Ondine Biopharma Corporation (the "Company" or "Ondine") (TSX:OBP)(AIM:OBP), a
medical device company developing photodisinfection based products, today
announced its financial results for the three months ended March 31, 2009.
"Driven by a backdrop of illiquid financial markets and a challenging economic
environment, Ondine made great progress over the past year at increasing
internal productivity while reducing monthly expenditures. Net operating loss
was reduced by 41% from the first quarter in 2008, while revenues for the
quarter were essentially unchanged, despite a 78% drop in marketing and sales
expenditures. The corporate restructuring, which began early in 2008, involves a
downsizing of sales and marketing activities in the dental arena in favour of
new product development, and is expected to be completed in the second quarter.
The company will concentrate on the development of our second product,
MRSAid(TM), a nasal decolonization system designed to reduce Hospital Acquired
Infections ('HAI's) arising from MRSA (Methicillin-Resistant Staphylococcus
aureus)," stated Carolyn Cross, Ondine's Chairman & CEO. "Costs associated with
MRSA infections have been estimated to be as high as $4 billion and growing.
Clinical studies have shown that MRSA screening and decolonizing protocols have
reduced MRSA infections, saving lives and huge costs in the process.
Key to this corporate restructuring is the recently proposed sale of our Dental
Healthcare Business which will enable us to further reduce operating costs,
provides Ondine some upfront cash and is expected to contribute continued
economic benefits and cash flows that we intend to use in part for the
development of expanded applications of our photodisinfection technology. If
approved by the TSX and by our shareholders at the upcoming annual general and
special meeting, this transaction is expected to close on or about May 20, 2009.
Having established global leadership in photodynamic disinfection, we expect to
leverage our past investments in quality management systems, as well as
regulatory, clinical and product development experiences across new products
lines and partner with industry leaders for product commercialization."
FINANCIAL RESULTS
For the three months ended March 31, 2009 (the "First Quarter 2009") the Company
recorded a loss of $1.45 million, or $0.02 per common share, compared with a
loss of $2.46 million, or $0.04 per common share, for the three months ended
March 31, 2008 (the "First Quarter 2008"). Product sales revenue for
Periowave(TM) laser base stations and treatment kits for the First Quarter 2009
was $0.19 million generating a gross margin of $0.12 million (62.8%) compared to
product sales of $0.20 million and gross profit margin of $0.14 million (69.4%)
for the First Quarter 2008.
RECENT DEVELOPMENTS
During the quarter, the Company announced positive results of a study
demonstrating the first successful decontamination of heavily MRSA-infected
wounds in animals. These results were published in a peer-reviewed journal, BMC
Microbiology. The study was carried out by a team of collaborative researchers
at the University College London, UK, and utilized Ondine's MRSAid(TM)
photodisinfection system. This photodynamic method of treatment is a completely
novel approach to disinfection of burns and wounds contaminated with the
potentially lethal MRSA bacterium. The results of this study indicate the
potential use of our platform technology in burn and wounds applications, as
well as for nasal decolonization. MRSAid(TM) is currently approved for nasal
decolonization in Canada and in the EU.
In April 2009, the Company announced it had received additional Health Canada
Licenses for our Photodisinfection System which is designed to reduce MRSA
colonization of the anterior nasal passages. The nose is a major reservoir of
this virulent pathogen and a primary route of transmission for hospital acquired
infections. Ondine's non-antibiotic MRSAid(TM) system is designed to block
carriage of these resistant microbes before transmission can occur between
patients, visitors and healthcare workers. The commercialization plan for the
MRSAid(TM) system includes continued in-hospital protocol evaluations on
high-level MRSA carriers, development of the US regulatory pathway and
establishment of commercial partners. Ondine believes that its US regulatory
experiences with the dental application will assist the company in its
MRSAid(TM) application to the FDA.
In April 2009, the Company announced it entered into a loan agreement with
Carolyn Cross, Chairman, CEO and a shareholder of the Company, pursuant to which
Ms. Cross has advanced the Company C$400,000 (the "Loan"), demonstrating her
continued financial support of the Company. The Loan is interest free until May
31, 2009, but thereafter, the principal amount will accrue interest at a rate of
5% per annum payable monthly.
Sale of Dental Healthcare Business
In April 2009, the Company announced it had entered into a non-binding letter of
intent ("LOI") with JS Dental Technologies Inc. ("JSD"), a Toronto-based
privately held firm to purchase the Company's Dental Healthcare Business (the
"Dental Business Sale"). Subject to the execution of definitive agreements,
Ondine shareholder and TSX approvals, the proposed transaction is expected to
allow Ondine to further reduce its ongoing operating expenses, and to provide
upfront cash and continued economic benefits and cash flows to be used in part
for the development of expanded applications of the Company's photodisinfection
platform. The transaction is expected to close on or about May 20, 2009 upon the
satisfaction of the various conditions listed above.
