Neurochem reports results for fourth quarter and fiscal year 2006
Neurochem will host a conference call Thursday, February 22, 2007,
at 8:30 A.M. ET.
LAVAL, QC, Feb. 21 /CNW Telbec/ - Neurochem Inc. (NASDAQ: NRMX; TSX: NRM)
reported results for the fourth quarter and fiscal year ended December 31,
2006. The Company reported a net loss of $19,359,000 ($0.50 per share), for
the quarter, compared to the net loss of $15,628,000 ($0.42 per share)
recorded in the fourth quarter of 2005. For the year ended December 31, 2006,
the net loss amounted to $75,387,000 ($1.95 per share), compared to
$72,366,000 ($2.06 per share) for the same period in the previous year.
Research and development (R&D) expenses increased during the fourth quarter of
2006 to $16,095,000 ($58,624,000 for the year), compared to $11,688,000 for
the same period the previous year ($50,495,000 for the year). The increase in
R&D expenses is due to expenses incurred in relation to the development of
tramiprosate (ALZHEMED(TM)), primarily for the ongoing Phase III clinical
trial in Europe, as well as for the open-label extension of the North American
Phase III study. Tramiprosate (ALZHEMED(TM)) is the Company's investigational
product candidate for the treatment of Alzheimer's disease (AD). For the
quarter and the year ended December 31, 2006, (R&D) expenses also included
costs incurred to support the North American Phase III clinical trial for
tramiprosate (ALZHEMED(TM)), the ongoing open-label extension of the
eprodisate (KIACTA(TM)) Phase II/III study for amyloid A (AA) amyloidosis, as
well as ongoing drug discovery programs. The increase in the net loss for 2006
compared to 2005 is mainly due to higher net R&D expenses, after deducting
research tax credits and grants, and is partially offset by a decrease in
general and administrative expenses.
As at December 31, 2006, the Company had available cash, cash equivalents
and marketable securities of $56,821,000, compared to $71,091,000 at December
31, 2005. The decrease is primarily due to funds used in operations and is
partially offset by proceeds of $47,557,000 from the issue of convertible
notes in November 2006, and proceeds of $9,372,000 from the exercise of a
warrant by Picchio Pharma in February 2006. Neurochem also has entered into an
equity line of credit facility that provides the Company up to US$60,000,000
of funds in return for the issuance of common shares at a discount of 3.0% to
market price at the time of draw downs over the term, subject to the terms of
the agreement.
"Our programs are on track. We are pleased to have completed the North
American Phase III clinical trial for ALZHEMED(TM) on schedule. The study
progressed as planned and the top-line results are expected to be released in
the spring of 2007," said Dr. Francesco Bellini, Neurochem's Chairman,
President and CEO. "Our KIACTA(TM) program is also advancing well and we
remain confident about the outcome as we await a decision on marketing
approval from the U.S. Food and Drug Administration," he concluded.
Conference Call
Neurochem will host a conference call Thursday, February 22, 2007, at
8:30 A.M. Eastern Time. The telephone numbers to access the conference call
are 1-416-644-3422 or 1-800-595-8550. A replay of the call will be available
until Thursday, March 1, 2007. The telephone numbers to access the replay of
the call are 1-416-640-1917 or 1-877-289-8525, for which the passcode is
21219097#.
Consolidated Financial Results Highlights
The following discussion and analysis should be read in conjunction with
the Company's audited consolidated financial statements for the year ended
December 31, 2006, which have been prepared in accordance with Canadian
generally accepted accounting principles (GAAP). All dollar figures are
Canadian dollars, unless specified otherwise.
Results of operations
For the three-month period ended December 31, 2006, the net loss amounted
to $19,359,000 ($0.50 per share), compared to $15,628,000 ($0.42 per share)
for the corresponding period in the previous year. For the year ended December
31, 2006, the net loss amounted to $75,387,000 ($1.95 per share), compared to
$72,366,000 ($2.06 per share) for the same period in the previous year.
