Newsroom 2006
Attention Business/Financial Editors:
Neurochem reports results for third quarter of fiscal 2006
Neurochem will host a conference call on Thursday, November 9, 2006,
at 8:30 A.M. ET.
LAVAL, QC, Nov. 8 /CNW/ - Neurochem Inc. (NASDAQ: NRMX; TSX: NRM)
reported results for the third quarter ended September 30, 2006. The Company
reported a net loss of $18,520,000 ($0.48 per share), compared to $21,074,000
($0.58 per share) for the corresponding period last year. The decrease is
mainly due to a reduction in general & administrative expenses. For the
nine-month period ended September 30, 2006, the net loss amounted to
$56,028,000 ($1.45 per share), compared to $56,738,000 ($1.65 per share) for
the same period last year. Research and development (R&D) expenses amounted to
$14,461,000 this quarter compared to $13,945,000 for the same period last
year. For the nine-month period, R&D expenses were $42,529,000 compared to
$38,807,000 for the corresponding period of the previous year. The increase in
R&D expenses in the nine-month period 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).
As at September 30, 2006, the Company had available cash, cash
equivalents and marketable securities of $26,769,000, 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 exercise of a
warrant in February of 2006 by a subsidiary of Picchio Pharma Inc. (Picchio
Pharma).
"Neurochem is going through a very important stage in its development as
it approaches the potential commercialization of its first product candidate,"
said Dr. Francesco Bellini, Neurochem's Chairman, President and CEO. "The
company has filed a complete response to the FDA for the approvable letter for
KIACTA(TM) and now awaits a response from the FDA. Coinciding with the last
patient's visit, we expect to complete our North American Phase III clinical
trial in January 2007 for ALZHEMED(TM), a potential breakthrough treatment
that could stop or slow the progression of Alzheimer's disease. The important
progress we have made on these two core product candidates, as well as our
sound financial base including the senior convertible notes along with the
equity line of credit, positions Neurochem well as we move forward," Dr.
Bellini concluded.
Conference Call
Neurochem will host a conference call on November 9, 2006, at 8:30 A.M.
ET. The telephone numbers to access the conference call are 1-416-644-3426 or
1-866-249-2157. A replay of the call will be available until Thursday,
November 16, 2006. The telephone numbers to access the replay of the call are
1-416-640-1917or 1-877-289-8525. The access code for the replay is
21208556 (pound key).
Consolidated Financial Results Highlights
The following discussion and analysis should be read in conjunction with
the Company's unaudited consolidated financial statements for the nine-month
period ended September 30, 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 September 30, 2006, the net loss
amounted to $18,520,000 ($0.48 per share), compared to $21,074,000 ($0.58 per
share) for the corresponding period last year. For the nine-month period ended
September 30, 2006, the net loss amounted to $56,028,000 ($1.45 per share),
compared to $56,738,000 ($1.65 per share) for the same period last year.
Revenue from collaboration agreement amounted to $607,000 for the current
quarter ($1,822,000 for the nine-month period), compared to $750,000 for the
same period last year ($2,777,000 for the nine-month period). 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 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 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 letter, the FDA requested additional efficacy
information, as well as a safety update. The FDA stated that this 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. The FDA asked for further manufacturing and
pharmacokinetic information, and acknowledged that a QT clinical study should
be submitted as part of a Phase 4 (post approval) commitment. The Company
submitted a complete response to the FDA on October 16, 2006. Neurochem is
also seeking marketing approval for eprodisate (KIACTA(TM)) for the treatment
of AA amyloidosis in the European Union. The Company's Marketing Authorization
Application has been validated by the European Medicines Agency (EMEA) in
September 2006, which confirmed that the regulatory review has started.
Reimbursable costs revenue amounted to $170,000 for the current quarter
($605,000 for the nine-month period), compared to $170,000 for the same period
last year ($827,000 for the nine-month period) and consists of costs
reimbursable by Centocor in respect of eprodisate (KIACTATM)-related
activities. The Company earns no margin on these reimbursable costs.
