Ondine Biopharma Corporation
TSX : OBP
AIM : OBP

Ondine Biopharma Corporation

March 24, 2010 08:26 ET

Ondine Biopharma Announces 2009 Year End Financial Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - March 24, 2010) - Ondine Biopharma Corporation (the "Company" or "Ondine") (TSX:OBP)(AIM:OBP) a medical technology company developing photodisinfection based products, today announced its financial results for the year ended December 31, 2009. All amounts are stated in Canadian dollars unless otherwise indicated.

"2009 was a remarkably productive year, despite the challenging financial markets. Significant progress was made on a number of fronts. Our performance demonstrates the dedication, commitment and creativity of the Ondine team", said Carolyn Cross, Chairman and CEO. "In the second quarter, Ondine sold its dental healthcare business for cash and residual economic benefits in order to focus resources on developing products for the large Hospital Acquired Infection ("HAI") market. In the second half of the year, Ondine reinforced this commitment to the HAI sector with the acquisition of Advanced Photodynamic Technologies, Inc. ("APT") and quickly integrated APT's HAI product development pipeline into the Ondine platform.

Ondine's most recent highlight was the submission and acceptance for filing of the PMA submission to the FDA for the Periowave Photodisinfection System, which is the first product developed and commercialized by Ondine that utilizes our platform technology. A key strength of Ondine's antimicrobial photodisinfection platform is its ability to address the growing superbug and antibiotic resistance problem, with cost effective, convenient user friendly approaches for clinicians and patients alike. We are very excited, therefore, to begin 2010 as a the leader in photodisinfection, focused on the HAI market."

HIGHLIGHTS

- Filed PMA Submission with FDA for Periowave™, and subsequently received acceptance of filing notification

- Disposition of Dental Assets to Periowave Dental Technologies Inc. for cash, royalties and potential milestone payments

- Acquired Advanced Photodynamic Technologies, Inc. through an equity exchange to become the global leader in photodisinfection (aPDT)

- Raised $3 million through equity financings and disposition of investment

- Achieved product development milestones for dental and medical markets, including additional Health Canada Licenses.

2009 FINANCIAL RESULTS

For the year ended December 31, 2009 (the "Current Year") the Company recorded a loss of $4.60 million, or $0.06 per common share, a decrease of $5.67 million (55%) when compared with the loss of $10.27 million, or $0.17 per common share, for the year ended December 31, 2008 (the "Prior Year"). Product sales revenue for Periowave™ laser base stations and treatment kits for the Current Year was $0.58 million generating a gross margin of $0.36 million (62.3%) compared to product sales of $0.91 million and gross profit margin of $0.18 million (20.4%) for the Prior Year. The Company prepares its consolidated financial statements in accordance with Canadian generally accepted accounting principles.

DEVELOPMENTS DURING 2009

Acquisitions and dispositions

On June 5, 2009, the Company completed the sale of its dental healthcare business (the "Dental Sale") to Periowave Dental Technologies Inc. ("PDT"), a Toronto-based privately held company. In addition to the net cash of $623,000 received from the closing of the Dental Sale in 2009, the Company benefits from the sale in a variety of other ways, including the gross margin the Company earns as continuing manufacturer of the Periowave™ product under a manufacturing and supply agreement with PDT; fees the Company receives pursuant to the terms of a management services agreement with PDT; and the royalties the Company earns on PDT's sales of Periowave™. The Company is also entitled to a net-receipts royalty if PDT enters into a licensing agreement for Periowave™ with a third party; milestone payments based on cumulative sales thresholds achieved by PDT; and, in lieu of future royalties and milestone payments, a share, based on a sliding scale over time, of the net sales proceeds if PDT sells the Dental Healthcare Business to a third party.

On December 7, 2009, the Company completed the acquisition of Advanced Photodynamic Technologies, Inc. ("APT") by issuing 8,856,458 of the Company's common shares for all of the common shares of APT. The former shareholders of APT are also entitled to receive contingent share consideration of up to an additional 11,187,105 common shares if all milestones are met and 5% of the net proceeds received by the Company from future third party transactions for the commercialization or acquisition of certain of APT's intellectual property. Products under development by APT are designed for the HAI market and utilize technology similar to the Company's existing Photodisinfection technology and include treatments for chronic sinusitis, local treatment of head and neck cancer, and for in situ disinfection of endotracheal tubes to prevent ventilator-associated pneumonia (VAP) - the second-most common HAI in North America

Financings

The financing summary for 2009 includes the following transactions:

- During February 2009, the Company raised gross proceeds of $517,210 through two tranches of a non-brokered private placement by issuing 8,620,168 common shares at $0.06 per share.

- On June 2, 2009, the Company closed a non-brokered private placement by issuing 14,851,250 common shares at $0.12 per share for $1,782,150 (US$1.5 million), in exchange for 39,042 ordinary shares of Grafton Resource Investments Ltd. (the "Grafton Fund", a closed-end mutual fund) at US$38.42 per fund share. The Company subsequently sold the Grafton shares for total cash proceeds of $1,138,000, recognizing a pre-tax loss of $644,000 on these sales.

- On June 26, 2009, the Company closed a non-brokered private placement by issuing 8,395,275 units at $0.11 per unit (an "$0.11 Unit") for aggregate gross proceeds of $923,480. Each $0.11 Unit consists of one common share of the Company and one share purchase warrant entitling the holder to acquire one common share of the Company at an exercise price of $0.15 until June 26, 2011.

- On December 23, 2009, the Company closed a non-brokered private placement by issuing 8,000,000 units at $0.05 per unit (a "$0.05 Unit") for aggregate gross proceeds of $400,000. Each $0.05 Unit consists of one common share of the Company and one share purchase warrant entitling the holder to acquire one common share of the Company at an exercise price of $0.05 until December 23, 2010.

