Afexa Life Sciences Inc.
TSX : FXA

Afexa Life Sciences Inc.

December 11, 2009 08:00 ET

Afexa Announces Fiscal 2009 Results and 2010 Q1 Outlook

EDMONTON, ALBERTA--(Marketwire - Dec. 11, 2009) -

  • Softer but profitable fiscal 2009 ends with excellent Q4 momentum
  • Best quarterly revenue ever expected in fiscal 2010 Q1
  • Jack Moffatt appointed Chairman and CEO

Afexa Life Sciences Inc. (TSX:FXA) today announced revenue in the fiscal year ended September 30, 2009 of $47.6 million, down from $49.4 million in fiscal 2008. Net earnings fell to $1.3 million ($0.01 per common share) in fiscal 2009 from net earnings of $4.6 million ($0.04 per common share) in the prior year. Fiscal 2009 fourth quarter revenue and net earnings improved significantly from the same period last year. Based on more than two months of results in fiscal 2010, Afexa anticipates that fiscal 2010 first quarter revenue will exceed the Company's previous record quarter ($21.3 million in revenue in the first three months of fiscal 2008).

As the Company announced on December 10, 2009, Mr. Jack Moffatt was appointed Chairman and CEO after leading the Company's restructuring and business planning efforts over the last two years.

"We are pleased with our progress in fiscal 2009. Afexa was profitable in the year and achieved this result despite worldwide economic difficulties that particularly affected our performance in the first half as retailers took cautious approaches to their inventory levels, and despite the impact of significant non-recurring costs during fiscal 2009. Not only are we profitable, but we have continued to make great progress as a company. We restructured, instituted new processes and focused on interdepartmental teamwork. In addition, we have resolved the outstanding issues from the 2007 financial restatements. Our results improved through the second six months of the year and, entering fiscal 2010, demand from our customers has continued to accelerate to the point that we are having difficulty meeting demand for our flagship COLD-FX® product line, even though we deliberately built up inventories in anticipation of robust demand. Given our momentum, we expect that revenue in the first quarter of fiscal 2010 will be the Company's best for any quarter in its history," said Mr. Moffatt.

From a strategic perspective, fiscal 2009 was a watershed year. The Company resolved a regulatory investigation and settled shareholder lawsuits. As already reported, Afexa reached a settlement agreement that resolved all issues with the Alberta Securities Commission concerning accounting and disclosure matters associated with restatement of the Company's financial statements for fiscal 2006 and the fiscal 2007 first quarter. Afexa previously announced that, subject to court approval, an agreement in principle has been reached that provides for the settlement, release and dismissal of all claims stemming from two proposed class action lawsuits begun in 2007 against the Company, certain of its officers, former directors and former auditors. The Company's settlement costs for the class action lawsuits are anticipated to be funded through insurance coverage.

In the fourth quarter of fiscal 2009, revenue was $15.6 million, up 10.8% from $14.0 million in the comparable period of the prior year. Net earnings grew more than five times to $2.8 million ($0.03 per common share) in the fiscal 2009 fourth quarter from $0.5 million ($0.00 per common share) in the quarter ended September 30, 2008.

Fiscal 2009 U.S. revenue was $2.4 million compared to $2.1 million in fiscal 2008; U.S. revenue is expected to decline as the Company continues to concentrate its resources on Canada.

Cash flow prior to working capital changes in fiscal 2009 was $3.2 million compared to $6.2 million in the prior fiscal year. Working capital rose to $15.1 million in the year ended September 30, 2009 from $13.7 million the year before, as a result of several factors including a large inventory buildup. Cash, cash equivalents and short-term investments at September 30, 2009 fell to $3.5 million from $9.4 million at the end of fiscal 2008, due to the working capital increase, the purchase of $1.4 million in fixed assets related mainly to lab equipment and patents, $0.7 million in principal payments on long-term debt, and $1.1 million used to purchase shares under a normal course issuer bid (NCIB).

The effectiveness of COLD-FX in reducing incidents and severity of flu and colds has been confirmed in numerous clinical trials. Recent publicity and public concern regarding these types of illnesses coincides with a significant surge in demand for Afexa's products. COLD-FX continues to be the number one selling cold and flu remedy in Canada, according to The Nielsen Company MarketTrack National all channel dollar sales for the categories of Cold Remedies and Supplements and Products, for the 52 weeks ended September 26, 2009. 