Research and development expenses, before research tax credits and
grants, amounted to $14,461,000 for the current quarter ($42,529,000 for the
nine-month period), compared to $13,945,000 for the same period last year
($38,807,000 for the nine-month period). The increase in the nine-month period
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). The 18-month North American Phase III clinical trial is expected to be
completed in January 2007. This trial is being conducted in close to 70
clinical centers in the U.S. and in Canada, with 1,052 mild-to-moderate AD
patients enrolled. 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 is conducted
in approximately 70 centers in ten European countries. As of September 30,
2006, 641 patients had been successfully screened in the European clinical
trial, of which 564 were randomized; the remaining 77 patients are expected to
be randomized and included in the clinical trial. Enrollment for the European
clinical trial is expected to be completed in the fall of 2006. The Phase III
clinical trials for tramiprosate (ALZHEMED(TM)) are designed to demonstrate
the safety, efficacy and disease-modifying potential of the product candidate
in the treatment of AD. In May 2006, the Company started an 18-month
open-label extension study for patients who have completed the ongoing North
American Phase III clinical trial for tramiprosate (ALZHEMED(TM)). For the
quarter and nine-month period ended September 30, 2006, research and
development expenses also included costs incurred to support the ongoing
eprodisate (KIACTA(TM)) Phase II/III open-label extension 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 $434,000 this quarter
($1,463,000 for the nine-month period), compared to $1,704,000 for the
corresponding period last year ($2,664,000 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 due to additional tax credits
recorded during the third quarter of 2005, claimed in respect to eligible
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
current quarter. In 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 $3,042,000 for the current
quarter ($9,850,000 for the nine-month period), compared to $6,737,000 for the
same quarter last year ($17,819,000 for the nine-month period). The decrease
is primarily attributable to a reduction in legal fees incurred by the Company
with regards to the dispute with Immtech International, Inc. (now known as
Immtech Pharmaceuticals, Inc. and referred to herein as Immtech). See Arbitral
award below.
Arbitral award amounted to $2,089,000 (approximately U.S. $1.9 million)
for the nine-month period and relates to the dispute with Immtech. In June
2006, the International Chamber of Commerce (the ICC) issued its Final Award
(Final Award) in the arbitration dispute involving Neurochem and Immtech. The
dispute concerns an agreement entered into between Immtech and Neurochem in
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. On August 12,
2003, Immtech brought claims against Neurochem in legal proceedings filed with
the Federal District Court for the Southern District of New York, U.S.A. The
dispute was presented to an arbitral tribunal (the Tribunal) convened in
accordance with the rules of the ICC. An evidentiary hearing before the
Tribunal was 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. While the
Tribunal found that Neurochem had breached certain sections of the Agreement,
Immtech was awarded U.S. $35,000 in damages, plus interest thereon. All of
Immtech's tort claims were rejected, as were its claims for injunctive relief
and equitable relief; the Tribunal also denied Neurochem's counterclaims.
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. On July 10, 2006, Immtech submitted an application in the form of a
letter to the Tribunal and the ICC seeking a determination by the Tribunal of
an issue Immtech asserted the Tribunal did not decide; specifically, Immtech
claimed that certain Neurochem "inventions", and pending patent applications
relating thereto, should be assigned to, and therefore be owned by Immtech and
that the Final Award failed to distinguish between the issue of ownership -as
distinct from the issue of inventorship. On July 28, 2006, Neurochem filed a
response opposing Immtech's request for a further determination with respect
to ownership of the Neurochem inventions and pending patent applications. The
Tribunal issued an Addendum to the Final Award dated September 21, 2006, in
which it denied Immtech's request to make a further determination A status
conference before the Federal District Court for the Southern District of New
York on the matter of the stayed litigation between Immtech and two
universities, on the one hand, and Neurochem, on the other hand, (the
Litigation) is scheduled for mid-November. Despite the outcome of the arbitral
proceedings, the outcome of the Litigation and the amount of loss, if any,
cannot reasonably be estimated. Accordingly, no provision for loss has been
recorded by the Company in connection with the Litigation.
Reimbursable costs amounted to $170,000 for the current quarter ($605,000
for the nine-month period), compared to $170,000 for the same period last year
($827,000 for the nine-month period), and consist of costs incurred on behalf
of Centocor in respect of eprodisate (KIACTATM) related activities and
reimbursable by Centocor.
Stock-based compensation amounted to $1,064,000 for the current quarter
($2,996,000 for the nine-month period), compared to $868,000 for the
corresponding quarter last year ($3,930,000 for the nine-month period). 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 decrease in the
nine-month period is 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 write-off of patents amounted to $424,000
for the current quarter ($1,326,000 for the nine-month period), compared to
$631,000 for the same quarter last year ($1,776,000 for the nine-month
period). 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 $24,000 for the current quarter
($74,000 for the nine-month period), compared to $126,000 for the same quarter
last year ($380,000 for the nine-month period). 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 in 2004.
Interest income amounted to $479,000 for the current quarter ($1,702,000
for the nine-month period), compared to $591,000 for the same quarter last
year ($1,475,000 for the nine-month period). The decrease in the quarter is
mainly due to lower average cash balances and is partially offset by higher
interest rates during the current quarter, compared to the same period last
year. The increase in the nine-month period is mainly attributable to higher
interest rates and is partially offset by lower average cash balances during
the current period, compared to the same period last year.
Foreign exchange loss amounted to $25,000 for the current quarter
($595,000 for the nine-month period), compared to $1,700,000 for the same
quarter last year ($68,000 for the nine-month period). 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 during 2006 are mainly
attributable to the strengthening of the Canadian dollar compared to the U.S.
dollar during the periods.
