Inflazyme Pharmaceuticals Ltd.
TSX : IZP

Inflazyme Pharmaceuticals Ltd.

November 14, 2007 17:00 ET

Inflazyme Pharmaceuticals Ltd.: Financial Results for the Second Quarter Ended September 30, 2007

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 14, 2007) - Inflazyme Pharmaceuticals Ltd. (TSX:IZP) today announced its second quarter financial results for the period ended September 30, 2007.

Results of operations for the second quarter ended September 30, 2007

The net loss for the second quarter ended September 30, 2007 was $321,000 ($0.00 per common share) compared to a net loss of $2,939,000 ($0.03 per common share) for the second quarter ended September 30, 2006. The decrease in the loss of $2,618,000 or 89% for the quarter ended September 30, 2007 was mainly due to a decreased loss from operations and the recognition of a gain on deferred licensing revenue.

The net loss for the six months ended September 30, 2007 was $1,014,000 ($0.01 per common share) compared to $5,769,000 ($0.05 per common share) for the same period in the prior year. The decrease of $4,755,000 or 82% was mainly due to a decrease in the loss from operations and a gain on the sale of research equipment and a gain on deferred licensing revenue.

Loss from operations for the second quarter ended September 30, 2007 was $580,000 compared to $3,042,000 in the same quarter of the prior year. The decrease of $2,462,000 or 81% in the loss from operations was due primarily to a discontinuation of research and development (R&D) activities and lower amortization expenses.

Loss from operations for the six months ended September 30, 2007 was $1,944,000 compared to $5,990,000 for the same period in the prior year. The decrease of $4,046,000 or 68% in the loss from operations was due primarily to the discontinuation of R&D activities, and lower amortization expenses.

Research and development expenses

The Company discontinued substantially all of its R&D activities in February 2007. Consequently the decrease in R&D reflects a reduction in contract research and development expenses, a reduction in personnel expenses and a reduction in laboratory related expense. Furthermore, during the quarter the Company received the final invoices from its third party contract research organizations related to the Phase 2b study, which was substantially completed in March 2007. The final invoices were less than the estimated accrued liabilities recognized for this study and accordingly the Company reduced the accrued liabilities in the current period to reflect the final invoice amounts. This change reduced the accrued liabilities by $379,000 and was recorded as a reduction of the R&D expense for the quarter, resulting in a recovery of R&D expenses for the quarter and six months ended September 30, 2007.

R&D recovery for the quarter ended September 30, 2007 was ($302,000) compared to expenses of $2,027,000 for the corresponding quarter last year, a decrease of $2,329,000. Research and development recovery for the six months ended September 30, 2007 was ($77,000) compared to expenses of $3,656,000 for the corresponding period last year.

General and administration expenses

For the quarter ended September 30, 2007, general and administration (G&A) expenses were $873,000 compared to $848,000 in same quarter of the prior year. An increase of $25,000 or 3% was due to higher professional fees and overhead costs partially offset by lower personnel expenses. Personnel expenses were $349,000 for the current quarter, a decrease of $179,000 from the corresponding quarter last year. The decrease resulted from the staff terminations that were effected in February 2007. Professional fees were $292,000 for the current quarter an increase of $118,000 compared to the corresponding quarter last year. Professional fees increased because of patent related expenses of $94,000 which were included in general and administration expenses. In the corresponding quarter last year these expenses were capitalized as patent and licenses or they were allocated to R&D. In addition, overhead costs were not allocated to R&D this quarter resulting in additional costs of $80,000 charged to G&A.

G&A expenses for the six months ended September 30, 2007 were $1,961,000 compared to expenses of $2,000,000 for the corresponding period last year. Professional fees for patents and overhead costs totalling $596,000 from R&D were directly charged or allocated to G&A for the current six months period ended. In comparison, professional fees for patents were expensed to R&D or capitalized, and overhead costs were allocated to R&D for the same period in the prior year.

Amortization expenses

For the quarter ended September 30, 2007, amortization expense was $31,000 compared to $177,000 in the corresponding quarter of the prior year. The amortization expense decreased in the current quarter primarily due to lower property and equipment assets. There were no additions during the current quarter. No depreciation was taken on the patent and license held for sale for the current quarter ended in accordance with Canadian generally accepted accounting principles.

Amortization expenses were $93,000 for the six months ended September 30, 2007 compared to $353,000 for the corresponding period last year for a decrease of $260,000 or 74%.

Interest income

For the quarter ended September 30, 2007, interest revenue was $33,000 compared to $103,000 in the same quarter of the prior year. The decrease of $70,000 or 68% was due to lower cash and cash equivalent balances.

Interest revenue was $80,000 for the six months ended September 30, 2007 compared to $221,000 in the same period of last year for a decrease of $141,000 or 64%.

