Ambrilia Biopharma Inc.
TSX : AMB

Ambrilia Biopharma Inc.

August 08, 2008 16:00 ET

Ambrilia Reports Second Quarter 2008 Results

Attention Business/Financial/Health Editors

MONTREAL, QUEBEC--(Marketwire - Aug. 8, 2008) - Ambrilia Biopharma Inc. (TSX:AMB) today reported its financial results for the second quarter ended June 30, 2008, and provided a review of the recent developments.

"Key milestones were reached for our C2L octreotide, goserelin formulation and NGR-delivery technology, which increased their respective potential values. Moreover, these remarkable achievements allowed us to intensify our divestment efforts to monetize these assets before year-end," said Dr. Philippe Calais, President and CEO. "This is a core objective of our strategic plan aimed at bringing non-dilutive cash inflows to fund the Company's R&D in virology and extend its runway to financing."

Dr. Calais added, "Just recently, we announced Merck & Co.'s decision to suspend the development of PPL-100/MK-8122 pending the outcome of additional work to evaluate other precursors of the drug (prodrugs), formulation options and back-up compounds. Although this represents a setback, our partnership with Merck continues and we await their further progress on the program."

Ambrilia's strategy is to capitalize on its broad product portfolio and original expertise in virology. During the course of 2008, execution of the strategy aims to monetize the non-virology assets through third parties agreements, in turn strengthening the Company's financial position to continue building its novel pipeline of antivirals.

RECENT HIGHLIGHTS

- Initiation of the Phase I/II clinical program of the novel goserelin formulation in prostate cancer patients.

- Validation of the in vivo proof-of-concept with the NGR-delivery technology applied to a small interfering RNA (siRNA), showing its efficient delivery to the tumor tissue, internalization and suppression of a cancer-promoting gene.

- Positive Phase III results for C2L octreotide supporting its ability to replace Sandostatin LAR® with less frequent injections and non inferior efficacy, and comparable safety.

- Expanded divestment opportunity pursuant to termination of U.S. license agreement with Covidien for C2L for a one time payment of $US1.2M to Ambrilia.

- Poster presentation on the new HIV integrase inhibitors at the XVII International Drug Resistance Workshop.

ONCOLOGY

C2L octreotide: Phase III results confirm safety and efficacy

Ambrilia's C2L is a proprietary prolonged release formulation of octreotide. The original product is commercialized as Sandostatin LAR® indicated for acromegaly and some rare digestive tumors. Acromegaly is a serious chronic condition related to a permanent hypersecretion of Growth Hormone (GH) by the pituitary gland, generally of tumoral origin.

Ambrilia reported last May the 24-week Phase III (Study 301) top-line results for its C2L, confirming its safety and efficacy in acromegaly patients, and its ability to replace Sandostatin LAR® with less frequent injections and non-inferior efficacy on GH and Insulin-like Growth Factor 1 (IGF-1) levels. The Company is moving forward with its planned Phase III clinical program and expects to report long-term safety data for its C2L 30mg dose (Study 302) during the third quarter of 2008 (Q3/08).

The Company still expects the regulatory filings to be initiated during the second half of 2008 (H2/08). Having recently regained the marketing rights to the U.S. which accounts for approximately 50% of the worldwide market, Ambrilia is currently exploring different divestment avenues with third parties, aiming to extract the maximum value from this asset by year end.

Novel formulation of goserelin: initiation of Phase I/II clinical program

Ambrilia's goserelin formulation is potentially the first-to-market generic to Zoladex® 3-month biodegradable implant, a top Luteinizing Hormone-Releasing Hormone (LHRH) analogue indicated for hormone-sensitive prostate cancer and several gynecological indications.

The Company has initiated its first Phase I/II multicenter study designed to assess the hormonal efficacy, pharmacokinetic (PK) and safety of its formulation of goserelin in prostate cancer patients.

The goserelin formulation is manufactured by Ambrilia at its GMP (Good Manufacturing Practice) facilities in Montreal, and as previously reported, the Company aims at divesting this product by the end of 2008. Discussions with potential acquirers are ongoing.

