Forbes Medi-Tech Inc.
OTC Bulletin Board : FMTI

November 14, 2007 16:05 ET

Forbes Medi-Tech Announces Third Quarter 2007 Financial Results

Company Reports 33% Increase in Revenues Over Previous Year

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 14, 2007) - Forbes Medi-Tech Inc. (TSX:FMI)(NASDAQ:FMTI) today announced its financial results for the three and nine-month periods ended September 30, 2007. Comparative periods for these statements are the three months and nine months ended September 30, 2006, respectively. All amounts are in Canadian Dollars unless otherwise noted.

Third Quarter 2007 Highlights

- Reported revenues of $2.4 million for the three months ended September 30, 2007 compared to $1.8 million for the three months ended September 30, 2006, an increase of 33%

- Reported revenues of $6.7 million for the nine months ended September 30, 2007 compared to $4.4 million for the nine months ended September 30, 2006, an increase of 52%

- Announced the launch of a Reducol™-based milk drink with Taiwan's largest drink producer, Uni-President

"We have increased revenue guidance in recent weeks, entered the final stages of compound selection for our pharmaceutical development program and taken steps to reduce excess inventory," said Charles Butt, President and CEO of Forbes Medi-Tech Inc. "For the remainder of 2007, we anticipate more product launches, the completion of compound selection and exploring non-dilutive opportunities that will improve the company's financial position."

Drug Development

Forbes has entered the final stages of compound selection for two of the most rapidly growing therapeutic indications, asthma and type 2 diabetes. Compounds in development are chosen on the basis of selectivity (the ability to home in on one receptor), potency and pharmacokinetics (drug distribution in the body over time). The FM-TP2000 Series targeting type 2 diabetes are based on the neural signal, following a meal, which is known to increase insulin secretion from pancreatic beta cells. The FM-TP3000 Series targeting asthma are inhaled VPAC2 agonists. Other investigational VPAC2 agonists have demonstrated immediate bronchodilatation with the potential for anti-inflammatory effects. The compound differs from long-acting Beta2 adrenoceptor agonists by working through a different receptor and mechanism.

Upon successful completion of current studies underway, it is expected that a compound from the FM-TP3000 Series targeting asthma would be confirmed this quarter and a compound from the FM-TP2000 Series targeting diabetes would be selected early in 2008.

Nutritional Business

Revenue from sales of Forbes cholesterol-lowering ingredient, Reducol™, and other cholesterol-lowering ingredients and value added products have grown 33% over the same quarter last year. Where the company has enjoyed several product launches in other parts of the world, the U.S. market penetration remains to be a key focus for Forbes. The company is working with US food manufacturers in various stages of product development. While the timing and completion of the product development stage is unclear at this point, the company will update its shareholders in the event of a successful product launch.

Financial Results



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Summary: 3 month 3 month 9 month 9 month
('000's Cdn$ except per period period period period
share values and ended ended ended ended
number of shares) Sept. 30, Sept. 30, Sept. 30, Sept. 30,
(unaudited) 2007 2006 2007 2006
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Revenues $ 2,396 $ 1,802 $ 6,740 $ 4,438
Expenses (5,604) (5,267) (15,895) (17,419)
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Loss from continuing
operations $ (3,208) $ (3,465) $ (9,155) $ (12,981)
Provision for income taxes 64 (4) 282 (81)
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Net loss from continuing
operations $ (3,144) $ (3,469) $ (8,873) $ (13,062)

Income from discontinued
operations, net of
current tax expense - - - 305
Gain from disposal of
discontinued operations,
net of taxes - - - 6,627
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Net loss for the period $ (3,144) $ (3,469) $ (8,873) $ (6,130)
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Weighted average number of
shares 38,412,100 37,930,860 38,405,800 37,082,462
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Loss per share from continuing
operations
Basic and diluted $ (0.08) $ (0.09) $ (0.23) $ (0.35)
Income per share from
discontinued operations
Basic and diluted - - - 0.01
Gain per share from disposal
of discontinued operations
Basic and diluted - - - 0.18
Net loss per share
Basic and diluted $ (0.08) $ (0.09) $ (0.23) $ (0.16)
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Results of 'Continuing Operations'

The following table summarizes the company's results of continuing operations for the periods ended September 30, 2007 and September 30, 2006.



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3 month 3 month 9 month 9 month
Summary: period period period period
('000's Cdn$ except per ended ended ended ended
share values) Sept. 30, Sept. 30, Sept. 30, Sept. 30,
(unaudited) 2007 2006 2007 2006
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Revenues $ 2,396 $ 1,802 $ 6,740 $ 4,438
Expenses (5,604) (5,267) (15,895) (17,419)
Income taxes recovery (expense) 64 (4) 282 (81)
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Loss from continuing operations $ (3,144) $ (3,469) $ (8,873) $ (13,062)
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Loss per share from continuing
operations
Basic and diluted $ (0.08) $ (0.09) $ (0.23) $ (0.35)
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Loss from Operations

As the company continues to develop the FM-TP Series of Compounds, and to further widen the distribution of its nutraceutical products, Forbes expects to continue to report future operating losses from continuing operations.



