BELLUS Health Reports Results for Third Quarter of Fiscal 2008 and on EMEA Update
LAVAL, QC, Nov. 10 /CNW Telbec/ - BELLUS Health Inc. (NASDAQ: BLUS; TSX:
BLU) reports results for the third quarter ended September 30, 2008. For the
three-month period ended September 30, 2008, the net loss amounted to
$11,095,000 ($0.22 per share), compared to $13,889,000 ($0.29 per share) for
the corresponding period the previous year. For the nine-month period ended
September 30, 2008, the net loss amounted to $36,703,000 ($0.74 per share),
compared to $65,389,000 ($1.54 per share) for the same period last year.
The net loss for the current third quarter included net sales of $153,000
which represents one month of sales of VIVIMIND(TM), the Company's first
natural health brand launched in Canada and on the Internet on September 2,
2008. The net loss for the nine-month period ended September 30, 2007,
included a non-cash accretion expense under Canadian GAAP of $10,430,000
relating to the $40 million 5% senior subordinated convertible notes issued in
May 2007.
Research and development expenses, before research tax credits and
grants, amounted to $5,208,000 for the current quarter ($21,111,000 for the
nine-month period), compared to $11,964,000 for the same period the previous
year ($43,533,000 for the nine-month period). The decrease in the current
periods compared to the same periods the previous year is mainly attributable
to a reduction in expenses incurred in relation to the development of
tramiprosate (ALZHEMED(TM); homotaurine) for the treatment of Alzheimer's
disease, following the Company's decision in November 2007 to terminate the
tramiprosate (ALZHEMED(TM)) pharmaceutical drug development program.
As at September 30, 2008, the Company had available cash, cash
equivalents and marketable securities of $20,595,000, compared to $58,672,000
at December 31, 2007. The decrease is primarily due to funds used in operating
activities.
Eprodisate (KIACTA(TM)) for the treatment of Amyloid A (AA) amyloidosis
With respect to eprodisate (KIACTA(TM)), the Company submitted a proposed
protocol for the second Phase III clinical trial for consideration by the U.S.
Food and Drug Administration (FDA) and the European Medicines Agency (EMEA).
EMEA has agreed with the study design including the new primary endpoint
focusing on renal events and excluding death. In addition both the FDA and the
EMEA have recognized that this second clinical trial will be confirmatory;
hence a p-value of less than 0.05, rather than the p-value of less than 0.01
for the previous Phase II/III trial, should be sufficient to gain approval of
eprodisate (KIACTA(TM)) for the treatment of AA Amyloidosis,. A follow-up
meeting with the FDA to finalize the study details should take place in the
very near future.
Consolidated Financial Results Highlights
BELLUS Health Inc., formerly known as Neurochem Inc., (BELLUS Health or
the Company) is a global health company focused on the development and
commercialization of products to provide innovative health solutions to
address critical unmet needs.
The shareholders of Neurochem Inc. approved the change of its name to
"BELLUS Health Inc." at the annual and special shareholders' meeting on April
15, 2008. The new stock ticker symbols of the Company are BLUS (NASDAQ) and
BLU (TSX).
The Management's Discussion and Analysis (MD&A) provides a review of the
Company's operations, performance and financial position for the three- and
nine-month periods ended September 30, 2008, compared with the three- and
nine-month periods ended September 30, 2007. It should be read in conjunction
with the Company's unaudited consolidated financial statements for the periods
ended September 30, 2008, as well as the Company's audited consolidated
financial statements for the year ended December 31, 2007, which have been
prepared in accordance with Canadian Generally Accepted Accounting Principles
(GAAP). For discussion regarding related-party transactions, contractual
obligations, disclosure controls and procedures, internal control over
financial reporting, critical accounting policies and estimates, recent
accounting pronouncements, and risks and uncertainties, refer to the Annual
Report and the Annual Information Form for the year ended December 31, 2007,
as well as registration statements and other public filings, which are
available on SEDAR at www.sedar.com or on EDGAR at www.sec.gov. This document
contains forward-looking statements, which are qualified by reference to, and
should be read together with the "Forward-Looking Statements" cautionary
notice which can be found at the end of this MD&A. All currency figures
reported in this document, including comparative figures, are reported in US
dollars, unless otherwise specified. This MD&A was prepared by Management with
information available as at November 10, 2008.