Therapeutic Peptide PCK3145: out-licensing discussions ongoing

Ambrilia's PCK3145 is a patented, non-toxic, therapeutic peptide for the treatment of advanced metastatic prostate cancer which completed Phase I/II studies in the U.K and in the U.S. The Company is pursuing its discussions with potential acquirers.

NGR-Delivery Technology: in vivo proof-of-concept with a siRNA validated

Ambrilia's targeted delivery technology uses a proprietary peptide (NGR peptide) coupled with a carrier. The Company has completed and validated its second proof-of-concept applied to a siRNA, showing its efficient delivery to the tumor tissue, internalization and suppression of a cancer-promoting gene. Ambrilia aims to divest its NGR-Delivery Technology by the end of 2008.

ANTIVIRALS

PPL-100/MK-8122: Merck puts development on hold pending outcome of additional work

On July 28, Ambrilia announced it was advised by Merck & Co. that HIV protease inhibitor PPL-100, also known as MK-8122, had been placed on a development hold pending outcome of additional basic science efforts to evaluate other precursors of the drug (prodrugs) and formulation options. Merck is also further exploring development of potential back-up compounds. Merck completed single-dose and multi-dose Phase I studies of MK-8122 in healthy volunteers.

The exclusive license agreement between the companies entered into on October 12, 2006 provides for additional milestone-based cash payments and royalties on the future development and commercialization of each back-up compound and/or related compounds developed by Merck and which fall within the scope of the Ambrilia HIV protease inhibitor program.

Protease inhibitors are a key component to the current HIV/AIDS standard of care, the Highly Active Anti-Retroviral Treatment (HAART) consisting of a cocktail of HIV medicines.

Antiviral portfolio: on track to generate a preclinical drug candidate

HIV Integrase Inhibitor Program

Ambrilia presented a Poster on its novel series of HIV integrase inhibitors, entitled "Small Molecule Inhibitors of HIV-1 Integrase" during the XVII International HIV Drug Resistance Workshop held June 10-14 in Sitges, Spain. The Company continues to advance this program.

Targeting HIV, Hepatitis C and Influenza A

R&D activities are also ongoing in Ambrilia's other early-stage virology programs including HIV entry inhibitors, Hepatitis C Virus (HCV) inhibitors and anti-Influenza A compounds.

The Company's goal is to generate at least one preclinical drug candidate by the first half of 2009 (H1/09) among its lead antivirals.

RESULTS OF OPERATIONS

Quarter ended June 30, 2008 compared with the Quarter ended June 30, 2007

The Company incurred a net loss of $3,126,246 or $0.07 per common share for the second quarter of 2008, compared with a net loss of $6,755,307 or $0.22 per common share for the same quarter last year.

Revenues for the second quarter of 2008 were $3,714,363, compared with $202,755 in the corresponding quarter last year. The higher revenues resulted primarily from the payment from Mallinckrodt Inc., a Covidien Company of $1.2 million under the May 13, 2008 termination agreement whereby Mallinckrodt Inc. relinquished all license and marketing rights to C2L octreotide. In addition, an amount of $2.4 million was recognized as license revenue in the current quarter relating to previous milestones received from Mallinckrodt Inc. which had been included in deferred revenue, but for which no future obligations now exist.

Research and development expenses amounted to $3,069,019 in the second quarter of 2008, compared with $2,171,042 in the same quarter last year. The increase of $897,977 resulted primarily from increased expenditures on C2L octreotide, which is in clinical trials, goserelin, and the HIV integrase inhibitor and HCV polymerase inhibitor programs. Research and development tax credits increased to $289,644 in the current quarter from $96,300 in the corresponding quarter last year. The increase in the current quarter reflects the higher spending compared to the second quarter of 2007 and the higher rate of tax credits available in France effective January 1, 2008.

General and administrative expenses amounted to $1,488,491 in the second quarter of 2008, a decrease of $735,080 over the total of $2,223,571 for the same quarter last year. The variation was primarily due to non recurring charges in 2007 of $877,700 relating to the departure of a former executive.

