Inflazyme Announces Financial Results for the Quarter Ended September 30, 2005; Strengthens Financial Position
November 7, 2005
VANCOUVER, B.C., CANADA – Inflazyme Pharmaceuticals Ltd. (TSX: IZP) today announced its second quarter financial results for the period ended September 30, 2005, which reflect the recent corporate reorganization that generated approximately $7 million in non-dilutive funding.
Corporate Reorganization Proceeds
On September 20, 2005, Inflazyme initiated a corporate reorganization that culminated on October 27, 2005 with the sale of a wholly-owned subsidiary. The total proceeds realized from the disposal of the subsidiary were $6.8 million, net of expenses of approximately $470,000. This additional funding, plus our working capital at September 30, 2005, is expected to fund the operations of Inflazyme, at our current expenditure level, until the end of calendar 2007. Previously, our cash reserves were sufficient until Q1 2007.
This non-diluting funding occurred through the sale of a wholly-owned subsidiary, the disposal of which does not affect our future business in any way. Inflazyme still retains all its intellectual property assets: the LSAIDs™, the PDE4 inhibitors, Mirococept® (APT070), Prodaptin™, and ATH. The LSAIDs™ and the PDE4 inhibitors are central to our Company’s future and we are continuing to explore further opportunities to strengthen our cash position through the sale or out-licensing of our remaining non-core assets.
At the same time, we continue to exercise financial prudence and our burn rate for the quarter was consistent with the guidance previously provided at approximately $700,000 per month.
Progress with our LSAID™ - IPL512,602
During this quarter, we received encouraging feedback from the Pulmonary Drug Division of the FDA confirming that the agency would consider the use of quality of life (QoL) measures and other patient-reported outcomes among the primary endpoints for Phase III studies. You may recall that in the Phase IIa study conducted earlier with IPL512,602, statistical significance was seen in several secondary endpoints including asthma QoL measures and the reduced need for rescue medication. Hence, such patient-reported outcomes measures are intended to be used in future studies with IPL512,602, and are similar to those employed to support efficacy in pivotal trials with other approved asthma products.
We expect IPL512,602 to advance into a Phase IIb clinical study by early next year and we are actively seeking a strategic partner to continue the further development and commercialization of our product.
Progress with our PDE4 Inhibitor – IPL455,903
IPL455,903 is partnered with Helicon Therapeutics, Inc. as a potential treatment for learning and memory disorders. We have been advised by them, that the Phase Ib, multi-dose clinical safety study with IPL455,903 is on track, and we anticipate announcing the results of this study before the end of the year. In addition, they have also advised us that the Phase IIa study is also on schedule and is expected to begin early next year. Helicon is responsible for all clinical studies through to Phase IIa, at which point Inflazyme has the option to buy back into the program to form a joint venture for the continued development of the product.
In May 2005, we announced the results of the single dose study with IPL455,903. It was demonstrated that the drug was safe and well tolerated and importantly, no signs of emesis were observed. Emesis is a side effect that has been associated with other PDE4 inhibitors in clinical development, even after a single dose has been administered. This effect has hampered the successful development of this particular class of drugs.
We are making good progress in advancing another PDE4 inhibitor toward pre-clinical development in the area of inflammation. We look forward to sharing further news with you as this program advances.
Results of operations for the quarter ended September 30, 2005
The net income for the quarter ended September 30, 2005 was $534,555 ($0.01 per common share) compared to a net loss of $6,163,236 ($0.06 per common share) in the corresponding quarter in the prior year. The net income for the period relates primarily to a dilution gain of $3,310,101, arising from the corporate reorganization, and a reduction in research and development, general and administration, and amortization expenses. Interest and licensing revenue were both lower during the current quarter compared to the prior period. Also, restructuring costs of $596,488 and a loss on disposal of assets held for sale of $86,572 were recognized in 2004 while no such expenses occurred in 2005.
