Newsroom 2006
Attention Business/Financial Editors:
Neurochem reports results for first quarter of fiscal 2006
LAVAL, QC, May 9 /CNW Telbec/ - Neurochem Inc. (NASDAQ: NRMX; TSX: NRM)
reported results for the first quarter ended March 31, 2006. The Company
reported a net loss of $17,134,000 ($0.45 per share) for the quarter, compared
to $16,970,000 ($0.54 per share) for the same period the previous year. The
modest increase is due to research and development (R&D) expenses which
amounted to $13,726,000 this quarter, compared to $11,965,000 for the same
period the previous year, relating to tramiprosate's (Alzhemed(TM)) ongoing
North American and European Phase III clinical trials. The increase in R&D was
almost offset by the decrease in general and administrative expenses (G&A).
G&A totalled $3,442,000 for the current quarter, compared to $5,165,000 the
same quarter last year. The decrease in G&A is primarily attributable to a
reduction in legal fees regarding the dispute with Immtech International, Inc.
(recently renamed Immtech Pharmaceuticals, Inc.)
At the end of the quarter, the Company reported cash, cash equivalents
and marketable securities of $59,595,000, compared to $71,091,000 on December
31, 2005. The decrease is primarily due to funds used in operations and
investing activities.
"Neurochem is moving closer to bringing new hope to millions of people
suffering from devastating illnesses," said Dr. Francesco Bellini, Neurochem's
Chairman, President and CEO. "We are very pleased that the FDA filed the new
drug application for Fibrillex(TM), which also received priority review.
Neurochem continues to meet its objectives and we will continue to work
closely with the FDA as the agency reviews the submission and prepares itself
to render a decision on eprosidate (Fibrillex(TM)), for the treatment of AA
amyloidosis. Alzhemed(TM)'s program is advancing through a Phase III clinical
trial in North America and we are progressing well with patient recruitment
for the Phase III clinical trial in Europe," he concluded.
Consolidated Financial Results Highlights
The following discussion and analysis should be read in conjunction with
the Company's unaudited consolidated financial statements for the quarter
ended March 31, 2006, as well as the Company's audited consolidated financial
statements for the year ended December 31, 2005, which have been prepared in
accordance with Canadian generally accepted accounting principles. For
discussion regarding related-party transactions, contractual obligations,
disclosure controls and procedures, critical accounting policies, recent
accounting pronouncements, and risks and uncertainties, refer to the Annual
Report and the Annual Information Form for the year ended December 31, 2005.
All dollar figures are Canadian dollars, unless specified otherwise.
Results of operations
For the three-month period ended March 31, 2006, the net loss amounted to
$17,134,000 ($0.45 per share), compared to $16,970,000 ($0.54 per share) for
the corresponding period last year.
Revenue from collaboration agreement amounted to $607,000 for the current
quarter, compared to $1,205,000 for the same period last year. This revenue is
earned under the agreement with Centocor, Inc. (Centocor) in respect of
eprodisate (Fibrillex(TM)), an oral investigational product candidate for the
treatment of Amyloid A (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 revenues 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 April 2006, the Company received
notification from the FDA that it has filed and designated the eprodisate
(Fibrillex(TM)) New Drug Application (NDA) for priority review, with a goal
date of August 13, 2006, when the FDA is expected to render a decision.
Reimbursable costs revenue amounted to $230,000 for the current quarter,
compared to $444,000 for the same period last year and consists of costs
reimbursable by Centocor in respect of eprodisate (Fibrillex(TM)) related
activities. The Company earns no margin on these reimbursable costs.