Business development expenses amounted to $361,025 in the second quarter of 2008, compared to $235,176 for the same quarter last year. The increase of $125,849 was primarily due to consulting fees incurred in relation to the Company's divesting strategy, partially offset by lower compensation costs following the departure of the former Executive Vice-President Business Development, Licensing and IP on February 29, 2008. These amounts are segregated on the statement of operations for the first time and were previously included with research and development and general and administrative expenses.

Amortization expense increased to $2,397,443 in the current quarter from $2,215,816 in the same quarter last year. The increase resulted primarily from the added amortization on intellectual property arising from the acquisition of additional shares of Ambrilia France in September 2007 and March 2008, under the terms of the original offer to Ambrilia France shareholders made in January 2006. The final tranche was acquired in March 2008.

Interest on long-term debt was $236,933 in the second quarter of 2008, compared to $261,568 in the same quarter last year. The decrease was due to the lower interest expense on the Biolevier loan as a result of the decrease in the Canadian prime rate in the current quarter compared to the second quarter of 2007.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents and short-term investments totaled $16,523,379 at June 30, 2008, compared with $25,399,921 at December 31, 2007. The decrease of $8,876,542 resulted from the utilization of $8,569,311 to finance operating activities for the first half of 2008, including an increase of $2,451,542 in non-cash working capital. In addition, a net amount of $307,231 was used in the period for additional property, plant and equipment and intellectual property.

The Company anticipates that it will have sufficient cash to finance its activities for at least the next 12 months. In order to continue to achieve this, consistent with its corporate strategy, the Company will need to reduce its current level of expenses, either through the divesture of technologies or by cutback in spending on other programs. It may also require additional financing.

OUTSTANDING SHARE DATA

As of July 30, 2008 the number of common shares outstanding is 48,580,612, an increase of 1,065,296 from December 31, 2007. The increase results from the issue of 448,318 shares in connection with the acquisition of additional shares of Ambrilia France and 616,978 shares issued as payment of interest for the first half of 2008 on the convertible debentures. The number of stock options outstanding at July 30, 2008 is 1,690,121, an increase of 666,854 from December 31, 2007. The increase resulted from a total of 699,199 new options having been granted during the period, partially offset by 32,345 options forfeited. In addition, 15,877,037 warrants are outstanding on July 30, 2008, a decrease of 1,188,604 from December 31, 2007 resulting from the exercise of 448,318 acquisition warrants relating to the Ambrilia France acquisition and the expiry of 370,143 broker compensation warrants related to the March 1, 2006 private placement together with an equal number of warrants attached thereto.



AMBRILIA BIOPHARMA INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)

As at June 30, December 31,
2008 2007
$ $
-------------------------------------------------------------------------

ASSETS
Current assets
Cash and cash equivalents 9,791,801 10,795,297
Short-term investments 6,731,578 14,604,624
Accounts receivable 302,165 411,892
Investment tax credits recoverable 933,218 642,352
Prepaid expenses 406,385 175,738
-------------------------------------------------------------------------
18,165,147 26,629,903
Long-term receivables 1,630,919 1,214,712
Property, plant and equipment 2,004,587 2,133,196
Intellectual property 46,094,300 48,657,580
-------------------------------------------------------------------------
67,894,953 78,635,391
-------------------------------------------------------------------------
-------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities 4,518,425 3,743,044
Deferred license revenues 1,129,028 3,527,958
-------------------------------------------------------------------------
5,647,453 7,271,002
Minority interest 1 1
Biolevier loan facility 8,263,765 8,205,038
Future income tax liability 3,409,553 4,347,762
Convertible debentures 2,739,446 2,568,034
-------------------------------------------------------------------------
20,060,218 22,391,837
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Shareholders' equity
Share capital 139,508,253 137,951,135
Warrants 8,610,715 8,610,715
Contributed surplus 8,846,994 8,502,544
Equity component of convertible debentures 1,920,914 1,920,914
Deficit (111,052,141) (100,741,754)
-------------------------------------------------------------------------
47,834,735 56,243,554
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67,894,953 78,635,391
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AMBRILIA BIOPHARMA INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS, DEFICIT AND COMPREHENSIVE LOSS
(unaudited)

Three months ended Six months ended
June 30, June 30,
2008 2007 2008 2007
$ $ $ $
-------------------------------------------------------------------------