Revenue from collaboration agreement amounted to $567,000 for the current
quarter ($2,389,000 for the year), compared to $607,000 for the same period in
the previous year ($3,384,000 for the year). This revenue is earned under the
agreement with Centocor, Inc. (Centocor) in respect of eprodisate
(KIACTA(TM) - formerly FIBRILLEX(TM)), an oral investigational product
candidate for the treatment of AA amyloidosis. Revenue recognized is in
respect of the non-refundable upfront payment received from Centocor, which is
being amortized over the estimated period through to the anticipated
regulatory approval date of the investigational product candidate. The
estimated period is subject to change based on additional information that the
Company may receive periodically. The other portion of the upfront payment
received from Centocor (U.S.$6,000,000) has been classified as deferred
revenue and is not being amortized as earned revenue given that it is
potentially refundable. In the event that the Company receives an approval
letter issued by the U.S. Food and Drug Administration (FDA), the amount would
no longer be refundable and would be amortized as earned revenue. In August
2006, the Company received an approvable letter from the FDA for eprodisate
(KIACTA(TM)), following the Company's New Drug Application submitted in
February 2006. In this action letter, the FDA requested additional efficacy
information, as well as a safety update. The FDA asked for further
manufacturing and pharmacokinetic information, and acknowledged that a QT
cardiac status clinical study should be submitted as part of a Phase IV (post
approval) commitment. The FDA stated that the efficacy information would
probably need to be addressed by one or more additional clinical trials. As an
alternative, the FDA also stated that significant findings obtained from a
complete follow-up of patients in the existing study could be persuasive. A
response was submitted to the FDA in October, 2006. In November 2006, the FDA
advised Neurochem that the response submitted in October was complete, as it
responded to all of the items raised in the August approvable letter. The NDA
amendment in the U.S. is subject to a six-month review (Class II amendment) as
designated by the FDA, with a goal date for a decision on eprodisate
(KIACTA(TM)) on or about April 16, 2007. Neurochem is also seeking marketing
approval for eprodisate (KIACTA(TM)) for the treatment of AA amyloidosis in
the European Union. The Company was advised by the European Medicines Agency
(EMEA) in September 2006 that its Marketing Authorization Application is valid
and that the regulatory review has started.
Reimbursable costs revenue amounted to $203,000 for the current quarter
($808,000 for the year), compared to $230,000 for the same period in the
previous year ($1,057,000 for the year) and consists of costs reimbursable by
Centocor in respect of eprodisate (KIACTA(TM))-related activities. The Company
earns no margin on these reimbursable costs.
Research and development expenses, before research tax credits and
grants, amounted to $16,095,000 for the current quarter ($58,624,000 for the
year), compared to $11,688,000 for the same period in the previous year
($50,495,000 for the year). The increase is due to expenses incurred in
relation to the development of tramiprosate (ALZHEMED(TM)) primarily in
respect of the ongoing Phase III clinical trial in Europe and the North
American open-label extension of the Phase III study. Tramiprosate
(ALZHEMED(TM)) is the Company's investigational product candidate for the
treatment of Alzheimer's disease (AD). Tramiprosate (ALZHEMED(TM)) has
recently completed its 18-month North American Phase III clinical trial. This
clinical trial included 1,052 enrolled patients at 67 clinical centers across
the U.S. and Canada. The top-line results of the North American Phase III
clinical trial are expected to be released during the spring of 2007. All
patients who completed the North American Phase III clinical trial were
eligible to receive tramiprosate (ALZHEMED(TM)) in an 18-month open-label
extension of the Phase III study. The European Phase III clinical trial on
tramiprosate (ALZHEMED(TM)) was launched in September 2005 with 930
mild-to-moderate AD patients being expected to participate in the trial. This
study also has a duration of 18 months and the trial is being conducted at
approximately 70 clinical centers in ten European countries. As of December
31, 2006, 770 patients had been successfully screened in the European clinical
trial, of which 726 were randomized; the remaining 44 patients are expected to
be randomized and included in the clinical trial. Enrolment of patients
participating in the European clinical trial is expected to be completed in
the first half of 2007. Both Phase III clinical trials are multi-centre,
randomized, double-blind, placebo-controlled, three-armed, parallel-designed
trials. For the quarter and year ended December 31, 2006, research and
development expenses also included costs incurred to support the North
American Phase III clinical trial for tramiprosate (ALZHEMED(TM)), the ongoing
open-label extension of the eprodisate (KIACTA(TM)) Phase II/III study, as
well as ongoing drug discovery programs. The Company expects research and
development expenses to increase in the future as product candidates progress
through the stages of clinical development and as the Company continues to
invest in product research and development.