Results of operations
For the three-month period ended September 30, 2008, the net loss
amounted to $11,095,000 ($0.22 per share), compared to $13,889,000 ($0.29 per
share) for the corresponding period the previous year. For the nine-month
period ended September 30, 2008, the net loss amounted to $36,703,000 ($0.74
per share), compared to $65,389,000 ($1.54 per share) for the same period last
year. The net loss for nine-month period ended September 30, 2007, included a
non-cash accretion expense under Canadian GAAP of $10,430,000 relating to the
$40 million 5% senior subordinated convertible notes issued in May 2007.
Net sales amounted to $153,000 for the current quarter and nine-month
period and represent the initial sales of VIVIMIND(TM), the Company's first
natural health brand launched in Canada and on the Internet on September 2,
2008. VIVIMIND(TM), to protect memory function, is based on the naturally
occurring ingredient, homotaurine, found in certain seaweed. Targeted at
healthy baby boomers, this patented natural health brand is expected to
address a largely underserved self-care market by providing a scientific,
evidence-based health solution. VIVIMIND(TM) is the direct result of over 15
years of significant scientific research, including clinical testing in over
2,000 individuals. Post-hoc analysis of the North American Phase III clinical
trial of homotaurine (VIVIMIND(TM)) involving 1,052 Alzheimer's disease (AD)
patients showed a positive impact on cognitive function and anatomically it
helped to reduce the volume loss of an important area of the brain responsible
for memory. VIVIMIND(TM) is commercialized by OVOS Natural Health Inc., a
wholly owned subsidiary of BELLUS Health. The Company's strategy includes
revenue generation in the short-to-medium-term through the sale of natural
health products and in the medium-to-long-term through development of a
pipeline of pharmaceutical products.
Revenue from collaboration agreement amounted to nil for the current
quarter ($205,000 for the nine-month period), compared to $228,000 for the
same period the previous year ($913,000 for the nine-month period). This
revenue was earned under the agreement with Centocor, Inc. (Centocor) in
respect of eprodisate (KIACTA(TM)), an oral investigational product candidate
for the treatment of Amyloid A (AA) amyloidosis. During the first quarter of
2008, the Company announced its decision to continue the drug development
program for eprodisate (KIACTA(TM)) and that it will initiate a second Phase
III clinical trial for eprodisate (KIACTA(TM)) in close cooperation with the
US Food and Drug Administration (FDA) and the European Medicines Agency
(EMEA). The Company expects to file the Investigational New Drug application
(IND) in the fourth quarter of 2008, with approximately 190 patients to be
followed for a period of 24 months. As part of the decision, the Company
withdrew its marketing applications for eprodisate (KIACTA(TM)) in the US, the
European Union and Switzerland. On April 15, 2008, the Company announced that
it had regained full ownership rights and control of eprodisate (KIACTA(TM))
from Centocor. During the second quarter of 2008, the refundable portion
($6,000,000) of the upfront payment received from Centocor in 2005 was
refunded to Centocor.
Reimbursable costs revenue amounted to nil for the current quarter
($69,000 for the nine-month period), compared to $73,000 for the same period
the previous year ($332,000 for the nine-month period), and, which for the
current nine-month period and the comparative periods the previous year,
consisted of costs reimbursable by Centocor in respect of eprodisate
(KIACTA(TM))-related activities. As the Company regained full ownership of
this program from Centocor, these costs are no longer reimbursable by
Centocor.
Research and development expenses, before research tax credits and
grants, amounted to $5,208,000 for the current quarter ($21,111,000 for the
nine-month period), compared to $11,964,000 for the same period the previous
year ($43,533,000 for the nine-month period). The decrease in the current
periods compared to the same periods the previous year is mainly attributable
to a reduction in expenses incurred in relation to the development of
tramiprosate (ALZHEMED(TM); homotaurine) for the treatment of AD, following
the Company's decision in November 2007 to terminate the tramiprosate
(ALZHEMED(TM)) pharmaceutical drug development program.