Research and development expenses, before research tax credits and
grants, amounted to $13,726,000 for the current quarter, compared to
$11,965,000 for the same period last year. The increase is primarily due to
expenses incurred in relation to the development of tramiprosate
(Alzhemed(TM)) for the ongoing Phase III clinical trials in North America and
Europe. Tramiprosate (Alzhemed(TM)) is the Company's investigational product
candidate for the treatment of Alzheimer's disease (AD). In July 2005, the
Company completed the enrolment of 1,052 patients with mild-to-moderate AD for
its North American Phase III clinical trial. The study duration is 18 months
and the trial is being conducted in close to 70 clinical centers in the U.S.
and in Canada. In September 2005, the Company launched its Phase III clinical
trial in Europe, with 930 mild-to-moderate AD patients expected to
participate. The study duration is also 18 months and the trial will be
conducted in approximately 70 centers in ten European countries. As of March
31, 2006, 289 patients have been successfully screened and 175 of them were
randomized in the European clinical trial. Enrollment for the European
clinical trial is expected to be completed during the fall of 2006. The Phase
III clinical trials on tramiprosate (Alzhemed(TM)) are designed to demonstrate
the safety, efficacy and disease-modifying potential of the product candidate
in the treatment of AD. In February 2006, the Company announced its intention
to initiate during the second quarter of 2006 an 18-month open-label extension
study for its ongoing North American Phase III clinical trial for tramiprosate
(Alzhemed(TM)). In February 2006, the Company completed the submission of an
NDA with the FDA for its investigational product candidate, eprodisate
(Fibrillex(TM)). For the quarter ended March 31, 2006, research and
development expenses also included costs incurred to support the on-going
eprodisate (Fibrillex(TM)) Phase II/III open-label extension study, as well as
on-going 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 amounted to $520,000 this quarter, compared to
$409,000 for the corresponding period last year. Research tax credits
represent refundable tax credits earned under the Quebec Scientific Research
and Experimental Development Program. The increase is mainly attributable to
increased research and development expenses incurred in Quebec, eligible for
refundable tax credits.
General and administrative expenses totaled $3,442,000 for the current
quarter, compared to $5,165,000 for the same quarter last year. The decrease
is primarily attributable to a reduction in legal fees with regards to the
dispute with Immtech International, Inc. (Immtech) (now known as Immtech
Pharmaceuticals, Inc.). See Litigation section below.
Reimbursable costs amounted to $230,000 for the current quarter, compared
to $444,000 for the same period last year, and consist of costs incurred on
behalf of Centocor in respect of eprodisate (Fibrillex(TM)) related activities
and reimbursable by Centocor.
Stock-based compensation amounted to $916,000 for the current quarter,
compared to $770,000 for the corresponding quarter last year. This expense
relates to employee and director 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 is due to new stock
options granted during the past twelve months.
Depreciation, amortization and write-off of patents amounted to $493,000
for the current quarter, compared to $570,000 for the same quarter last year.
The decrease results mainly from the sale-leaseback transaction entered into
by the Company in November 2005 in respect of its facilities and campus
located in Laval, Quebec.
Interest and bank charges amounted to $27,000 for the current quarter,
compared to $121,000 for the same quarter last year. The decrease 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 and campus from Shire BioChem Inc. in
2004.
Interest income amounted to $643,000 for the current quarter, compared to
$251,000 for the same quarter last year. The increase is mainly attributable
to higher average cash balances in the current quarter, compared to the same
quarter last year. The higher average cash balance results from the net
proceeds received from the public offering in March 2005, the exercise of
warrants by a subsidiary of Picchio Pharma Inc. (Picchio Pharma) in July 2005
and February 2006, as well as the sale-leaseback transaction in November 2005.
Furthermore, interest rates were higher during the current quarter compared to
the same quarter last year. Please refer to the Liquidity and Capital
Resources section for details on the warrant exercised in February 2006.
Foreign exchange loss amounted to $46,000 for the current quarter,
compared to a gain of $226,000 for the same quarter last 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.
Other income amounted to $285,000 for the current quarter, compared to
$51,000 for the same quarter last year. Other income consists of non-operating
revenue, primarily sub-lease revenue.
Share of loss in a company subject to significant influence amounted to
$816,000 and non-controlling interest amounted to $262,000 for the current
quarter, compared to $755,000 and $225,000 respectively for the corresponding
quarter last year. These items result from the consolidation of the Company's
interest in a holding company that owns Innodia Inc. shares, 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 of 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.