Research tax credits and grants amounted to $690,000 this quarter
($2,153,000 for the year), compared to $1,729,000 for the corresponding period
in the previous year ($4,393,000 for the year). Research tax credits represent
refundable tax credits earned under the Quebec Scientific Research and
Experimental Development Program for expenditures incurred in Quebec. The
decrease in the quarter is mainly due to grants of $1,149,000 received by the
Company in the fourth quarter of 2005, representing the final contribution
received under the Technology Partnerships Canada (TPC) Program for the
development of tramiprosate (ALZHEMED(TM)). The decrease in the year is also
attributable to additional tax credits recorded during the third quarter of
2005, claimed in respect of research and development taxable benefits on stock
options for 2005 and prior years.
Other research and development charges amounted to $1,277,000 for the
year ended December 31, 2006. During 2006, the Quebec taxation authorities
proposed retroactive changes in the application of the tax credit program that
would deny tax credits on eligible research and development taxable benefits
relating to stock options for 2005 and prior years. Accordingly, management
determined that the criteria for recognition of these credits was no longer
met and recorded a provision for these research tax credits.
General and administrative expenses totaled $3,200,000 for the current
quarter ($13,050,000 for the year), compared to $4,393,000 for the same
quarter in the previous year ($22,212,000 for the year). The decrease is
primarily attributable to a reduction in legal fees incurred by the Company
regarding the dispute with Immtech Pharmaceuticals, Inc. formerly known as
Immtech International, Inc. (Immtech). See Arbitral award below.
Arbitral award amounted to $2,089,000 (approximately U.S. $1.83 million)
for the year ended December 31, 2006 and relates to the dispute with Immtech.
In June 2006, the International Chamber of Commerce Court of Arbitration (ICC)
issued its Final Award (the Final Award) in the arbitration dispute involving
Neurochem and Immtech. The dispute concerned an agreement entered into between
Immtech and Neurochem in April 2002 (the Agreement) under which Neurochem had
the right to apply its proprietary anti-amyloid technology to test certain
compounds to be provided by Immtech. The ICC denied the majority of Immtech's
claims after an evidentiary hearing before the tribunal convened in accordance
with the rules of the ICC (the Tribunal) held in September 2005. In the Final
Award, the Tribunal held that Neurochem did not misappropriate any of
Immtech's compounds, information or trade secrets and that Immtech was not
entitled to any interest in, or ownership or assignment of, Neurochem's patent
applications. The Tribunal found that Neurochem had breached certain sections
of the Agreement, and Immtech was awarded U.S.$35,000 in damages, plus
interest thereon for a disputed progress payment under the Agreement. Immtech
was awarded only a portion of the ICC's administrative charges and arbitral
fees and costs incurred by the Tribunal which had been previously advanced by
Immtech, as well as a portion of Immtech's arbitration-related legal fees.
Those charges, fees and costs amounted to approximately U.S.$1.83 million.
Neurochem has made the payments required by the Final Award. The Tribunal
issued an Addendum to the Final Award dated September 21, 2006, in which it
denied Immtech's July 10, 2006, request to make a further determination with
respect to ownership of the Neurochem inventions and pending patent
applications, leaving its earlier ruling intact. On January 25, 2007, Immtech,
the University of North Carolina at Chapel Hill (UNC), and Georgia State
University Research Foundation, Inc. (together with UNC, the Universities)
filed with the Federal District Court for the Southern District of New York,
USA (the Court) a Notice of Voluntary Dismissal bringing to an end the
litigation action described below. The litigation between the parties had been
stayed since 2004 when the Court ordered Immtech to submit its claims to
arbitration as provided for in the underlying agreement between Immtech and
Neurochem, leaving the claims of the Universities to be decided after the
conclusion of the arbitration. In the litigation, the Universities asserted
that they had claims against Neurochem that were independent of the claims
asserted by Immtech in the arbitration. Neurochem's position is that the
Universities had no claims. On January 25, 2007, the plaintiffs voluntarily
dismissed their complaint against Neurochem without any payment, license,
business agreement, concession or compromise by Neurochem.