The Company is also developing NC-503 (eprodisate) for the treatment of
Type II diabetes and certain other features of metabolic syndrome. A Phase II
clinical trial in diabetic patients was initiated in Canada and patient
recruitment and randomization commenced during the second quarter of 2008. The
study is a randomized 26-week, double-blind, placebo-controlled study. Interim
results are anticipated in early 2009. Results from a validated rat model of
diabetes and metabolic syndrome have demonstrated that NC-503 decreases
glycemic levels in obese diabetic Zucker rats, when compared to the control
group, while preserving 40% more pancreatic islet cells (insulin secreting
cells) as compared to the control group, and showed some protective effect on
renal function.
Research tax credits and grants amounted to $264,000 for the current
quarter ($1,128,000 for the nine-month period), compared to $434,000 for the
corresponding period the previous year ($1,434,000 for the nine-month period).
Research tax credits represent refundable tax credits earned under the Quebec
Scientific Research and Experimental Development Program for expenditures
incurred in Quebec. The decrease is mainly attributable to lower research and
development expenses incurred in Quebec during the current periods which are
eligible for refundable tax credits.
General and administrative expenses totaled $2,987,000 for the current
quarter ($8,513,000 for the nine-month period), compared to $2,559,000 for the
same quarter the previous year ($9,184,000 for the nine-month period). The
increase in the quarter is mainly due to expenses incurred in relation to the
Company's natural health product activities.
Selling and marketing expenses amounted to $1,424,000 for the current
quarter ($3,459,000 for the nine-month period) and represent expenses incurred
in relation to the commercialization of the Company's natural health brand,
VIVIMIND(TM), which was launched during the current quarter.
Reimbursable costs amounted to nil for the current quarter ($69,000 for
the nine-month period), compared to $73,000 for the same period the previous
year ($332,000 for the nine-month period), and, which for the current
nine-month period and the comparative periods the previous year, consisted of
costs incurred on behalf of Centocor in respect of eprodisate
(KIACTA(TM))-related activities and reimbursable by Centocor. As the Company
regained full ownership of this program from Centocor, these costs are no
longer reimbursable by Centocor.
Stock-based compensation amounted to $439,000 for the current quarter
($2,298,000 for the nine-month period), compared to $998,000 for the
corresponding quarter the previous year ($2,854,000 for the nine-month
period). This expense relates to stock options and stock-based incentives,
whereby compensation cost in relation to stock options is measured at fair
value at the date of grant and is expensed over the award's vesting period.
The decrease is mainly due to cancellation of stock options as well as
adjustments in relation to forfeitures of stock options during the current
quarter.
Interest income amounted to $145,000 for the current quarter ($856,000
for the nine-month period), compared to $1,021,000 for the same quarter the
previous year ($2,585,000 for the nine-month period). The decrease is mainly
attributable to lower average cash balances and lower interest rates during
the current periods, compared to the same periods in the previous year.
Accretion expense amounted to $1,243,000 for the current quarter
($3,675,000 for the nine-month period), compared to $1,452,000 for the same
quarter the previous year ($14,568,000 for the nine-month period). Accretion
expense represents the imputed interest under GAAP on the $42,085,000
aggregate principal amount of 6% convertible senior notes issued in November
2006 (2006 Notes), as well as on the $40,000,000 6% senior convertible notes
(Senior Notes) and $40,000,000 5% senior subordinated convertible notes
(Junior Notes) issued in May 2007. The Company accretes the carrying values of
the convertible notes to their face value through a charge to earnings over
their expected life of 60 months, 54 months and 1 month, respectively. The
decrease in the current nine-month period, compared to the same period the
previous year is mainly due to accretion expenses of $10,430,000 recorded
during the second quarter of 2007 on the Junior Notes, which were fully
converted during that quarter. As of September 30, 2008, $42,085,000 of the
2006 Notes remains outstanding as well as $4,500,000 of the Senior Notes.
Refer to the Liquidity and Capital Resources section for more details on the
convertible notes.
Change in fair value of embedded derivatives amounted to a gain of
$45,000 for the current quarter (gain of $145,000 for the nine-month period)
compared to a gain of $972,000 for the same quarter the previous year (loss of
$898,000 for the nine-month period) and represents the variation in the fair
value of the embedded derivatives, including the embedded derivative related
to the $80,000,000 aggregate principal amount of Senior and Junior Notes
issued in May 2007.