Gain on deferred licensing revenue

In January 2003, the Company granted a limited license to a compound from its library of phosphodiesterase (PDE) 4 inhibitors in exchange for a non-refundable license fee of $383,000 and an option to participate equally in the development and commercialization of the compound beyond Phase 2a. The upfront fee was recorded as deferred licensing revenue and was being recognized as revenue over 10 years, the estimated expected period of the Company's involvement with the development of this compound. The option was exercisable up to 90 days after the completion of the first Phase 2a study, by the Company paying one-half of the development costs incurred from the start of Phase 1.

In August 2007, the Company allowed the option to expire and is no longer involved in the development of the compound. Accordingly, the deferred licensing revenue balance was reduced to nil and a gain on deferred licensing revenue of $211,000 was recognized in the consolidated statement of operations and deficit during the quarter.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2007 the Company's cash and cash equivalents totalled $1,919,000 compared to $5,461,000 at March 31, 2007. Working capital at September 30, 2007 was $2,299,000 compared to $3,439,000 at March 31, 2007. The decrease in working capital primarily reflects the decrease in cash and cash equivalents of $3,542,000 offset by a decrease in accounts payable and accrued liabilities of $2,492,000. The accounts payable and accrued liabilities balance at September 30, 2007 is $579,000.

The Company used $1,613,000 to fund operations during the quarter ended September 30, 2007 compared with $1,721,000 for the same quarter last year. For the six months ended September 30, 2007 the Company used $4,257,000 compared to $4,245,000 same period in the prior year.

Cash from investing activities for the quarter ended September 30, 2007 was $15,000 compared to cash used in investing activities of $25,000 for the corresponding quarter in the prior year. In the current quarter, the cash from investing activities relates to the proceeds from the sale of the research equipment. For the six months ended September 30, 2007, cash from investing activities was $715,000 compared to $90,000 used in the same period of last year.

On September 24, 2007, the Company entered into a definitive asset purchase agreement to sell its patents and licenses related to its PDE inhibitors, the LSAIDs and its protein therapeutics technology to Biolipox AB, a private Swedish pharmaceutical company. Biolipox was very recently acquired by Orexo AB, a public Swedish pharmaceutical company (OMX Nordic List, Mid Cap:ORX).

Under the terms of the agreement, the Company is to receive $4 million upon closing of the transaction, and an additional $7 million is to be paid upon the successful achievement of certain milestones as follows: (i) $1.5 million upon a decision to enter a Phase 2b clinical study with a PDE inhibitor; (ii) $2.5 million upon a decision to initiate a Phase 3 study with a PDE inhibitor; and (iii) $3 million upon a decision to begin a Phase 3 clinical study with an LSAID™. The purchaser will also pay a modest royalty on net sales of the first PDE inhibitor commercialized.

In addition to these amounts, the Company is to receive up to 35% of the proceeds from the subsequent sale of its protein therapeutics technology if these assets are sold within 12 months of the Biolipox transaction closing.

There can be no assurance that the milestones, royalty, and payments related to the sale of the protein technology will be achieved.

The Biolipox agreement is subject to approval by the Company's shareholders at its AGM and Special Meeting of Shareholders to be held on November 16, 2007 in Vancouver, and is also subject to approval by the regulatory authorities as well satisfying other customary closing conditions. The transaction is expected to close no later than November 30, 2007. If the transaction does not close, then the Company may choose to terminate its operations at that time so as to conduct an orderly wind up of its operations and liquidate its assets.

Subsequent to closing the transaction, the Company's Board of Directors will determine whether it is in the shareholders' best interest for the Company to distribute the proceeds from the transaction directly to shareholders, or to seek to merge the Company, or undertake some combination of these two choices. The Board of Directors expects to make a decision by December 31, 2007, or sooner.

About Inflazyme

Inflazyme Pharmaceuticals is a biopharmaceutical company pioneering medical breakthroughs to transform the lives of patients with respiratory and inflammatory diseases worldwide. Further information on the Company may be obtained from its website at www.inflazyme.com.

Statements in this news release other than historical information are forward-looking statements subject to risks and uncertainties. Actual results could differ materially depending on factors such as the availability of resources, the timing and effects of regulatory actions, the strength of competition, the outcome of litigation and the effectiveness of patent protection. Additional information regarding risks and uncertainties is set forth in the current Annual Information Form for Inflazyme on file with the Canadian Securities Commissions. The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this information.



