BELLUS Health reports results for third quarter of fiscal 2009
LAVAL, QC, Nov. 10 /CNW Telbec/ - BELLUS Health Inc. (TSX: BLU) (the
Company) reports financial results for the third quarter and nine-months
ended September 30, 2009. The Company reported a reduced net loss, compared
to the corresponding period in the previous year, and an increased cash
position for the quarter, due largely to Management's efforts to reduce
overhead expenses and its cash burn rate, as well as a successful rights
offering during the third quarter.
Quarterly Highlights:
The following highlights and financial results should be read in
conjunction with the company's financial statements, notes to the financial
statements, and Management's Discussion and Analysis for the third quarter
and nine-month period ended September 30, 2009. These documents will be
available in the coming days on the Company's web site at
www.BellusHealth.com, and on SEDAR at www.sedar.com.
All currency figures reported in this press release, including
comparative figures, are reported in US dollars, unless otherwise specified.
- For the three-month period ended September 30, 2009, BELLUS Health
reported a net loss of $5,840,000 ($0.04 per share), compared to a net
loss of $11,175,000 ($0.22 per share) for the corresponding period the
previous year. For the nine-month period ended September 30, 2009, the
net loss amounted to $2,867,000 ($0.02 per share), compared to a net
loss of $36,959,000 ($0.75 per share) for the same period last year.
- The decrease in the current periods compared to the same periods the
previous year is mainly due to a reduction in research and
development activities and related workforce, as well as to other
additional measures implemented by the Company to reduce its burn
rate.
- In addition, results for the nine-month period ended September 30,
2009, include a gain on extinguishment of debt in the amount of
$17,020,000 resulting from amendments to the terms of BELLUS Health's
2006 and 2007 convertible notes, following the previously announced
refinancing of the Company in April 2009.
- Results for the nine-month period ended September 30, 2009, also
include a net credit for vacant space in the amount of $2,196,000 in
relation to the vacant portion of the Company's premises.
- As at September 30, 2009, the Company had available cash and cash
equivalents of $17,217,000, compared to $10,595,000 at December 31,
2008. The increase is primarily due the completion of the
CDN$9.7 million rights offering in September 2009 and the
CDN$20.5 million convertible notes financing in April 2009.
- On September 10, 2009, the Company successfully completed a
CDN$9,687,233 rights offering and issued a total of 52,363,419 common
shares at a price of CDN$0.185 per share (the Subscription Price).
Under the rights offering, rights were exercised to subscribe for
9,120,177 common shares at the Subscription Price for proceeds of
CDN$1,687,233. At the same time, in accordance with the terms of the
stand-by purchase agreements entered into by BELLUS Health with Vitus
Investments III Private Limited (Vitus), a corporation whose shares are
beneficially owned by Mr. Carlo Bellini, and Victoria Square Ventures
Inc. (VSVI), a subsidiary of Power Corporation of Canada, each of Vitus
and VSVI subscribed for 21,621,621 common shares of BELLUS Health at
the Subscription Price for an aggregate of CDN$8,000,000.
Financial Results:
Gross sales amounted to $76,000 for the current quarter ($272,000 for the
nine-month period) compared to $206,000 for the comparative periods the
previous year. Net sales amounted to $99,000 for the current quarter
(negative $6,000 for the nine-month period) compared to $153,000 for the
comparative periods the previous year. These sales represent the sales of
VIVIMIND(TM) (also known as tramiprosate and homotaurine), the Company's
first natural health brand launched in September 2008, in Canada and globally
on the Internet.
Effective July 7, 2009, the Company decided to reduce VIVIMIND(TM)'s
suggested retail price and recorded appropriate provisions during the quarter
ended June 30, 2009. This decision was supported by changing economic
conditions, as well as comments from consumers, healthcare providers and
retail customers. This price adjustment will make VIVIMIND(TM) accessible to
a broader clientele and ultimately promote the growth of the cognitive
natural health market. During the current quarter, the Company adjusted
provisions to reflect its best estimate of the impact of the price
adjustment.
Research and development expenses, before research tax credits and
grants, amounted to $2,156,000 for the current quarter ($8,635,000 for the
nine-month period), compared to $5,208,000 for the same period the previous
year ($21,111,000 for the nine-month period). The decrease is mainly
attributable to a reduction in the research and development activities of
tramiprosate (ALZHEMED(TM)) and workforce.