Write-down of third party Asset-Backed Commercial Paper amounted to nil
for the current quarter ($375,000 for the nine-month period) and represents an
additional provision recorded on the valuation of asset-backed commercial
paper held by the Company. See Liquidity and Capital Resources section for
more details.
Foreign exchange loss amounted to $216,000 for the current quarter (gain
of $644,000 for the nine-month period), compared to a gain of $565,000 for the
same quarter the previous year (gain of $1,184,000 for the nine-month period).
Foreign exchange gains or losses arise on the movement in foreign exchange
rates in relation to the Company's net monetary assets denominated in
currencies other than US dollars, which is its functional and reporting
currency, and consists primarily of monetary assets and liabilities
denominated in Canadian dollars. Foreign exchange gains for the current
nine-month period include $924,000 of gain recognized on the reclassification,
during the first quarter of 2008, from deferred revenue (non-monetary
liability) to accrued liability (monetary liability) of the refundable amount
($6,000,000) due to Centocor, following the recovery by the Company of
ownership rights and control of eprodisate (KIACTA(TM)).
Other income amounted to $276,000 for the current quarter ($810,000 for
the nine-month period), compared to $270,000 for the same quarter the previous
year ($987,000 for the nine-month period). Other income consists of
non-operating revenue, primarily sub-lease revenue.
Liquidity and capital resources
As at September 30, 2008, the Company had available cash, cash
equivalents and marketable securities of $20,595,000, compared to $58,672,000
at December 31, 2007. The decrease is primarily due to funds used in operating
activities. The Company also has short-term bank indebtedness of $8,466,000,
including $5,963,000 incurred in relation to the refund to Centocor. As
previously discussed, during the second quarter of 2008, the Company refunded
the refundable portion of the upfront payment received from Centocor in 2005.
Since this obligation was secured by Asset-Backed Commercial Paper (ABCP), the
market for which is currently being restructured as discussed later in this
section, the Company entered into a credit facility, with the chartered bank
that sold the Company the ABCP, in order to finance the repayment. Bank
indebtedness bears interest at the bank's prime rate minus 1%. This bank
indebtedness is expected to be refinanced by long term bank facilities upon
the successful restructuring of the ABCP discussed below.
On July 17, 2008, the Company acquired 100% of the remainder of the
outstanding capital stock that it did not already own of Innodia Inc.
(Innodia), a private company engaged in developing compounds for the treatment
of diabetes, obesity and related metabolic conditions and diseases. Prior to
the acquisition, the Company indirectly held 23% of Innodia's capital stock.
The Company acquired all of the business of Innodia including the intellectual
property assets related to its diabetes and obesity projects and now holds the
exclusive rights to BELLUS Health's diabetes platform and all related
compounds. The purchase price, in the amount of $1,278,000, was settled by the
issuance from treasury of 1,185,797 common shares. Additional consideration
consisting of either treasury shares or, at the option of the Company, cash is
conditionally payable on the first anniversary of the closing of the
transaction, based upon the determination of the value of certain assets at
that time.
On May 2, 2007, the Company issued $80,000,000 aggregate principal amount
of convertible notes, consisting of $40,000,000 6% senior convertible notes
due in 2027 and $40,000,000 5% senior subordinated convertible notes due in
2012. The 6% senior convertible notes have an initial conversion price equal
to the lesser of $12.68 or the 5-day weighted average trading price of the
common shares preceding any conversion, subject to adjustments in certain
circumstances. The Company will pay interest on the 6% senior convertible
notes until maturity on May 2, 2027, subject to earlier repurchase, redemption
or conversion. The 5% senior subordinated convertible notes were subject to
mandatory conversion into common shares under certain circumstances. In
connection with this transaction, the Company issued warrants to purchase an
aggregate of 2,250,645 common shares until May 2, 2012, at an initial purchase
price of $12.68 per share, subject to adjustments in certain circumstances.
During the year ended December 31, 2007, $35,500,000 of the 6% senior
convertible notes were converted into 5,619,321 common shares and the totality
of the 5% senior subordinated convertible notes were converted into 4,444,449
common shares.