Reimbursable costs amounted to $203,000 for the current quarter ($808,000
for the year), compared to $230,000 for the same period in the previous year
($1,057,000 for the year), and consist of costs incurred on behalf of Centocor
in respect of eprodisate (KIACTA(TM))-related activities and reimbursable by
Centocor.
Stock-based compensation amounted to $1,052,000 for the current quarter
($4,048,000 for the year), compared to $865,000 for the corresponding quarter
in the previous year ($4,795,000 for the year). This expense relates to stock
options and stock-based incentives, whereby compensation cost is measured at
fair value at the date of grant and is expensed over the award's vesting
period. The increase in the quarter is due to new stock options granted during
the past year. The decrease in the year is primarily attributable to expenses
of $1,441,000 recorded in the second quarter of 2005 in relation to 140,000
common shares to be issued to the Chairman, President and Chief Executive
Officer, pursuant to an agreement signed in December 2004.
Depreciation, amortization and patent cost write-off amounted to $438,000
for the current quarter ($1,764,000 for the year), compared to $1,413,000 for
the same quarter in the previous year ($3,189,000 for the year). The decrease
is mainly attributable to the write-off of patent costs of $853,000 recorded
in the fourth quarter of 2005 in relation to non-core technology patents,
responsibility for which reverted to Parteq Research & Development
Innovations, the technology transfer office of Queen's University. The
decrease in the year is also attributable to the sale-leaseback transaction
entered into by the Company in November 2005 in respect of its facilities
located in Laval, Quebec. As a result of the transaction, the Company had no
depreciation expense for the buildings in 2006. In 2005, depreciation expense
on the buildings was recorded up to the date of the sale-leaseback
transaction.
Interest and bank charges amounted to $77,000 for the current quarter
($151,000 for the year), compared to $82,000 for the same quarter in the
previous year ($462,000 for the year). The decrease in the year is
attributable to the reimbursement in November 2005, in connection with the
sale-leaseback transaction, of the long-term debt previously contracted to
finance the acquisition of facilities in 2004.
Interest income amounted to $654,000 for the current quarter ($2,356,000
for the year), compared to $607,000 for the same quarter in the previous year
($2,082,000 for the year). The increase in the year is mainly attributable to
higher interest rates and is partially offset by lower average cash balances
during the current year, compared to the same period in the previous year.
Accretion expense amounted to $634,000 for the quarter and year ended
December 31, 2006, and mainly represents the imputed interest under GAAP on
the U.S.$42,085,000 aggregate principal amount of 6% convertible senior notes
issued in November 2006. Please refer to the section Liquidity and Capital
Resources for more details on the convertible notes.
Foreign exchange gain amounted to $277,000 for the current quarter (loss
of $318,000 for the year), compared to a gain of $255,000 for the same quarter
in the previous year (gain of $187,000 for the year). Foreign exchange gains
or losses arise on the movement in foreign exchange rates related to the
Company's net monetary assets held in foreign currencies, primarily U.S.
dollars. Foreign exchange losses recognized in the year 2006 are mainly
attributable to the strengthening of the Canadian dollar compared to the
U.S. dollar during the period.
Other income amounted to $322,000 for the current quarter ($1,529,000 for
the year), compared to $297,000 for the same quarter in the previous year
($935,000 for the year). Other income consists of non-operating revenue,
primarily sub-lease revenue. The increase in the year is mainly attributable
to recovery of prior years' property taxes recorded in the third quarter of
2006, in the amount of $332,000.