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3 month 3 month 9 month 9 month
period period period period
Revenue: (summary) ended ended ended ended
('000's Cdn$) Sept. 30, Sept. 30, Sept. 30, Sept. 30,
(unaudited) 2007 2006 2007 2006
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Sales-phytosterol products $ 2,064 $ 1,030 $ 5,402 $ 3,032
Sales-finished goods (Forbes
Fayrefield Ltd.) 236 418 884 467
Licensing - 29 57 86
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Phytosterol revenues 2,300 1,477 6,343 3,585
Interest and other 96 325 397 853
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Total revenues $ 2,396 $ 1,802 $ 6,740 $ 4,438
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Total revenues - including interest income, for the three months ended September 30, 2007 were $2.4 million ($1.8 million - three months September 30, 2006) and $6.7 million for the nine months ended September 30, 2007 ($4.4 million - nine months ended September 30, 2006). This increase was due to increases in both sales of Reducol™ by Forbes and sales by Forbes-Fayrefield of finished products, such as margarine spread, spoonable yogurt, and yogurt drinks.

Expenses:



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3 month 3 month 9 month 9 month
period period period period
Expenses: (summary) ended ended ended ended
('000's Cdn$) Sept. 30, Sept. 30, Sept. 30, Sept. 30,
(unaudited) 2007 2006 2007 2006
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Cost of sales $ 2,826 $ 1,305 $ 6,439 $ 3,099
General & administrative 1,159 1,263 3,900 4,184
Research & development 793 1,997 2,841 7,122
Marketing, sales & product
development 352 686 1,244 1,812
Foreign Exchange loss (gain) 419 (20) 1,308 1,094
Depreciation & amortization 55 36 163 108
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Total expenses $ 5,604 $ 5,267 $ 15,895 $ 17,419
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Cost of sales for the three months ended September 30, 2007 totaled $2,826 thousand on phytosterol revenues of $2,300 thousand, or 123% of phytosterol revenues, versus $1,305 thousand on phytosterol revenues of $1,477 thousand for the three months ended September 30, 2006, or 88% of phytosterol revenues. In the three months ended September 30, 2007, Forbes recognized $491 thousand (September 30, 2006 - $nil) of inventory reserves on excess inventories and $437 thousand (September 30, 2006 - $nil) relating to losses on 2008 purchase commitments, which are included in Cost of Sales. Prior to the impact of these allowances in the three months ended September 30, 2007, Cost of Sales as a percentage of phytosterol revenues was 83% compared to 88% for the three months ended September 30, 2006.

Cost of Sales for the nine months ended September 30, 2007 totaled $6,439 thousand on phytosterol revenues of $6,343 thousand, or 102% of phytosterol revenues, versus $3,099 thousand on phytosterol revenues of $3,585 thousand for the nine months ended September 30, 2006, or 86% of phytosterol revenues. In the nine months ended September 30, 2007 the company recognized $961 thousand (September 30, 2006 - $nil) of inventory reserves on excess inventories, and $437 thousand (September 30, 2006 - $nil) relating to losses on 2008 purchase commitments, which are included in Cost of Sales. Prior to the impact of these allowances in the nine months ended September 30, 2007, Cost of Sales as a percentage of phytosterol revenues was 79% compared to 86% for the nine months ended September 30, 2006.

Fluctuations in Cost of Sales as a percentage of phytosterol revenue are attributable to a number of factors including the mix of products sold in a period, varying contractual sales terms, lower margins realized on the sales of finished goods sold through Forbes-Fayrefield and inventory valuation adjustments. In the past quarter Forbes has recognized inventory valuation and purchase commitment provisions which have resulted in an adverse impact on the Q3-07 margins. The company is working to improve its overall margins.

Research and development expenses ("R&D") for the three months ended September 30, 2007 totaled $0.8 million compared with $2.0 million for the same period in 2006. R&D expenses for the nine months September 30, 2007 totaled $2.8 million compared with $7.1 million for the same period in 2006. R&D expenditures in the first three quarters of 2007 were primarily spent on the FM-TP series of compounds and the finalization of work on the US FM-VP4 clinical trial. R&D expenses are expected to increase as work progresses on the FM-TP Series of Compounds.