The Company is currently developing NC-503 (eprodisate) for the treatment
of Type II diabetes and certain other features of metabolic syndrome. During
the second quarter of 2008, a 26-week, double-blind, placebo-controlled Phase
II clinical trial in diabetic patients was initiated in Canada and patient
recruitment was concluded during the current quarter. The Company expects to
release the final results of the Phase II clinical trial in the first quarter
of 2010. 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 have shown some protective effect on renal function.
Research tax credits and grants amounted to $160,000 for the current
quarter ($617,000 for the nine-month period), compared to $264,000 for the
corresponding period the previous year ($1,128,000 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 attributable to lower
research and development expenses incurred in Quebec during the current
periods.
General and administrative expenses totaled $1,382,000 for the current
quarter ($5,739,000 for the nine-month period), compared to $3,200,000 for
the same quarter the previous year ($9,149,000 for the nine-month period).
Expenses for the current three-month period are presented net of an amount of
$1,245,000 in relation to amortization of the deferred gain on sale of
property ($2,825,000 for the nine-month period), compared to $335,000 for the
corresponding period the previous year ($1,004,000 for the nine-month
period). The decrease is due to a reduction in the workforce during the first
quarter ended March 31, 2009, as well as other additional measures
implemented by the Company to reduce its burn rate.
Marketing and selling expenses amounted to $845,000 for the current
quarter ($3,283,000 for the nine-month period) compared to $1,424,000 for the
same quarter of the previous year ($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). The decrease is due to a
reduction in marketing activities during the current periods, compared to the
same periods the previous year, during which the product was launched.
Stock-based compensation amounted to $762,000 for the current quarter
($1,938,000 for the nine-month period), compared to $439,000 for the
corresponding quarter the previous year ($2,298,000 for the nine-month
period). The increase in the three-month period compared to the same period
in the previous year is mainly due to additional grants of deferred share
units in the current period. The decrease in the nine-month period is mainly
due to adjustments in relation to forfeitures of stock options, which
occurred as a result of reductions in the workforce.
Net credit for vacant space amounted to $2,196,000 and is in relation to
the vacancy of a portion of the Company's premises following the reduction in
the Company's research activities and associated workforce.
Interest income amounted to $29,000 for the current quarter ($72,000 for
the nine-month period) compared to $145,000 for the same quarter the previous
year ($856,000 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 the previous year.
Accretion expense amounted to $1,312,000 for the current quarter
($3,663,000 for the nine-month period), compared to $1,243,000 for the same
quarter the previous year ($3,675,000 for the nine-month period). Accretion
expense represents the imputed interest under GAAP on the 2006, 2007 and 2009
Convertible notes. The Company accretes the carrying values of the
convertible notes to their face value through a charge to earnings over their
expected lives. As of September 30, 2009, $13,000,000 of the Amended 2006
Notes, $500,000 of the Amended 2007 Notes and CDN$21,115,000 of the 2009
Notes remained outstanding.
Gain on extinguishment of debt amounted to $17,020,000 and resulted from
amendments to the terms of the 2006 and 2007 Notes that took place at the
time of a refinancing of the Company in April 2009.
Change in the fair value of New Asset-Backed Commercial Paper (ABCP)
Notes increased by $317,000 for the current quarter (increase of $500,000 for
the nine-month period) compared to nil for the same quarter the previous year
(decrease of $375,000 for the nine-month period). This represents net changes
during the periods on the valuation of New ABCP Notes held by the Company.
Foreign exchange loss amounted to $15,000 for the current quarter (loss
of $318,000 for the nine-month period), compared to a loss of $216,000 for
the same quarter the previous year (gain of $644,000 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, the Company's functional and reporting
currency, such net monetary assets consisting primarily of assets and
liabilities denominated in Canadian dollars. Foreign exchange gains for the
comparative nine-month period include $924,000 of gain recognized on the
reclassification of the refundable amount ($6,000,000) due to Centocor, Inc.,
from deferred revenue (non-monetary liability) to accrued liability (monetary
liability) following the recovery by the Company of ownership rights in and
control of eprodisate (KIACTA(TM)).
Other income amounted to $293,000 for the current quarter ($1,053,000 for
the nine-month period), compared to $276,000 for the same quarter the
previous year ($810,000 for the nine-month period). Other income consists of
non-operating revenue, such as sub-lease revenue and other items. The
increase in the nine-month period is attributable to a gain realized during
the first quarter of 2009 on the settlement of a dispute with a supplier.