Inflazyme Pharmaceuticals Ltd.
Consolidated Balance Sheets

(Unaudited)
September 30, March 31,
2007 2007
---------------- --------------

Assets

Current assets
Cash and cash equivalents $ 1,919,464 $ 5,461,316
Accounts receivable 85,035 109,944
Assets held for sale 605,791 680,760
Prepaid expenses 268,359 257,402
---------------- --------------

2,878,649 6,509,422

Property and equipment 83,882 176,833

---------------- --------------
$ 2,962,531 $ 6,686,255
---------------- --------------
---------------- --------------

Liabilities

Current liabilities
Accounts payable and accrued
liabilities $ 579,498 $ 3,070,645

Deferred licensing revenue - 229,950
---------------- --------------

579,498 3,300,595
---------------- --------------

Shareholders' equity

Capital stock 141,212,889 141,212,889

Contributed surplus 2,215,525 2,204,392

Deficit (141,045,381) (140,031,621)
---------------- --------------
2,383,033 3,385,660

---------------- --------------
$ 2,962,531 $ 6,686,255
---------------- --------------
---------------- --------------



On behalf of the board

Kevin Mullane (signed) Louis Drapeau (signed)
---------------------- ----------------------
President and CEO Director
Director



Inflazyme Pharmaceuticals Ltd.
Consolidated Statements of Operations and Deficit
(Unaudited)


For the Three Months Ended For the Six Months Ended
--------------------------------------------------------------
September 30, September 30, September 30, September 30,
2007 2006 2007 2006
--------------------------------------------------------------

Revenues
Licensing
revenue $ 22,061 $ 9,627 $ 31,642 $ 19,246
--------------------------------------------------------------

Expenses

Research and
development (301,879) 2,026,942 (77,417) 3,656,043
General and
administration 873,477 848,243 1,960,534 1,999,891
Amortization of
property,
equipment,
patents and
licenses 30,656 176,926 92,953 353,177
--------------------------------------------------------------

602,254 3,052,111 1,976,070 6,009,111
--------------------------------------------------------------

Loss from
operations (580,193) (3,042,484) (1,944,428) (5,989,865)
--------------------------------------------------------------

Interest
income 33,283 103,283 79,738 221,251

Gain on
sale of
fixed
assets 15,020 - 640,142 -

Gain on
deferred
licensing
revenue 210,788 - 210,788 -

--------------------------------------------------------------
Loss for
the period (321,102) (2,939,201) (1,013,760) (5,768,614)

Deficit,
beginning
of period (140,724,279) (127,476,632) (140,031,621) (124,647,219)
--------------------------------------------------------------

Deficit,
end of
period $(141,045,381) $ (130,415,833) $ (141,045,381) $ (130,415,833)
--------------------------------------------------------------
--------------------------------------------------------------

Basic and
diluted
loss per
common
share $ (0.00) $ (0.03) $ (0.01) $ (0.05)
--------------------------------------------------------------
--------------------------------------------------------------

Weighted
average
number of
common
shares
outstanding 131,181,375 113,534,375 131,181,375 113,534,375
--------------------------------------------------------------
--------------------------------------------------------------


Inflazyme Pharmaceuticals Ltd.
Consolidated Statements of Cash Flows
(Unaudited)


For the Three Months Ended For the Six Months Ended
--------------------------------------------------------------
September 30, September 30, September 30, September 30,
2007 2006 2007 2006
--------------------------------------------------------------

Cash flows
from
operating
activities
Loss for the
period $ (321,102) $ (2,939,201) $(1,013,760) $ (5,768,614)
Items not
affecting
cash:
Amortization
of property,
equipment,
patents and
licenses 30,656 176,926 92,953 353,177
Gain on sale
of fixed
assets (15,020) - (640,142) -
Gain on
deferred
licensing
revenue (210,788) - (210,788) -
Deferred
licensing
revenue (9,581) (9,582) (19,162) (19,163)
Stock-based
compensation 3,748 14,751 11,133 57,125
--------------------------------------------------------------
(522,087) (2,757,106) (1,779,766) (5,377,475)

Changes in
non-cash
working
capital (1,091,070) 1,035,732 (2,477,198) 1,132,435
--------------------------------------------------------------
(1,613,157) (1,721,374) (4,256,964) (4,245,040)
--------------------------------------------------------------

Cash flows
from
investing
activities
Purchase of
property and
equipment - - - (4,235)
Patents and
licenses - (24,823) - (85,417)
Proceeds
from sale
of fixed
assets 15,020 - 715,112 -
--------------------------------------------------------------
15,020 (24,823) 715,112 (89,652)

--------------------------------------------------------------
Decrease
in cash
and cash
equivalents (1,598,137) (1,746,197) (3,541,852) (4,334,692)

Cash and
cash
equivalents,
beginning
of period 3,517,601 10,220,592 5,461,316 12,809,087
--------------------------------------------------------------

Cash and
cash
equivalents,
end of
period $ 1,919,464 $ 8,474,395 $ 1,919,464 $ 8,474,395
--------------------------------------------------------------
--------------------------------------------------------------

Supplemental
disclosure
of cash flow
information
Interest paid - - - -
Interest
received 36,100 108,901 79,738 209,203


Contact Information

  • Inflazyme Pharmaceuticals Ltd.
    Julie Rezler
    Sr. Director, Corporate Development
    1-800-315-3660 or (604) 279-8511
    (604) 279-8711 (FAX)
    Email: ir@inflazyme.com
    Website: www.inflazyme.com