On November 9, 2006, the Company issued $42,085,000 aggregate principal
amount of 6% convertible senior notes (the 2006 Notes) due in 2026. The 2006
Notes are convertible into common shares based on an initial conversion rate
of 50.7181 shares per $1,000 principal amount of 2006 Notes ($19.72 per
share). The 2006 Notes are convertible, at the option of the holder under
certain conditions. On October 15, 2009, the conversion rate of the 2006 Notes
will be adjusted to an amount equal to a fraction whose numerator is $1,000
and whose denominator is the average of the closing sale prices of the common
shares during the 20 trading days immediately preceding, and including, the
third business day immediately preceding October 15, 2009. However, no such
adjustment will be made if the adjustment will reduce the conversion rate. On
and after November 15, 2009, the conversion rate will be readjusted back to
the conversion rate that was in effect prior to October 15, 2009. On or after
November 15, 2011, the Company may redeem the 2006 Notes, in whole or in part,
at a redemption price in cash equal to 100% of the principal amount of the
2006 Notes, plus any accrued and unpaid interest. On November 15, 2011, 2016
and 2021, the holders of the 2006 Notes may require the Company to purchase
all or a portion of their 2006 Notes at a purchase price in cash equal to 100%
of the principal amount of the 2006 Notes to be purchased, plus any accrued
and unpaid interest. The Company, at its discretion, may elect to settle the
principal amount owing upon redemption or conversion in cash, shares or a
combination thereof. As at September 30, 2008, the totality of the 2006 Notes
remained outstanding. The terms of the 2006 Notes require the continued
listing of the Company's shares on a recognized American Stock Exchange;
failure to meet this requirement may be an event of default which may result
in the convertible notes being immediately due and payable. (see subsequent
event). For additional information, refer to the Annual report and Annual
Information Form for the year ended December 31, 2007, as well as other
publicly filed documents.
In August 2006, the Company entered into a securities purchase agreement
in respect of an equity line of credit facility (ELOC) with Cityplatz Limited
(Cityplatz) that provides the Company up to $60,000,000 of funds in return for
the issuance of common shares. The ELOC facility was amended in February 2008
and the term was extended to February 2010. Under the amended ELOC facility,
the maximum amount of each drawdown is limited to the lower of $6,000,000 or
12.5% of the volume-weighted price calculation of the common shares at the
time of drawdown. The common shares will be issued at a discount of 4.0% to
market price if the volume-weighted average price (VWAP) per share is $6 or
higher and 7.0% if the VWAP per share is lower than $6 at the time of
drawdown. A placement fee equal to 2.4% of gross proceeds will be payable to
the placement agent. The ELOC shall terminate if (i) the Company's common
shares are de-listed from NASDAQ unless the common shares are listed at such
time on another trading market specified in the agreement and such de-listing
is in connection with a subsequent listing on another trading market specified
in the agreement (see subsequent event), (ii) the Company is subject to a
change of control transaction or (iii) the Company suffers a material adverse
effect which cannot be cured prior to the next drawdown notice. The Company
may terminate the securities purchase agreement (i) if Cityplatz fails to fund
a properly notified drawdown within five trading days of the end of the
applicable settlement period or (ii) after it has drawn down at least
$15,000,000 under the ELOC. As at September 30, 2008, the Company had not
drawn any funds under the ELOC. As at September 30, 2008, $3,982,000 of funds
were potentially eligible for drawdown.
