Amortization 39 104 201 314
Loss on disposal/write-down
property & equipment 71 1 184 11
Stock-based compensation 13 50 44 380
Deferred share units compensation - - - 62
Accretion, adjustment and loss on
repurchase of convertible royalty
participation units 72 530 114 1,528
Long term government assistance
Repayable (3) - 196 -
Changes in non-cash working capital
items relating to operating activities 135 2 (32) 637
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Cash used in operating activities $(297) $(622) $(1,368) $(4,343)
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Rights offering costs - (269) (110) (269)
Repurchase of royalty participation
Units (71) (71)
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Cash provided by (used in) financing
activities (71) (269) $(181) $(269)
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Funds from (purchases of) short-term
investments 249 - (203) 2,975
Proceeds on disposal of equipment 140 - 215 -
Purchases of property and equipment - - - (15)
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Cash provided by (used in) investing
activities $389 $- $12 $2,960
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(Decrease) increase in cash and cash
equivalents $21 $(891) $(1,537) $(1,652)
Cash and cash equivalents, beginning
of period 87 1,860 1,645 2,621
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Cash and cash equivalents, end
of period $108 $969 $108 $969
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FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, and forward-looking information within the meaning of applicable securities laws in Canada (collectively referred to as "forward-looking statements"). Statements, other than statements of historical fact, are forward-looking statements. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other matters contemplated by the forward-looking statements will not occur.
Although our management believes that the expectations represented by such forward-looking statements are reasonable, there is significant risk that the forward-looking statements may not be achieved, and the underlying assumptions thereto will not prove to be accurate. Forward-looking statements in this news release include, but are not limited to, statements concerning our expectations for: investigating a range of opportunities for the OmigardTM program; exploring strategic options for the MX-2401 program including licensing MX-2401 to a third party; working within an annual burn rate of under $1.2 million; the Company's current financial resources being sufficient to fund operations into approximately the second quarter of calendar 2010; and the Company obtaining additional funds through licensing and non-dilutive financing arrangements including the $4 million non-dilutive financing transaction as part of the reorganization of MIGENIX.
With respect to the forward-looking statements contained in this news release, we have made numerous assumptions regarding, among other things: our ability to assess and advance opportunities in the OmigardTM program; our ability to generate and manage licensing and other strategic opportunities in the MX-2401 program; our ability to retain or engage the personnel required to advance the Company's objectives; our ability to obtain additional funds through licensing and non-dilutive financing arrangements including the $4 million non-dilutive financing transaction as part of the reorganization of MIGENIX; and future expense levels being within our current expectations.
Actual results or events could differ materially from the plans, intentions and expectations expressed or implied in any forward-looking statements, including the underlying assumptions thereto, as a result of numerous risks, uncertainties and other factors including: the possibility that opportunities will arise that require more cash than the Company has or can reasonably obtain; dependence on key personnel; dependence on corporate collaborations; potential delays; uncertainties related to early stage of technology and product development; uncertainties as to the requirement that a drug be found to be safe and effective after extensive clinical trials and the possibility that the results of such trials, if completed, will not establish the safety or efficacy of our products; uncertainties as to future expense levels and the possibility of unanticipated costs or expenses or cost overruns; and other risks and uncertainties which may not be described herein. Certain of these factors and other factors are described in detail in the Company's Annual Information Form and other filings with the Canadian securities regulatory authorities and the U.S. Securities & Exchange Commission.
Forward-looking statements are based on our current expectations and MIGENIX assumes no obligations to update such information to reflect later events or developments.
Source: Migenix Inc. (TSX - MGI) (OTCBB - MGIFF) http://www.migenix.com
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