Other income amounted to $614,000 for the current quarter ($1,207,000 for
the nine-month period), compared to $291,000 for the same quarter last year
($638,000 for the nine-month period). Other income consists of non-operating
revenue, primarily sub-lease revenue. The increase in the current quarter
includes an amount of $332,000 in respect of the recovery of prior years'
property taxes.
Share of loss in a company subject to significant influence amounted to
$503,000 for the current quarter ($2,210,000 for the nine-month period),
compared to $574,000 for the corresponding quarter last year ($2,153,000 for
the nine-month period). Non-controlling interest amounted to $166,000 for the
current quarter ($724,000 for the nine-month period), compared to $171,000 for
the corresponding quarter last year ($641,000 for the nine-month period).
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 September 30, 2006, the Company had available cash, cash
equivalents and marketable securities of $26,769,000, 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 exercise of a
warrant in February of 2006 by a subsidiary of Picchio Pharma Inc. (Picchio
Pharma).
In addition, on August 9, 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 provides for an obligation
for Neurochem to drawdown at least U.S.$25,000,000 over the two-year term of
the facility. The agreement is conditional on the registration of the
underlying securities and the required regulatory approvals. As at September
30, 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 October 31, 2006, the Company had 38,701,732 common shares
outstanding, 220,000 common shares issuable to the Chief Executive Officer
upon the achievement of specified performance targets and 2,608,670 options
granted under the stock option plan.
The Company believes that its available cash and short-term investments,
expected interest income, potential funding under the equity line of credit,
from potential partnerships, research and licensing agreements, research tax
credits, grants, and access to capital markets should be sufficient to finance
the Company's operations and capital needs for the coming year. However, in
light of the uncertainties associated with the regulatory approval process 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.
Subsequent Event
On November 3, 2006, the Company entered into a private placement of
U.S.$40,000,000 aggregate principal amount of 6% senior convertible notes due
in 2026, with a conversion premium of 20%. The Company has granted the U.S.
registered broker-dealer a 30-day option to purchase up to an additional U.S.
$2,085,000 aggregate principal amount of the notes. The Company will pay
interest on the notes until maturity on November 15, 2026, subject to earlier
repurchase, redemption or conversion. The sale of the notes is expected to
close on November 9, 2006.
Neurochem Inc.
Consolidated Financial Information(1)
(in thousands of Canadian dollars, except per share data)
Three-month period Nine-month period
ended ended
September 30 September 30
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Consolidated Statements
of Operations 2006 2005 2006 2005
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(unaudited) (unaudited) (unaudited) (unaudited)
Revenues:
Collaboration agreement $607 $750 $1,822 $2,777
Reimbursable costs 170 170 605 827
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777 920 2,427 3,604
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Expenses (Income):
Research and development 14,461 13,945 42,529 38,807
Research tax
credits and grants (434) (1,704) (1,463) (2,664)
Other research
and development charges 1,277 - 1,277 -
General and administrative 3,042 6,737 9,850 17,819
Arbitral award - - 2,089 -
Reimbursable costs 170 170 605 827
Stock-based compensation 1,064 868 2,996 3,930
Depreciation, amortization
and write-off of patents 424 631 1,326 1,776
Interest and bank charges 24 126 74 380
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20,028 20,773 59,283 60,875
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Net loss before
undernoted items: (19,251) (19,853) (56,856) (57,271)
Interest income 479 591 1,702 1,475
Foreign exchange loss (25) (1,700) (595) (68)
Other income 614 291 1,207 638
Share of loss in a
company subject to
significant influence (503) (574) (2,210) (2,153)
Non-controlling interest 166 171 724 641
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Net loss ($18,520) ($21,074) ($56,028) ($56,738)
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Net loss per share:
Basic ($0.48) ($0.58) ($1.45) ($1.65)
Diluted ($0.48) ($0.58) ($1.45) ($1.65)
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Weighted average number
of common shares
outstanding:
Basic 38,814,360 36,618,807 38,589,402 34,288,153
Diluted 38,814,360 36,758,624 38,589,402 35,957,177
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At At
September 30 December 31
Consolidated Balance Sheets 2006 2005
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(unaudited) (audited)
Cash, cash equivalents
and marketable securities $26,769 $71,091
Other current assets 13,888 13,298
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Total current assets 40,657 84,389
Capital assets 10,447 10,327
Other long-term assets 2,404 2,230
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Total assets $53,508 $96,946
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Current liabilities $26,241 $17,420
Long-term liabilities 19,300 28,745
Non-controlling interest 1,030 509
Shareholders' equity 6,937 50,272
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Total liabilities and shareholders' equity $53,508 $96,946
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(1) Données provenant des états financiers consolidés non vérifiés de la
Société.
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 AA amyloidosis, and is under regulatory review for marketing
approval by the U.S. Food and Drug Administration and European Medicines
Agency. 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: please contact: Lise Hébert, Ph.D., Vice
President, Corporate Communications, (450) 680-4570, lhebert@neurochem.com