As at September 30, 2008, the Company held $13,219,000 in principal value
of third party ABCP, including $6,606,000 of third party ABCP acquired as part
of the Innodia acquisition. These investments were due to mature in August
2007, but, as a result of a disruption in the credit markets, particularly in
the ABCP market, they did not settle on maturity and currently remain
outstanding. There are currently no market quotations available for these
ABCP. On April 25, 2008, the restructuring plan announced by the Pan-Canadian
Investors Committee (the Committee) in December 2007 was approved by the ABCP
holders and is expected to be completed shortly, resulting in the conversion
of the ABCP into longer term financial instruments. As at September 30, 2008,
the Company estimated the fair value of these ABCP at approximately
$9,716,000, of which $546,000 is presented as part of Restricted Cash, as it
is pledged to a bank as collateral for letters of credit issued in connection
with lease agreements. In connection with its fair value estimations, the
Company recorded a write-down of $1,184,000 for the year ended December 31,
2007, and an additional write-down of $375,000 during the quarter ended March
31, 2008, to recognize impairment losses related to these investments. During
the current quarter, no additional write-down was recorded; although there
were certain changes in factors and assumptions, the net result did not affect
the fair value estimation. The Company estimated the fair value of the ABCP
using a probability weighted discounted cash flow approach, based on its best
estimates of the period over which the assets are going to generate cash flows
ranging from five to 28 years based on the proposed restructuring, the coupon
interest rate, the discount rate to apply to the net cash flows anticipated to
be received commensurate with the return on comparably rated notes in
accordance with the risk factors of the different investments and other
qualitative factors. This estimate of the fair value of the ABCP is not
supported by observable market prices or rates, therefore is subject to
uncertainty, including, but not limited to, the successful implementation of
the restructuring plan being considered, the estimated amounts to be
recovered, the yield of the substitute financial instruments and the timing of
future cash flows. The resolution of these uncertainties could be such that
the ultimate fair value of these investments may vary from the Company's
current estimate. Changes in the near term could require changes in the
recognized amount of these assets.
As at September 30, 2008, the Company's workforce comprised 103 employees
compared to 172 employees as at September 30, 2007. During the current period,
the Company reduced further its research activities and associated workforce
to focus on its key projects.
As at October 31, 2008, the Company had 50,043,892 common shares
outstanding, 220,000 common shares issuable to the Chief Executive Officer
upon the achievement of specified performance targets, 4,552,856 options
granted under the stock option plan, 2,884,471 shares currently issuable under
the convertible notes, and 2,250,645 warrants outstanding, for a total of
59,951,864 common shares, on a fully diluted basis.
To date, the Company has financed its operations primarily through public
offerings of common shares, private placements, issuance of convertible notes,
as well as a sale-leaseback transaction, research tax credits, collaboration
and research contracts, interest and other income. The future profitability of
the Company is dependent upon such factors as the success of the clinical
trials, the approval by regulatory authorities of products developed by the
Company, the ability of the Company to successfully market, sell and
distribute products, including its natural health products, and the ability of
the Company to obtain the necessary financing to complete its projects.
The Company has incurred significant operating losses and negative cash
outflows from operations since inception and has an accumulated deficit of
$354,957,000. As at September 30, 2008, the Company's committed cash
obligations and expected level of expenses for the upcoming twelve months
exceed the committed sources of funds and the Company's cash and cash
equivalents on hand. The Company received a NASDAQ Staff Deficiency Letter;
failure to maintain a listing on a recognized American stock exchange may
trigger a default on the convertible notes and the termination of the ELOC.
The Company is actively considering various alternatives to secure additional
financing. Picchio Pharma and its related parties have expressed their
commitment to participate and to purchase at least 30% of the next financing.
No definitive agreements with potential investors have been reached yet and
there can be no assurance that such agreements will be reached. The ability of
the Company to continue as a going concern is dependent upon raising
additional financing through borrowings, share issuances, receiving funds
through collaborative research contracts or product licensing agreements, and
ultimately, from obtaining regulatory approval in various jurisdictions, to
market and sell its product candidates and achieving future profitable
operations. The outcome of these matters is dependent on a number of items
outside of the Company's control. As a result, there is significant
uncertainty as to whether the Company will have the ability to continue as a
going concern beyond the first quarter of 2009.
The consolidated financial statements have been prepared on a going
concern basis, which assumes the Company will continue its operations in the
foreseeable future and will be able to realize its assets and discharge its
liabilities and commitments in the ordinary course of business. These
financial statements do not include any adjustments to the amounts and
classification of assets and liabilities that may be necessary should the
Company not be successful in its effort to obtain additional financing or be
able to remain listed on a recognized American exchange, to receive
significant funds on signing collaborative research contracts or by
outlicensing its products or making significant product sales.