Under the terms of the proposal, Ondine and JSD will collaborate on the
continued commercialization of the Periowave(TM) photodisinfection technology.
Ondine would receive an up-front cash payment of C$725,000, a potential $250,000
FDA success fee, 5% royalties, manufacturing margins as supplier, and potential
management consulting and product development fees of US$600,000/year for the
next two years. Ondine would also receive a stream of milestone payments that
range from $200,000 to $12.5 million based on cumulative sales thresholds
ranging from $10 million to $1 billion achieved by JSD. In the event of a
subsequent sale to a third party, Ondine would receive, in lieu of further
royalties and milestone payments, a percentage of all proceeds of such sale, up
to a maximum of 40 percent if the subsequent sale occurs in the first year and
declining on a yearly basis to 5 percent in the sixth year and 2.5 percent
thereafter.
The Company has set its annual general and special meeting of the shareholders
to be held on May 19, 2009 (the "Meeting"). At the Meeting, the shareholders
will vote on a resolution to authorize the Company to proceed with the sale. The
terms of the LOI and the background to the Dental Business Sale are detailed in
the information circular prepared in connection with the Meeting. Both the
information circular and the full text of the LOI are available on the SEDAR
website at www.sedar.com and on the Company's website at
www.ondinebiopharma.com. Subject to the execution of the definitive agreement,
the transaction is expected to close shortly after the Meeting if the sale is
approved by the shareholders and by the Toronto Stock Exchange.
After giving effect to the sale of the Company's dental healthcare business, the
Company expects that it will continue to be engaged in an active research and
product development business and that its common shares will continue to be
listed on the TSX, or alternatively on the TSX Venture Exchange, and on AIM.
Financial Review
Although the Company reduced its sales and marketing costs significantly during
the First Quarter 2009, when compared to the First Quarter 2008, both its
product sales revenue and gross profit margin for First Quarter 2009 were
comparable to those amounts for First Quarter 2008. During the Current Period
the Company sold its products in Canada to three dental distributors while
during the Prior Period the Company sold its products in Canada to one dental
distributor. During both periods the Company also sold its products to its
distributor in the United Kingdom.
The Company is continuing to see progress with market acceptance for its
Periowave(TM) system in Canada. Many clinicians in Canada have increased
Periowave(TM) utilization to one or more treatments per day. Information
obtained from the Company's Canadian distributors show an increase of 30% in the
number of treatment kits sold by them during the First Quarter 2009, when
compared to the First Quarter 2008. In addition, a number of dental offices in
Canada have purchased more than one laser base station. The priority for the
Canadian market is to establish the appropriate marketing and sales strategies,
as well as to identify key strategic partnership opportunities for the larger
United States and European markets.
The $1.03 million decrease in loss for the First Quarter 2009, when compared to
the First Quarter 2008, was due to reductions in research and development (28%),
general and administration (29%), and marketing and sales expenses (78%), which
were partially offset by a decrease in other income, primarily due to a decrease
in interest income. These reductions mainly reflect the Company's restructuring
and cost cutting measures. The Company intends to focus resources and efforts on
new product development of a selective number of applications of our platform
technology and defer or reduce the pace of development of our other product
opportunities in our pipeline until after commercial partnerships are
consummated or financial markets improve and there is an improvement in our
financial position.
During the First Quarter 2009, the Company continued to invest in research and
development including, among other things, the tasks required to enable the
Company to file a premarket approval ("PMA") submission with the FDA to market
Periowave(TM) in the United States. The Company believes that it is nearing
completion of this FDA submission. The PMA submission combined with regulatory
and clinical trial work to date is expected to be leveraged for MRSAid(TM)'s US
application with the FDA. Currently, research and development activities are
focused on the development of the MRSAid(TM) product and its regulatory pathway.
Research and development expenses for the First Quarter 2009 were $0.79 million,
a decrease of $0.32 million when compared to $1.11 million incurred during the
First Quarter 2008. The bulk of the reduction of R&D expenses related to
activities no longer required in the first quarter of 2009.
General and administration expenses for the First Quarter 2009 were $0.58
million, a decrease of $0.24 million when compared to $0.82 million incurred
during the First Quarter 2008. Marketing and sales expenses for the First
Quarter 2009 were $0.15 million, a decrease of $0.53 million when compared to
$0.68 million incurred during the First Quarter 2008. Reductions in expenditures
from the restructuring efforts referred to above were the result of decreases in
personnel, consulting, and sales related activities.