Share of loss in a company subject to significant influence amounted to
$558,000 for the current quarter ($2,768,000 for the year), compared to
$971,000 for the corresponding quarter in the previous year ($3,124,000 for
the year). Non-controlling interest amounted to $185,000 for the current
quarter ($909,000 for the year), compared to $289,000 for the corresponding
quarter in the previous year ($930,000 for the year). These items result from
the consolidation of the Company's interest in a holding company that owns
shares of Innodia Inc., for which Neurochem is the primary beneficiary. In
March 2006, the Company invested an additional amount of $1,660,000 in that
holding company in connection with a financing by Innodia Inc. As a result of
the transaction, the Company's indirect equity investment in Innodia Inc. is
approximately 23% of the issued and outstanding shares. Innodia Inc. is a
private development stage company engaged in developing novel drugs for the
treatment of type 2 diabetes and underlying diseases.
Liquidity and capital resources
As at December 31, 2006, the Company had available cash, cash equivalents
and marketable securities of $56,821,000, compared to $71,091,000 at December
31, 2005. The decrease is primarily due to funds used in operations and is
partially offset by proceeds received from the issue of convertible notes in
November 2006 and from the exercise of a warrant in February 2006 by a
subsidiary of Picchio Pharma Inc. (Picchio Pharma).
Proceeds from convertible notes amounted to $47,557,000 for the year
ended December 31, 2006 and are in respect of a private placement entered into
in November 2006 of U.S.$42,085,000 aggregate principal amount of 6%
convertible senior notes due in 2026, with a conversion premium of 20%. The
Company will pay interest on the notes until maturity on November 15, 2026,
subject to earlier repurchase, redemption or conversion.
In addition, in August 2006, the Company entered into a securities
purchase agreement in respect of an equity line of credit facility, with a
24-month term, that provides the Company up to U.S.$60,000,000 of funds in
return for the issuance of common shares at a discount of 3.0% to market price
at the time of draw downs over term. The agreement includes an obligation for
Neurochem to drawdown at least U.S.$25,000,000 over the two-year term of the
facility. As at December 31, 2006, the Company had not drawn any funds under
the equity line of credit.
On February 16, 2006, Picchio Pharma, the Company's largest shareholder,
exercised the warrant previously issued pursuant to a February 2003 private
placement which was otherwise scheduled to expire on February 18, 2006,
generating total proceeds to the Company of $9,372,000 and resulting in the
issuance of 1,200,000 common shares from treasury.
As at January 31, 2007, the Company had 38,777,872 common shares
outstanding, 220,000 common shares issuable to the Chief Executive Officer
upon the achievement of specified performance targets, 2,546,979 options
granted under the stock option plan and 2,134,471 shares potentially issuable
under the convertible notes, for a maximum of 43,679,322 common shares, on a
fully diluted basis.
The Company believes that its available cash and short-term investments,
expected interest income, potential funding from partnerships, research
collaborations and licensing agreements, potential proceeds from the equity
line of credit facility, research tax credits, grants, and access to capital
markets should be sufficient to finance the Company's operations and capital
needs during the ensuing year. However, in light of the uncertainties
associated with the regulatory approval process, clinical trial results, and
the Company's ability to secure additional licensing, partnership and/or other
agreements, further financing may be required to support the Company's
operations in the future.
Neurochem Inc.