Liquidity & Capital Resources

Cash, cash equivalents and working capital

As at September 30, 2007, the company's net cash and cash equivalents were $5.9 million compared with $15.3 million as at December 31, 2006. The company's working capital at September 30, 2007 was $11.6 million compared with $19.4 million at December 31, 2006. The decrease in cash and working capital in the quarter was mainly attributable to funding the loss from continuing operations.

After taking into account our planned research and development expenditures, our anticipated revenue, and assuming no unanticipated costs or expenses, we consider that our capital resources will be sufficient to finance operations into the beginning of the second quarter of 2008. The Company is diligently working to obtain additional funding, as well as to enhance its portfolio of products through potential strategic partnership and M&A activities.

Operations

During the three months ended September 30, 2007, the company used $2.5 million of cash for continuing operations compared with $5.4 million of cash used in the three months ended September 30, 2006. Net cash used in continuing operations for the third quarter of 2007 was primarily a result of the net loss for the period adjusted for non-cash expenses. During the nine months ended September 30, 2007, Forbes used $9.4 million of cash for continuing operations, primarily due to the operating loss offset by non-cash expenses, and decreases in non-cash operating liabilities, compared with $19.4 million used for continuing operations during the nine months ended September 30, 2006, primarily resulting from the net loss adjusted for non cash expenses, increases in non-cash operating assets, primarily inventories, and decreases in non cash operating liabilities, primarily the current tax liability.

Third Quarter 2007 Report

This news release includes by reference the Company's unaudited financial statements for the third quarter ended September 30, 2007, including the full Management Discussion & Analysis (MD&A). The MD&A and financial statements are being filed with applicable Canadian and U.S. regulatory authorities.

Conference Call and Webcast

A conference call and webcast to discuss these financial results will be held on Wednesday November 14, 2007 at 1:30pm PT. (4:30pmET) To participate in the conference call, please dial 800-952-4972 or (direct) 416-641-2140. For those investors unable to participate in the call, the live webcast can be accessed through the Company's website at www.forbesmedi.com. The call will also be available for replay until November 21, 2007 by calling 416-695-5800 or 800-408-3053 (passcode 3241670#). The webcast link will be archived on the Forbes website afterwards.

About Forbes Medi-Tech Inc.

Forbes Medi-Tech Inc. is a life sciences company dedicated to the research, development and commercialization of innovative products for the prevention and treatment of life-threatening disease. Our strategy and vision is to develop and market a portfolio of products for the benefit of all consumers, from the healthy person desiring consumer lifestyle products that can help reduce the risk of future disease, to medical patients needing therapeutic prescription products for the treatment of an established ailment.

This News Release contains forward-looking statements and information regarding Forbes' revenues, sufficiency of capital resources, research and development, additional product launches, selection of compounds from the FM-TP Series of Compounds, Forbes' strategy and vision, and other information related to future periods. Forward-looking statements and information can be identified by the use of forward-looking terminology such as "revenue guidance", "anticipate", "opportunities", "to develop", "working to", "will", "strategy", "vision", "future", "2008" or comparable terminology referring to future events or results. Forward-looking statements and information are statements and information about the future and are inherently uncertain. The Company's actual achievements and other results and occurrences could differ materially from those anticipated in these forward-looking statements and information due to a variety of risks, uncertainties and other factors, including, without limitation, the Company's need for additional future capital, which may not be available in a timely manner or at all; uncertainty whether the Company will be able to achieve its revenue guidance; the risk of unanticipated costs or expenses; reliance by the Company on its customers, strategic partners and suppliers for performance; uncertainty whether there will be additional product launches as anticipated or at all; uncertainty whether the Company will realize is strategies and vision; the need for additional research and development, the outcome of which is uncertain; uncertainty whether compound selection will occur as anticipated or at all; uncertainty as to market acceptance of the Company's and its customer's products; product liability, intellectual property and insurance risks; marketing risks; the risk of unknown side effects; the effect of competition; changes in business strategy or development plans; exchange rate fluctuations; as well as a description of other risks and uncertainties affecting the Company and its business, as contained in news releases and filings with the United States Securities and Exchange Commission and Canadian Securities Regulatory Authorities, any of which could cause actual results to vary materially from current results or the Company's anticipated future results. Forward-looking statements and information are based on the assumptions, beliefs, opinions and expectations of the Company's management at the time they are made, and the Company does not assume any obligation to update its forward-looking statements or information if those assumptions, beliefs, opinions or expectations or other circumstances should change.