"In addition to public concern and awareness of our product related to flu and colds, we are already garnering broad interest in the marketplace from our Olympic Games efforts and this should also enhance Afexa's performance in fiscal 2010," Mr. Moffatt commented. "While the convergence of events propelling our business at present is exceptional, we believe that many new users of our products will become ongoing customers, since research shows that COLD-FX consumers are very loyal to our brand. Additionally, we have launched IMMUNITY-FX™ nationally; it is designed as a daily immune booster to help consumers stay healthy. We will continue to focus effort and energy on developing this exciting new product in the marketplace." 

Afexa began an NCIB on October 16, 2009 to purchase up to 5,245,645 (5%) of its issued and outstanding common shares. Since that time, with a news release discussing financial results pending, Afexa has not purchased any of its shares under the renewed NCIB. The NCIB will terminate on October 15, 2010. However, under the previous NCIB, which began on October 16, 2008 and enabled the purchase of up to 5,386,175 (5%) of the then issued and outstanding common shares, Afexa bought 2,810,580 common shares at an average cost of $0.40 per share including brokerage fees. Management continues to believe that the current market price of the shares does not accurately reflect their underlying value and expects to make purchases under the current NCIB.

Detailed Financial Statements and Management's Discussion and Analysis

A complete set of Financial Statements and Management's Discussion and Analysis for the year ended September 30, 2009 will be available on SEDAR (www.sedar.com) and will be posted on the Company's web site. The financial results presented in this news release are a summary only and readers are encouraged to read the full text of the Financial Statements and Management's Discussion and Analysis for important additional information.

ABOUT AFEXA LIFE SCIENCES INC.
Afexa Life Sciences Inc., founded in 1992, strives to transform people's lives to be healthier and happier by focusing on prevention and recovery through the use of evidence-based naturally-derived health products. The Company's lead product COLD-FX® strengthens the immune system and is widely used as a leading over the counter remedy ("OTC") for helping to prevent and relieve cold and flu infections.

Advisory Regarding Forward-Looking
This news release contains certain forward-looking information and statements within the meaning of applicable securities laws. The forward-looking information and statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Such information and statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information or statements including, without limitation: those comments predicting the timing and/or initiation of clinical trials, clinical trial results, and associated regulatory clearances, financing and acceptance of COLD-FX® and other of the Company's products in the marketplace. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "would", "project", "could", "should", "contemplate", "potential", "depend", "forecast", "believe", "plans", "targets", "intends" and similar expressions are intended to identify forward-looking statements. Forward-looking statements include discussions regarding customer orders for COLD-FX in the first weeks of fiscal 2010. The Company believes that the expectations and assumptions reflected in the forward-looking information and statements contained herein are reasonable but no assurance can be given that these expectations and assumptions are correct and that the results, performance or achievements expressed in, or implied by, forward-looking statements within this disclosure will occur, or if they do, that any benefits may be derived from them. Specifically, the Company can give no assurance that the launch of IMMUNITY-FX will receive consumer support. Additional detail regarding risk factors will be provided in the Company's Management's Discussion and Analysis (the "MD&A") for the fiscal year ended September 30, 2009, which is expected to be filed on or before December 11, 2009. These documents will be filed on the Company's SEDAR profile at www.sedar.com or on the Company's website at www.afexa.com. All forward-looking statements are expressly qualified in their entirety by this cautionary statement. The Company assumes no duty to update or revise forward looking information, except as may be required pursuant to applicable laws. The Company claims exemption under U.S. SEC Rule 12g3-2(b).

Contact Information

  • Afexa Life Sciences Inc. - Financial Contact
    Allan Cleiren
    Chief Financial Officer and Senior VP Operations
    (780) 432-0022
    acleiren@afexa.com
    or
    Afexa Life Sciences Inc. - Investor Contact
    Jane Tulloch
    Senior Director, Investor Relations
    (780) 577-3724
    jtulloch@afexa.com
    www.afexa.com