REVENUES
License revenue 3,569,742 7,101 3,580,688 14,465
Interest revenue on
cash, cash
equivalents and
short term investments 138,369 180,762 384,913 366,008
Other income 6,252 14,892 9,252 30,289
-------------------------------------------------------------------------
3,714,363 202,755 3,974,853 410,762
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EXPENSES
Research and
development 3,069,019 2,171,042 6,167,457 4,666,370
Research and
development
tax credits (289,644) (96,300) (583,467) (370,254)
-------------------------------------------------------------------------
Net research and
development 2,779,375 2,074,742 5,583,990 4,296,116
General and
administrative 1,488,491 2,223,571 3,195,060 4,440,241
Business development 361,025 235,176 647,969 531,137
Patent expenditures 34,773 15,522 50,597 32,363
Amortization of
property, plant
and equipment 140,883 132,506 278,769 256,466
Amortization of
intellectual property 2,256,560 2,083,310 4,454,422 4,130,273
Accretion on Biolevier
loan facility 29,415 29,079 58,727 57,896
Accretion on
convertible debentures 87,117 60,973 171,412 139,886
Interest on Biolevier
loan facility 175,683 200,318 371,795 398,434
Interest on
convertible debentures 61,250 61,250 122,500 122,500
Financial charges 8,351 9,357 11,045 38,457
Restructuring charges - - 608,901 -
Foreign exchange
(gain) loss 26,205 68,085 (32,285) 54,824
-------------------------------------------------------------------------
7,449,128 7,193,889 15,522,902 14,498,593
-------------------------------------------------------------------------
Loss before
income taxes (3,734,765) (6,991,134) (11,548,049) (14,087,831)

Future income tax
recovery (expense) 620,701 (180,320) 1,059,993 910,985
Foreign exchange gain
(loss) on future
income tax liability (12,182) 416,147 177,669 309,158
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608,519 235,827 1,237,662 1,220,143
-------------------------------------------------------------------------

Net loss and
comprehensive
loss for the
period (3,126,246) (6,755,307) (10,310,387) (12,867,688)
Deficit, beginning
of period (107,925,895) (81,576,276)(100,741,754) (75,463,895)
-------------------------------------------------------------------------
Deficit, end of
period (111,052,141) (88,331,583)(111,052,141) (88,331,583)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Basic and diluted
loss per share (0.07) (0.22) (0.22) (0.43)
Weighted average
number of common
shares
outstanding 47,969,562 30,648,112 47,810,058 30,033,368
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AMBRILIA BIOPHARMA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

Three months ended Six months ended
June 30, June 30,
2008 2007 2008 2007
$ $ $ $
-------------------------------------------------------------------------

OPERATING ACTIVITIES
Net loss for
the period (3,126,246) (6,755,307) (10,310,387) (12,867,688)
Items not affecting
cash
Amortization of
property, plant
and equipment 140,883 132,506 278,769 256,466
Amortization of
intellectual
property 2,256,560 2,083,310 4,454,422 4,130,273
Accretion on
Biolevier loan
facility 29,415 29,079 58,727 57,896
Accretion on
convertible
debentures 87,117 60,973 171,412 139,886
Interest paid by
issuance of
common shares 122,500 122,164 122,500 122,164
Future income tax
recovery and
related exchange
(gain) loss (608,519) (235,827) (1,237,662) (1,220,143)
Unrealized foreign
exchange gain on
loan payable - (9) - (2,451)
Services paid by
issuance of stock
options 140,169 88,476 344,450 408,009
Compensation paid
by issuance of
common shares - (24,800) - 100,000
-------------------------------------------------------------------------
(958,121) (4,499,435) (6,117,769) (8,875,588)
Net change in non-cash
balances relating to
operations (2,479,880) (260,371) (2,451,542) (1,781,694)
-------------------------------------------------------------------------
Cash flows related
to operating
activities (3,438,001) (4,759,806) (8,569,311) (10,657,282)
-------------------------------------------------------------------------