As at March 31, 2009 the Company had cash and cash equivalents totaling $0.43
million compared with $1.03 million as at December 31, 2008. In April 2009, the
Company received a $0.40 million Loan from Carolyn Cross. During the First
Quarter 2009 the Company used approximately $1.1 million of cash for its
operating activities and received net proceeds of $0.51 million from the
issuance of 8,620,168 common shares in a non-brokered private placement for
aggregate gross proceeds of $517,210. The shares were issued in two tranches and
are subject to a four month hold period in Canada. Insiders of the Company
purchased 2,216,334 of the shares, which represent 25.7% of the private
placement and 3.2% of the Company's 69,979,344 issued and outstanding common
shares subsequent to the closing of the second tranche. The CEO, Carolyn Cross,
participated in the private placement to the maximum allowed under the rules of
the TSX without shareholder approval.
Based on the Company's current level of activities and its future plans, the
Company needs to raise additional capital in the near term to continue with its
planned operating activities. The Company believes the current challenging
conditions in the capital marketplace will make it more difficult and time
consuming than normal for companies at its stage of development to secure
additional funding. No assurances can be given that additional funding will be
available on terms that are acceptable to the Company. In the interim, the
Company will continue to reduce its expenses and to defer capital outlays in
order to extend the period it can operate utilizing its existing cash balances.
As at March 31, 2009 the Company had 69,979,344 common shares outstanding.
Additional analysis of the Company's financial results for the First Quarter
2009 is included in our management's discussion and analysis of financial
condition and results of operations (MDA) for the quarter ended March 31, 2009,
which will be available on the Company's website and on www.sedar.com.
About Ondine Biopharma Corporation
Ondine is developing non-antibiotic therapies for the treatment of a broad
spectrum of bacterial, fungal and viral infections. The Company is focused on
developing leading edge products utilizing its patented light-activated
technology. Photodisinfection provides broad-spectrum antimicrobial efficacy
without encouraging the formation and spread of antibiotic resistance. The
Company is based in Vancouver, British Columbia, Canada, with a research and
development laboratory in Bothell, Washington, USA, and an international office
in St. Michael, Barbados. For additional information, please visit the Company's
website at: www.ondinebiopharma.com.
Forward-Looking Statements:
Certain statements contained in this release containing words like "believe",
"intend", "may", "expect" and other similar expressions, are forward-looking
statements that involve a number of risks and uncertainties. Factors that could
cause actual results to differ materially from those projected in the Company's
forward-looking statements include the following: market acceptance of our
technologies and products; our ability to obtain financing; our financial and
technical resources relative to those of our competitors; our ability to keep up
with rapid technological change; ability to obtain shareholder and TSX approval
as well as negotiate definitive agreements for the sale of the Company's Dental
Healthcare Business; government regulation of our technologies; our ability to
enforce our intellectual property rights and protect our proprietary
technologies; the ability to obtain and develop partnership opportunities; the
timing of commercial product launches; the ability to achieve key technical
milestones in key products and other risk factors identified from time to time
in the Company's public filings.
Ondine Biopharma Corporation
Incorporated under the laws of British Columbia
CONSOLIDATED BALANCE SHEETS
As at (Unaudited - expressed in Canadian dollars)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
March 31, December 31,
2009 2008
$ $
---------------------------------------------------------------------------
ASSETS
Current
Cash and cash equivalents 439,880 1,033,248
Accounts receivable 237,563 416,352
Inventories 346,516 283,877
Prepaid expenses and deposits 292,485 321,202
---------------------------------------------------------------------------
Total current assets 1,316,444 2,054,679
Capital assets 606,689 651,878
Intangible assets 223,532 239,853
---------------------------------------------------------------------------
2,146,665 2,946,410
---------------------------------------------------------------------------
---------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 1,380,499 1,334,572
Income taxes payable 23,040 37,800
Current portion of deferred tenant inducement 46,535 45,276
Future income tax 82,355 82,355
---------------------------------------------------------------------------
Total current liabilities 1,532,429 1,500,003
Deferred tenant inducement, net of current portion 97,300 109,149
---------------------------------------------------------------------------
Total liabilities 1,629,729 1,609,152
---------------------------------------------------------------------------
Shareholders' equity
Share capital 51,841,737 51,336,368
Contributed surplus 4,207,671 4,087,139
Deficit (55,532,472) (54,086,249)
---------------------------------------------------------------------------
Total shareholders' equity 516,936 1,337,258