Litigation
In connection with an agreement concluded in 2002, Immtech (which changed
its name on March 22, 2006, to Immtech Pharmaceuticals, Inc.) brought claims
against the Company in legal proceedings filed on August 12, 2003, with the
Federal District Court for the Southern District of New York, U.S.A. The
dispute is now before an arbitral tribunal convened in accordance with the
rules of the International Court of Arbitration. A hearing before the arbitral
tribunal was held in mid-September 2005. Neurochem's external legal counsel
was advised by the arbitral tribunal on May 5, 2006, that the hearing in this
matter was closed as of April 17, 2006. The parties await the arbitral
tribunal's award. The outcome of this matter and the amount of loss, if any,
cannot reasonably be estimated. Accordingly, no provision for possible loss
has been recorded by the Company in connection with this matter. The Company
has, and will continue to, vigorously defend itself against claims brought by
Immtech. See note 7 to the Consolidated Financial Statements.
Related party transactions
Refer to note 6 of the Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
As at March 31, 2006, the Company had available cash, cash equivalents
and marketable securities of $59,595,000, compared to $71,091,000 at December
31, 2005. The decrease is primarily due to funds used in operations and
investing activities. The decrease is partially compensated by proceeds
received from the exercise of a warrant by Picchio Pharma.
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 April 30, 2006, the Company had 38,644,449 common shares
outstanding, 220,000 common shares issuable to the Chief Executive Officer
upon the achievement of specified performance targets and 2,477,787 options
granted under the stock option plan.
Neurochem Inc.
Consolidated Financial Information(1)
(in thousands of Canadian dollars, except
per share data)
Three-month period ended
March 31
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Consolidated Statements of Operations 2006 2005
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(unaudited) (unaudited)
Revenues:
Collaboration agreement $ 607 $ 1,205
Reimbursable costs 230 444
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837 1,649
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Expenses:
Research and development 13,726 11,965
Research tax credits (520) (409)
Research grants (15) (9)
General and administrative 3,442 5,165
Reimbursable costs 230 444
Stock-based compensation 916 770
Depreciation, amortization and write-off
of patents 493 570
Interest and bank charges 27 121
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18,299 18,617
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Net loss before undernoted items: (17,462) (16,968)
Interest income 643 251
Foreign exchange gain (loss) (46) 226
Other income 285 51
Share of loss in a company subject to
significant influence (816) (755)
Non-controlling interest 262 225
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Net loss ($17,134) ($16,970)
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Net loss per share:
Basic ($0.45) ($0.54)
Diluted ($0.45) ($0.54)
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Weighted average number of common
shares outstanding:
Basic 38,154,106 31,401,858
Diluted 38,154,106 34,568,931
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At At
March 31 December 31
Consolidated Balance Sheets 2006 2005
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(unaudited) (audited)
Cash, cash equivalents and marketable
securities $ 59,595 $ 71,091
Other current assets 14,031 13,298
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Total current assets 73,626 84,389
Capital assets 10,474 10,327
Other long-term assets 4,164 2,230
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Total assets $ 88,264 $ 96,946
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Current liabilities $ 20,162 $ 17,420
Deferred revenue 3,370 8,779
Deferred gain on sale of property 19,402 19,759
Long-term accrued liabilities 342 207
Non-controlling interest 1,492 509
Shareholders' equity 43,496 50,272
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Total liabilities and shareholders'
equity $ 88,264 $ 96,946
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(1) Condensed from the Company's unaudited consolidated
financial statements.
About Neurochem
Neurochem is focused on the development and commercialization of
innovative therapeutics to address critical unmet medical needs. Eprodisate
(Fibrillex(TM)) is designated as an orphan drug, is a Fast Track product
candidate and is also part of the US Food and Drug Administration (FDA)
Continuous Marketing Application Pilot 1 and Pilot 2 programs. In April 2006,
the FDA filed and granted the eprodisate (Fibrillex(TM)) new drug application
for priority review. Tramiprosate (Alzhemed(TM)), for the treatment of
Alzheimer's disease, is currently in Phase III clinical trials in both North
America and Europe and 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, 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: Lise Hébert, Ph.D., Vice President, Corporate
Communications, (450) 680-4570, lhebert@neurochem.com