Consolidated Financial Information(1)
(in thousands of Canadian dollars, except per share data)
Three-month period ended Year ended
December 31 December 31
-------------------------------------------------------------------------
Consolidated Statements
of Operations 2006 2005 2006 2005
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (unaudited) (audited) (audited)
Revenues:
Collaboration
agreement $567 $607 $2,389 $3,384
Reimbursable costs 203 230 808 1,057
-------------------------------------------------------------------------
770 837 3,197 4,441
-------------------------------------------------------------------------
Expenses (Income):
Research and
development 16,095 11,688 58,624 50,495
Research tax
credits and grants (690) (1,729) (2,153) (4,393)
Other research and
development charges - - 1,277 -
General and
administrative 3,200 4,393 13,050 22,212
Arbitral award - - 2,089 -
Reimbursable costs 203 230 808 1,057
Stock-based
compensation 1,052 865 4,048 4,795
Depreciation,
amortization and
patent cost
write-off 438 1,413 1,764 3,189
Interest and
bank charges 77 82 151 462
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20,375 16,942 79,658 77,817
-------------------------------------------------------------------------
Net loss before
undernoted items: (19,605) (16,105) (76,461) (73,376)
Interest income 654 607 2,356 2,082
Accretion expense (634) - (634) -
Foreign exchange
gain (loss) 277 255 (318) 187
Other income 322 297 1,529 935
Share of loss in
a company subject
to significant
influence (558) (971) (2,768) (3,124)
Non-controlling
interest 185 289 909 930
-------------------------------------------------------------------------
Net loss ($19,359) ($15,628) ($75,387) ($72,366)
-------------------------------------------------------------------------
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Net loss per share:
Basic ($0.50) ($0.42) ($1.95) ($2.06)
Diluted ($0.50) ($0.42) ($1.95) ($2.06)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted average
number of common
shares outstanding:
Basic 38,845,937 37,386,296 38,654,063 35,104,342
Diluted 41,291,523 37,905,241 40,866,313 36,485,971
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At At
December 31 December 31
Consolidated Balance Sheets 2006 2005
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(audited) (audited)
Cash, cash equivalents and marketable
securities $56,821 $71,091
Other current assets 12,191 13,298
-------------------------------------------------------------------------
Total current assets 69,012 84,389
Capital assets and patents 10,479 10,327
Other long-term assets 3,720 2,230
-------------------------------------------------------------------------
Total assets $83,211 $96,946
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Current liabilities $26,078 $17,420
Long-term liabilities 58,288 28,745
Non-controlling interest 845 509
Shareholders' equity (deficiency) (2,000) 50,272
-------------------------------------------------------------------------
Total liabilities and shareholders' equity $83,211 $96,946
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Condensed from the Company's consolidated financial statements.
About Neurochem
Neurochem Inc. is focused on the development and commercialization of
innovative therapeutics to address critical unmet medical needs. Eprodisate
(KIACTA(TM) - formerly FIBRILLEX(TM)) is currently being developed for the
treatment of Amyloid A (AA) amyloidosis, and is under regulatory review for
marketing approval by the US Food and Drug Administration and European
Medicines Agency. Tramiprosate (ALZHEMED(TM)), for the treatment of
Alzheimer's disease, has completed a Phase III clinical trial in North America
and is currently in a Phase III clinical trial in Europe, while tramiprosate
(CEREBRIL(TM)), for the prevention of Hemorrhagic Stroke caused by Cerebral
Amyloid Angiopathy, has completed a Phase IIa clinical trial.
To Contact Neurochem
For additional information on Neurochem and its drug development
programs, please call the North American toll-free number 1-877-680-4500 or
visit our Web Site at: www.neurochem.com.
Certain statements contained in this news release, other than statements
of fact that are independently verifiable at the date hereof, may constitute
forward-looking statements. Such statements, based as they are on the current
expectations of management, inherently involve numerous risks and
uncertainties, known and unknown, many of which are beyond Neurochem's
control. Such risks include but are not limited to: the impact of general
economic conditions, general conditions in the pharmaceutical industry,
changes in the regulatory environment in the jurisdictions in which Neurochem
does business, stock market volatility, fluctuations in costs, and changes to
the competitive environment due to consolidation, that actual results may vary
once the final and quality-controlled verification of data and analyses has
been completed, as well as other risks disclosed in public filings of
Neurochem. Consequently, actual future results may differ materially from the
anticipated results expressed in the forward-looking statements. The reader
should not place undue reliance, if any, on the forward-looking statements
included in this news release. These statements speak only as of the date made
and Neurochem is under no obligation and disavows any intention to update or
revise such statements as a result of any event, circumstances or otherwise.
Please see the Annual Information Form for further risk factors that might
affect the Company and its business.
For further information: please contact: Lise Hébert, Ph.D., Vice President, Corporate Communications, (450) 680-4572, lhebert@neurochem.com
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