---------------------------------------------------------------------------
2,146,665 2,946,410
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Ondine Biopharma Corporation
CONSOLIDATED STATEMENTS OF LOSS
AND COMPREHENSIVE LOSS
For the three months ended (Unaudited - expressed in Canadian dollars)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
March 31, March 31,
2009 2008
$ $
---------------------------------------------------------------------------
REVENUE
Product sales 194,183 202,028
Cost of sales 72,327 61,727
---------------------------------------------------------------------------
Gross margin 121,856 140,301
---------------------------------------------------------------------------
EXPENSES
Research and development 790,385 1,106,863
General and administration 582,406 824,413
Marketing and sales 145,423 680,367
Depreciation and amortization 61,510 92,164
---------------------------------------------------------------------------
(1,579,724) (2,703,807)
---------------------------------------------------------------------------
Other
Interest income 309 77,758
Foreign exchange gain 11,336 22,746
---------------------------------------------------------------------------
11,645 100,504
---------------------------------------------------------------------------
Loss before income taxes (1,446,223) (2,463,002)
Income tax recovery - -
---------------------------------------------------------------------------
Loss for the period (1,446,223) (2,463,002)
Unrealized gain on short-term investments - 593
---------------------------------------------------------------------------
Comprehensive loss for the period (1,446,223) (2,462,409)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Basic and diluted loss per common share (0.02) (0.04)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Weighted average number of common shares
outstanding 65,500,140 61,041,668
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Ondine Biopharma Corporation
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited - expressed in Canadian dollars)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Accumu-
lated
Other Total
Contrib- Compre- Share-
Number of Share uted hensive holders'
Common Capital Surplus Deficit Loss Equity
Shares $ $ $ $ $
---------------------------------------------------------------------------
Balance,
December
31, 2007 61,027,675 51,193,823 3,467,847 (43,816,528) (1,204) 10,843,938
Common
shares
issued for
cash during
the year
for:
Exercise of
options 331,501 82,875 - - - 82,875
Stock-based
compens-
ation - - 678,962 - - 678,962
Reallocation
of contrib-
uted
surplus
arising
from
stock-based
compen-
sation on
exercise of
stock
options - 59,670 (59,670) - - -
Loss for the
year - - - (10,269,721) - (10,269,721)
Reclass-
ification
of
unrealized
loss on
short-term
investments - - - - 1,204 1,204
---------------------------------------------------------------------------
Balance,
December
31, 2008 61,359,176 51,336,368 4,087,139 (54,086,249) - 1,337,258
Common
shares
issued for
cash during
the period
for:
Private
placement
(net of
issue
costs) 8,620,168 505,369 - - - 505,369
Stock-based
compen-
sation - - 120,532 - - 120,532
Loss for the
period - - - (1,446,223) - (1,446,223)
---------------------------------------------------------------------------
Balance,
March 31,
2009 69,979,344 51,841,737 4,207,671 (55,532,472) - 516,936
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Ondine Biopharma Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended (Unaudited - expressed in Canadian dollars)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
March 31, March 31,
2009 2008
$ $
---------------------------------------------------------------------------
OPERATING ACTIVITIES
Loss for the period (1,446,223) (2,463,002)
Add items not affecting cash:
Depreciation and amortization 61,510 92,164
Stock-based compensation 120,532 100,945
Deferred tenant inducement (10,590) (8,959)
Foreign exchange gain - 2,380
Changes in non-cash working capital items relating to
operations:
Accounts receivable 178,789 (43,841)
Inventory (62,639) (86,631)
Prepaid expenses and deposits 28,717 80,357
Accounts payable and accrued liabilities 45,927 (599,120)
Income taxes payable (14,760) 815
---------------------------------------------------------------------------
Cash used in operating activities (1,098,737) (2,924,892)
---------------------------------------------------------------------------
FINANCING ACTIVITIES
Issuance of common shares, net of issuance costs 505,369 78,709
---------------------------------------------------------------------------
Cash provided by financing activities 505,369 78,709
---------------------------------------------------------------------------
INVESTING ACTIVITIES
Short-term investments - (50,685)
Purchase of capital assets - (44,612)
---------------------------------------------------------------------------
Cash used in investing activities - (95,297)
---------------------------------------------------------------------------
Net decrease in cash and cash equivalents (593,368) (2,941,480)
Cash and cash equivalents, beginning of period 1,033,248 4,540,245
---------------------------------------------------------------------------
Cash and cash equivalents, end of period 439,880 1,598,765
---------------------------------------------------------------------------
---------------------------------------------------------------------------
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