FORBES MEDI-TECH INC.
CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of Canadian dollars)

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September 30 December 31
2007 2006
(unaudited)
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ASSETS
Current Assets
Cash and cash equivalents $ 5,851 $ 15,287
Accounts receivable 1,531 1,546
Income taxes recoverable 328 -
Inventories 6,204 6,093
Prepaid expenses and deposits 296 598
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14,210 23,524
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Long-term Assets
Fixed assets 508 552
Intangible and other assets 851 944
Goodwill 367 367
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$ 15,936 $ 25,387
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LIABILITIES and SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 1,999 $ 3,486
Current income tax liability 529 539
Deferred revenues - 58
Current portion of tenure allowance 38 -
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2,566 4,083
Long-term liabilities
Tenure allowance 944 954
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3,510 5,037
Shareholders' equity
Share capital 101,027 100,994
Contributed surplus 9,859 8,943
Deficit (98,460) (89,587)
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12,426 20,350
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$ 15,936 $ 25,387
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FORBES MEDI-TECH INC.
CONSOLIDATED STATEMENTS OF OPERATIONS, COMPREHENSIVE LOSS AND DEFICIT
(Expressed in thousands of Canadian dollars, except per share amounts)
(unaudited)

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Three months ended Nine months ended
Sept. 30 Sept. 30 Sept. 30 Sept. 30
2007 2006 2007 2006
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REVENUES
Sales $ 2,300 $ 1,448 $ 6,286 $ 3,499
Licensing - 29 57 86
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Phytosterol revenues 2,300 1,477 6,343 3,585
Interest and other 96 325 397 853
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2,396 1,802 6,740 4,438

EXPENSES
Cost of sales 2,826 1,305 6,439 3,099
General and administrative 1,159 1,263 3,900 4,184
Research and development 793 1,997 2,841 7,122
Marketing, sales and product
development 352 686 1,244 1,812
Foreign exchange loss (gain) 419 (20) 1,308 1,094
Depreciation and
amortization 55 36 163 108
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5,604 5,267 15,895 17,419
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Loss from continuing
operations for the
period before taxes (3,208) (3,465) (9,155) (12,981)
Discontinued Operations
Income from discontinued
operations, net of
current tax expense - - - 305
Gain from disposal of
discontinued operations,
net of current income tax
provision of $ 7,574
and future income tax
reduction of $ (845) - - - 6,627
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Net loss for the period
before taxes (3,208) (3,465) (9,155) (6,049)
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Provision for (recovery of)
income taxes 64 (4) 282 (81)
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Net loss and comprehensive
loss for the period $ (3,144) $ (3,469) $ (8,873) $ (6,130)

Deficit, beginning of period (95,316) (81,404) (89,587) (78,743)
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Deficit, end of period $ (98,460) $ (84,873) $ (98,460) $ (84,873)
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Weighted average number of
common shares
outstanding ('000's) 38,412 37,931 38,406 37,082

Basic and diluted loss per
share from
continuing operations $ (0.08) $ (0.09) $ (0.23) $ (0.35)
Basic and diluted income per
share from
discontinued operations - - - $ 0.01
Basic and diluted gain per
share from disposal
of discontinued operations - - - $ 0.18

Basic and diluted loss per
share $ (0.08) $ (0.09) $ (0.23) $ (0.16)
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FORBES MEDI-TECH INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of Canadian dollars)
(unaudited)

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Three months ended Nine months ended
Sept. 30 Sept. 30 Sept. 30 Sept. 30
2007 2006 2007 2006
--------------------------------------------------------------------------
OPERATIONS
Net loss for the period $ (3,144) $ (3,469) $ (8,873) $ (6,130)
Adjustments for:
Impairment of inventory 491 - 961 -
Loss on purchase commitment 437 - 437 -
Income from discontinued
operations, net of
taxes - - - (305)
Gain on sale of discontinued
operations, net
of taxes - - - (6,627)
Depreciation and amortization 55 36 163 108
Amortization of deferred
license revenues - (29) (57) (86)
Amortization of capitalized
financing fees - - - 26
Accretion of interest - - - 117
Stock-based compensation expense 14 296 942 1,658
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(2,147) (3,166) (6,427) (11,239)
Net change in non-cash operating
items from continuing
operations (313) (2,231) (2,931) (8,179)
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Net cash used in continuing
operations (2,460) (5,397) (9,358) (19,418)

Net cash provided by discontinued
operations - - - 1,922
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(2,460) (5,397) (9,358) (17,496)
INVESTMENTS
Acquisition of fixed assets (35) (15) (85) (76)
Proceeds on disposal of
Phyto-Source
manufacturing joint venture - - - 28,935
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(35) (15) (85) (28,859)
FINANCING
Issuance of common shares - 468 7 676
Decrease in long-term
liabilities from
discontinued operations - - - (330)
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- 468 7 346
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Increase (decrease) in cash and
cash equivalents (2,495) (4,944) (9,436) 11,709

Cash and cash equivalents,
beginning of period 8,346 25,951 15,287 9,298
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Cash and cash equivalents, end of
period $ 5,851 $ 21,007 $ 5,851 $ 21,007
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