INVESTING ACTIVITIES
Acquisition of
intellectual property (24,655) (41,841) (182,894) (143,157)
Acquisition of property,
plant and equipment (14,121) (361,440) (125,014) (573,458)
Proceeds from disposal
of property, plant and
equipment 407 500 677 500
Purchase of short-term
investments (6,731,578) (4,420,745) (6,731,578) (5,410,025)
Maturities of short-
term investments 8,812,340 3,438,005 14,604,624 20,193,030
Cash flows related to
investing activities 2,042,393 (1,385,521) 7,565,815 14,066,890

FINANCING ACTIVITIES
Issuance of common
shares - 5,849,995 - 5,861,127
Share issuance costs - (189,127) - (189,127)
Repayment of loan payable - - - (766,391)
-------------------------------------------------------------------------
Cash flows related to
financing activities - 5,660,868 - 4,905,609
-------------------------------------------------------------------------

Net increase (decrease)
in cash and cash
equivalents (1,395,608) (484,459) (1,003,496) 8,315,217
Cash and cash
equivalents,
beginning of
period 11,187,409 11,955,530 10,795,297 3,155,854
-------------------------------------------------------------------------
Cash and cash
equivalents, end
of period 9,791,801 11,471,071 9,791,801 11,471,071
-------------------------------------------------------------------------
-------------------------------------------------------------------------


CONFERENCE CALL AND WEBCAST DETAILS

Ambrilia will be hosting a conference call and webcast on Monday, August 11, 2008 at 9:00 am ET to discuss its second quarter financial results and most recent developments. The call will be moderated by Dr. Philippe Calais, President and Chief Executive Officer, who will be joined by Ms. Monique Letourneau, Executive Vice-President, Finance and Chief Financial Officer.

Interested parties may access the conference call by way of telephone or webcast. The numbers to access the conference call are 416 644 3417 (international) and 1 800 731 5319 (toll free). The webcast will be available on the Company's website at www.ambrilia.com, Investors' section, Conference calls and webcasts, and will be archived for 365 days.

A replay of the call will be available on the Company's website at www.ambrilia.com, Investors' section, Conference calls and webcasts, from Monday, August 11, 2008, 11:00 am ET to Monday, August 18, 2008, 11:59 pm ET, and the numbers to access the replay are 416 640 1917 (international) and 1 877 289 8525 (toll free) with access code 21278770.

Sandostatin LAR® is a registered trademark of Novartis

AG Zoladex® is a registered trademark of AstraZeneca PLC

AMBRILIA'S FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements that reflect the Company's current expectation regarding future events. There is a risk that expectations and forward looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on these forward-looking statements as they involve risks and uncertainties, which could make actual results differ materially from those projected herein and depend on a number of factors including, but not limited to, changing market conditions, successful and timely completion of clinical studies, uncertainties related to the regulatory approval process, establishment of corporate alliances and other risks detailed from time to time in the Company's filings. We refer you to the Risk Factors section of the Company's annual information form which contains a more exhaustive analysis of the risks and uncertainties that are generally connected to the business of the Company. Such statements are also based on various assumptions, including the successful and timely completion of clinical studies on Ambrilia's products demonstrating efficacy and safety for human use, their successful commercialization within the forecasted timelines and the attainment of the forecasted milestone payments and other revenues. While Ambrilia anticipates that subsequent events and developments may cause Ambrilia's views to change, Ambrilia specifically disclaims any obligation to update these forward looking statements, unless obligated to do so by applicable securities laws.

ABOUT AMBRILIA BIOPHARMA

Ambrilia Biopharma Inc. (TSX:AMB) is a biotechnology company focused on the discovery and development of novel treatments for viral diseases and cancer. The Company's strategy aims to capitalize on its broad portfolio and original expertise in virology. Ambrilia's product portfolio is comprised of oncology and antiviral assets, including two new formulations of existing peptides for cancer treatment, a therapeutic peptide for prostate cancer, a targeted delivery technology for cancer, an HIV protease inhibitor program (exclusive worldwide rights granted to Merck & Co., Inc.) as well as HIV integrase and entry inhibitors, Hepatitis C virus inhibitors and anti-Influenza A compounds. Ambrilia's head office, research and development and manufacturing facilities are located in Montreal with a regional office in France.

For more information, please visit the Company's web site: www.ambrilia.com

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