On September 20, 2005, the Company initiated a corporate reorganization that culminated in the sale of a wholly-owned subsidiary on October 27, 2005. On September 20, 2005, the Company transferred the net assets of the subsidiary to a new wholly-owned subsidiary. Following completion of the net asset transfer, the Company received an initial payment of $3,430,000 related to the sale of the original subsidiary. The carrying value of the subsidiary immediately following the transfer of the net assets was nominal and accordingly a gain of $3,310,101 (net of $119,899 in related costs) was recognized in the consolidated statement of operations.
Research and development expenses
Research and development expenses for the quarter ended September 30, 2005 were $1,242,984 versus $3,093,296 during the quarter ended September 30, 2004. The decrease was due to the reduction in personnel expenses through headcount reductions and the resultant reduction in laboratory activity. Contract research activity was lower during the second quarter this year compared to the corresponding quarter last year. The Adprotech acquisition in April 2004 resulted in the company incurring contract research costs related to its Phase I/II rheumatoid arthritis study with Mirococept® which were not incurred in the current quarter.
General and administration expenses
General and administration expenses for the quarter ended September 30, 2005 were $847,172 compared to $1,358,337 for the corresponding quarter of the prior year, a decrease of $511,165. The decrease was due to reduced facilities costs and lower professional fees.
Amortization expenses
The Company recorded $774,733 in amortization expense during the quarter ended September 30, 2005 compared to $1,253,425 during the corresponding period of the prior year. The amortization amount has decreased due to write-downs in the acquired intangible asset balances taken during fiscal 2005.
Liquidity and Capital Resources
At September 30, 2005, the Company’s cash, cash equivalents and short-term investments totalled $15,376,480 compared to $15,860,738 at March 31, 2005. Working capital at September 30, 2005 was $14,037,423 compared to $15,057,698 at March 31, 2005. The decrease in working capital reflects the use of capital resources in the on-going operations of the business off-set by the proceeds realized from the corporate reorganization.
Cash and cash equivalents were $14,321,407 at September 30, 2005 compared to $15,650,334 at March 31, 2005 a decrease of $1,328,927. The decrease in cash and cash equivalents resulted from cash used to fund operating activities of $220,564, cash used in investing activities of $960,419 and cash used in financing activities of $147,944.
On October 27, 2005, Inflazyme disposed of its holdings in a wholly-owned subsidiary for proceeds of $3,625,580, net of commission expenses of $231,420. The total net proceeds realized after deferred expenses and commission, by Inflazyme, as a result of the disposal of the shares and the dilution gain is $3,515,681. This will be recorded in the quarter ending December 31, 2005.
Inflazyme believes that its working capital position at September 30, 2005, plus the proceeds realized from the disposal of the subsidiary, will enable the Company to fund operating expenses and capital requirements to the end of calendar 2007.
Conference Call
Inflazyme will host a conference call to discuss this announcement on Tuesday, November 8, 2005 at 6:00 a.m. Pacific Time/9:00 a.m. Eastern Time. To access the call, please dial 416-695-9753 or 1-877-888-3490. Audio replay of the conference call will be available until December 8, 2005 by calling 416-695-5275 or 1-888-509-0081.
About Inflazyme
Inflazyme Pharmaceuticals is a biopharmaceutical company pioneering medical breakthroughs to transform the lives of patients with respiratory and inflammatory diseases worldwide. Further information on the Company may be obtained from its website at www.inflazyme.com.
Statements in this news release other than historical information are forward-looking statements subject to risks and uncertainties. Actual results could differ materially depending on factors such as the availability of resources, the timing and effects of regulatory actions, the strength of competition, the outcome of litigation and the effectiveness of patent protection. Additional information regarding risks and uncertainties is set forth in the current Annual Information Form for Inflazyme on file with the Canadian Securities Commissions. The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this information.
Contact:
Tel: 1.800.315.3660/604.279.8511
Fax: 604.279.8711
E-mail: ir@inflazyme.com
Website: www.inflazyme.com
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