Subsequent event
The Company received a NASDAQ Staff Deficiency Letter dated October 10,
2008, stating that, for 10 consecutive trading days, the market value of the
Company's listed securities has been below the minimum $50,000,000 requirement
for continued inclusion on The NASDAQ's Global Market. The Company believes
that the recent decline in its market value is due to the general pressure on
equity markets worldwide. The Company has 30 calendar days, or until November
10, 2008, to regain compliance to which BELLUS Health will strive. If the
market value of the Company's common stock is $50,000,000 or more for a
minimum of 10 consecutive business days at any time prior to November 10,
2008, NASDAQ may determine that the Company has regained compliance with the
applicable listing requirements. If compliance with the Rules cannot be
demonstrated by November 10, 2008, NASDAQ will provide written notification
that the Company's securities will be delisted, at which time the Company may
appeal the determination to a Listing Qualifications Panel, requesting
additional time to regain compliance. Pending this appeal, the common stock
would continue to trade on NASDAQ. Among the alternatives the Company is
considering, is the submission of a transfer application to transfer the
Company's listed securities to The NASDAQ Capital Market Tier if it cannot
regain compliance with the requirements of NASDAQ's Global Market Tier within
the appeals period or any extended time granted by NASDAQ. There can be no
assurance that NASDAQ will approve the Company's transfer application. The
Company's common stock is also listed on the Toronto Stock Exchange (TSX) and
such listing is not affected by the notice received from NASDAQ. The market
value of the Company's common stock has not been $50,000,000 or more for a
minimum of 10 consecutive business days during the period beginning on October
10 and ending on November 10, 2008. Accordingly, the Company anticipates that
it will receive written notification from NASDAQ that its securities will be
delisted from its Global Tier Market, and expects to file a notice of appeal
in response.
Change in functional and reporting currency
Effective July 1, 2007, the Company adopted the US dollar as its
functional and reporting currency, as a significant portion of its revenues,
expenses, assets, liabilities and financing are denominated in US dollars.
Prior to that date, the Company's operations were measured in Canadian dollars
and the consolidated financial statements were expressed in Canadian dollars.
The Company followed the recommendations of the Emerging Issues Committee
(EIC) of the Canadian Institute of Chartered Accountants (CICA), set out in
EIC-130, "Translation method when the reporting currency differs from the
measurement currency or there is a change in the reporting currency". In
accordance with EIC-130, assets and liabilities as of June 30, 2007 were
translated in US dollars using the exchange rate in effect on that date;
revenues, expenses and cash flows were translated at the average rate in
effect during the six-month period ended June 30, 2007 and equity transactions
were translated at historical rates. Any exchange differences resulting from
the translation were included in accumulated other comprehensive income
presented in shareholders' equity. Financial statements presented after June
30, 2007, are measured and presented in US dollars.
Forward-looking statements
Certain statements included in this Management's Discussion and Analysis
may constitute "forward-looking statements" within the meaning of the US
Private Securities Litigation Reform Act of 1995 and Canadian securities
legislation and regulations, and are subject to important risks, uncertainties
and assumptions. This forward-looking information includes amongst others,
information with respect to the Company's objectives and the strategies to
achieve these objectives, as well as information with respect to the Company's
beliefs, plans, expectations, anticipations, estimates and intentions.
Forward-looking statements generally can be identified by the use of
conditional or forward-looking terminology such as "may", "will", "expect",
"intend", "estimate", "anticipate", "plan", "foresee", "believe" or "continue"
or the negatives of these terms or variations of them or similar terminology.
Refer to the Company's filings with the Canadian securities regulatory
authorities and the US Securities and Exchange Commission, for a discussion of
the various factors that may affect the Company's future results. Such risks
include but are not limited to: the impact of general economic conditions,
general conditions in the pharmaceutical and/or natural health products
industry, changes in the regulatory environment in the jurisdictions in which
the BELLUS Health Group does business, stock market volatility, fluctuations
in costs, and changes to the competitive environment, that actual results may
vary once the final and quality-controlled verification of data and analyses
has been completed. The results or events predicted in forward-looking
information may differ materially from actual results or events. The Company
believes that expectations represented by forward-looking statements are
reasonable, yet there can be no assurance that such expectations will prove to
be correct. Unless otherwise stated, the forward-looking statements contained
in this report are made as of the date of this report, and the Company does
not undertake any obligation to update publicly or to revise any of the
included forward-looking statements, whether as a result of new information,
future events or otherwise, unless required by applicable legislation or
regulation. The forward-looking statements contained in this report are
expressly qualified by this cautionary statement.