Going Concern
As at September 30, 2009, the Company had cash and cash equivalents in
the amount of $17,217,000. The Company expects to receive $2.3 million of tax
credits in the next months and there are credit facilities in the amount of
approximately $1.2 million that are currently available.
As at September 30, 2009, the Company's committed cash obligations and
expected level of expenses for the upcoming twelve months may exceed the
committed sources of funds and the Company's cash and cash equivalents on
hand. 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, distribution
agreements or product licensing agreements, and ultimately, from obtaining
regulatory approval in various jurisdictions to market and sell its product
candidates and ultimately achieving future profitable operations. The outcome
of these matters is dependent on a number of factors outside of the Company's
control. These factors raise significant doubt about the Company's ability to
continue as a going concern. Management continues to actively pursue
additional financing. The Company is currently involved in ongoing
discussions with several parties to secure partnership agreement,
collaboration agreement, licensing agreement and/or sale with respect to its
businesses, product or product candidates. While the discussions could lead
to the signing of binding agreements in the future, there can be no assurance
whatsoever that any such transaction will be put in place. As a result, there
is material uncertainty as to whether the Company will have the ability to
continue as a going concern and thereby realize its assets and discharge its
liabilities in the normal course of business.
As announced in the Company's March 31, 2009, press release, the TSX
undertook a routine delisting review of BELLUS Health as a result of the
Company's having invoked the financial difficulty exemption in connection
with the 2009 Notes financing. On October 20, 2009, the Company received
confirmation from the TSX that its Listing Committee had determined that the
Company satisfies the TSX's continued listing requirements.
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 medical 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 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.
BELLUS Health Inc.
Consolidated Financial Information(1)
(in thousands of US dollars, except per share data)
Three-month period Nine-month period
ended September 30 ended September 30
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Consolidated Statements
of Operations 2009 2008 2009 2008
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(unaudited) (unaudited) (unaudited) (unaudited)
Revenues:
Gross sales $ 76 $ 206 $ 272 $ 206
Discounts, returns and
cooperative promotional
incentives 23 (53) (278) (53)
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Net sales 99 153 (6) 153
Collaboration agreement - - - 205
Reimbursable costs - - - 69
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99 153 (6) 427
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Expenses:
Research and development 2,156 5,208 8,635 21,111
Research tax credits and
grants (160) (264) (617) (1,128)
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1,996 4,944 8,018 19,983
General and administrative 1,382 3,200 5,739 9,149
Marketing and selling 845 1,424 3,283 3,459
Reimbursable costs - - - 69
Stock-based compensation 762 439 1,938 2,298
Depreciation of equipement 178 219 519 652
Net credit for vacant space - - (2,196) -
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5,163 10,226 17,301 35,610
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Loss before undernoted
items (5,064) (10,073) (17,307) (35,183)
Interest income 29 145 72 856
Interest and bank charges (80) (109) (232) (181)
Accretion expense (1,312) (1,243) (3,663) (3,675)
Change in fair value of
embedded derivatives (8) 45 8 145
Gain on extinguishment of
debt - - 17,020 -
Change in fair value of
New ABCP Notes 317 - 500 (375)
Foreign exchange (loss)
gain (15) (216) (318) 644
Other income 293 276 1,053 810
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Net loss and comprehensive
loss (5,840) $(11,175) (2,867) $(36,959)
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Basic net loss per share $ (0.04) $ (0.22) $ (0.02) $ (0.75)
Diluted net loss per
share $ (0.04) $ (0.22) $ (0.16) $ (0.75)
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At At
September 30 December 31
Consolidated Balance Sheets 2009 2008
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(unaudited) (audited)
Cash and cash equivalents $ 17,217 $ 10,595
Other current assets 4,036 3,667
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Total current assets 21,253 14,262
Equipment 2,661 3,124
Other long-term assets 7,736 9,030
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Total assets $ 31,650 $ 26,416
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Current liabilities $ 11,785 $ 9,257
Long-term deferred gain and liabilities 33,275 63,211
Shareholders' deficiency (13,410) (46,052)
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Total liabilities and shareholders' deficiency $ 31,650 $ 26,416
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(1)Condensed from the Company's unaudited consolidated financial
statements.
For further information: Michelle Stein, Specialist, Corporate Communications, (450) 680-4573, mstein@bellushealth.com
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