BELLUS Health Inc.
Consolidated Financial Information (1)
(in thousands of US dollars, except per share data)
Three-month Nine-month
period ended period ended
September 30 September 30
-------------------------------------------------------------------------
Consolidated
Statements
of Operations 2008 2007 2008 2007
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues:
Gross sales $ 206 $ - $ 206 $ -
Discounts, returns
and cooperative
promotional
incentives (53) - (53) -
-------------------------------------------------------------------------
Net sales 153 - 153 -
Collaboration
agreement - 228 205 913
Reimbursable costs - 73 69 332
-------------------------------------------------------------------------
153 301 427 1,245
-------------------------------------------------------------------------
Expenses:
Research and
development 5,208 11,964 21,111 43,533
Research tax
credits and
grants (264) (434) (1,128) (1,434)
-------------------------------------------------------------------------
4,944 11,530 19,983 42,099
General and
administrative 2,987 2,559 8,513 9,184
Marketing and
selling 1,424 - 3,459 -
Reimbursable costs - 73 69 332
Stock-based
compensation 439 998 2,298 2,854
Depreciation,
amortization and
patent cost
write-off 352 380 1,032 1,087
-------------------------------------------------------------------------
10,146 15,540 35,354 55,556
-------------------------------------------------------------------------
Loss before
undernoted items (9,993) (15,239) (34,927) (54,311)
Interest income 145 1,021 856 2,585
Interest and bank
charges (109) (26) (181) (150)
Accretion expense (1,243) (1,452) (3,675) (14,568)
Change in fair
value of embedded
derivatives 45 972 145 (898)
Write-down of
third party
asset-backed
commercial paper - - (375) -
Foreign exchange
gain (loss) (216) 565 644 1,184
Other income 276 270 810 987
Share of loss in a
company subject
to significant
influence - - - (327)
Non-controlling
interest - - - 109
-------------------------------------------------------------------------
Net loss ($11,095) ($13,889) ($36,703) ($65,389)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net loss per share:
Basic and diluted ($0.22) ($0.29) ($0.74) ($1.54)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted average
number of
common shares
outstanding 49,954,777 47,495,376 49,312,636 42,360,279
-------------------------------------------------------------------------
-------------------------------------------------------------------------
At At
September 30 December 31
Consolidated Balance Sheets 2008 2007
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (audited)
Cash, cash equivalents and marketable
securities $20,595 $58,672
Other current assets 3,203 3,933
-------------------------------------------------------------------------
Total current assets 23,798 62,605
Capital assets and patents 9,743 9,996
Other long-term assets 10,229 5,830
-------------------------------------------------------------------------
Total assets $43,770 $78,431
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Current liabilities $18,955 $21,240
Long-term deferred gain and liabilities 53,327 52,602
Non-controlling interest - 680
Shareholders' (deficiency) equity (28,512) 3,909
-------------------------------------------------------------------------
Total liabilities and shareholders'
(deficiency) equity $43,770 $78,431
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Condensed from the Company's unaudited consolidated financial
statements.
About BELLUS Health
BELLUS Health is a global health company focused on the development and
commercialization of products to provide innovative health solutions to
address critical unmet needs.
To Contact BELLUS Health
For additional information on BELLUS Health and its drug development
programs, please call the Canada and United States toll-free number
1-877-680-4500 or visit the Web Site at www.bellushealth.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 BELLUS Health
Inc.'s (formerly known as Neurochem Inc.) control. Such risks include but are
not limited to: the impact of general economic conditions, general conditions
in the pharmaceutical and/or nutraceutical industry, changes in the regulatory
environment in the jurisdictions in which the BELLUS Health Group 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 BELLUS
Health Inc. 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 any forward-looking statements
included in this news release. These statements speak only as of the date made
and BELLUS Health Inc. is under no obligation and disavows any intention to
update or revise such statements as a result of any event, circumstances or
otherwise, unless required by applicable legislation or regulation. Please see
the Annual Information Form of BELLUS Health Inc. for further risk factors
that might affect the BELLUS Health Group and its business.
For further information: Lise Hébert, Ph.D., Vice President, Corporate Communications, (450) 680-4572, lhebert@bellushealth.com
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