Clinical and Regulatory

The following developments were announced:

- In March 2009, a Health Canada license for the Company's handheld Periowave™ photodisinfection system was obtained. This system utilizes a new model of laser, which is a hand held version of the countertop laser base station. It is expected this new system will be commercialized in the second quarter of 2010.

- In March 2009, Ondine announced positive results of a study demonstrating the first successful decontamination of heavily MRSA-infected wounds in animals. The study was carried out by a team of collaborative researchers at the University College London, UK, and utilized Ondine's MRSAid™ photodisinfection system.

- In April 2009, additional Health Canada Licenses were obtained for our MRSAid™ Photodisinfection System which is designed to reduce MRSA colonization of the anterior nasal passages. Ondine's non-antibiotic MRSAid™ system is designed to block carriage of these resistant microbes before transmission can occur between patients, visitors and healthcare workers.

Management Changes

- January 2009: Carolyn Cross, was appointed Chairman of Ondine's Board of Directors and continued as Chief Executive Officer of the Company; Dr. Nicolas Loebel was appointed President of the Company; Mr. Thomas Dawson was appointed Chief Operating Officer of the Company; and Dr Cale Street was appointed Vice-President of Research of Ondine's wholly-owned subsidiary, Ondine Research Laboratories, Inc. ("ORL"). Pierre Leduc resigned from his position as Executive Chairman of the Board.

- May 21, 2009: Ms. Margaret Shaw was elected as a director of the Company.

- December 7, 2009: Dr. Merrill Biel was appointed as a Director of the Company.

RECENT DEVELOPMENTS

Regulatory

On March 17, 2010, the Company announced that it had received notification from the United States Food and Drug Administration (FDA) that the Company's premarket approval (PMA) submission for Periowave™ has been accepted for filing. The FDA's action means that the PMA application is sufficiently complete and ready for substantive review. The PMA was submitted with the objective of obtaining regulatory clearance for the marketing of the Periowave™ Photodisinfection System in the United States for the treatment of chronic periodontitis in adults as an adjunct to standard methods of care. The submission incorporates the results of many years of preclinical and clinical development.

FINANCIAL REVIEW

Consolidated statements of operations for the fourth quarter of 2009 ("Fourth Quarter 2009") compared to the fourth quarter of 2008 ("Fourth Quarter 2008") are as follows (unaudited - in thousands except per share amounts):



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Three months ended
December 31,
2009 2008
$ $
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Revenue
Product sales 39 302
Cost of sales 23 164
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Gross Margin 16 138
Consulting revenue 215 -
Royalty revenue 18 -
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249 138
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Expenses (recovery)
Research and development 782 1,114
General and administration 538 614
Marketing and sales (10) 311
Depreciation and amortization 68 89
Write-down of inventory deposit 87 -
Write-down of capital assets - 143
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(1,465) (2,271)
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Other
Loss on sale of investment (15) -
Loss on disposal of equipment (21) -
Interest income - 8
Foreign exchange gain (loss) (3) 1
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(39) 9
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Loss before income taxes (1,255) (2,124)
Income tax recovery 29 -
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Loss for the period (1,226) (2,124)
Unrealized (loss) gain on short-term investments - (1)
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Comprehensive loss for the period (1,226) (2,125)
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Basic and diluted loss per common share (0.01) (0.03)
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Weighted average number of shares outstanding 96,542 61,359
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Sales during the Current Year were less than the Prior Year principally due to the closing of the Dental Sale on June 5, 2009 as the assets acquired by purchaser, PDT, included product inventory. The Company realised a $0.68 million gain on the Dental Sale. Subsequent to the closing, the Company continued to be the manufacturer of the Periowave™ product with all sales being made to PDT at fixed margins under the terms of a manufacturing and supply agreement. Sales during the second half of the Current Year were $0.07 million compared to $0.45 million during the second half of the Prior Year. The improvement in gross profit margin in the Current Year, as compared to the Prior Year, is principally due to cost of sales for the Prior Year including a provision for excess and obsolete inventory of $0.47 million. During the Current Year, the Company further reduced its expenses, primarily in connection with its cost control program. The Company's expenses during the Current Year were also significantly reduced by the Dental Sale, which eliminated substantially all of its marketing and sales costs for the balance of the year compared to marketing and sales expenses of $0.78 million during the second half of the Prior Year.

During the Current Year the Company entered into a number of other transactions for which there were no comparable transactions in the Prior Year, resulting in consulting revenue of $0.43 million, primarily due to fees earned pursuant to the terms of a management services agreement with PDT and an aggregate loss of $0.64 million on the sale of the Company's investment in the Grafton Fund. Other significant variances in the results for the Current Year, as compared to the Prior Year, were caused by the write-down of capital assets in the Prior Year, which did not occur in the Current Year, the write-down of $0.23 million in an inventory deposit in the Prior Year compared to a write-down of $0.09 million in the Current Year; and a decrease of $0.14 million in interest and other income during the Current Year compared to the Prior Year. Although the Company substantially reduced its expenses in the Current Year, when compared to the Prior Year, the Company continued to incur significant costs during the Current Year in connection with its activities intended to obtain regulatory clearance to market Periowave™ in the United States.

The $0.90 million decrease in loss for Fourth Quarter 2009, when compared to Fourth Quarter 2008, was primarily due to Fourth Quarter 2009 including consulting revenue of $0.22 million, which did not occur in Fourth Quarter 2008, and expense reductions in research and development (R&D) of $0.33 million; general and administration (G&A) of $0.08 million; and in marketing and sales of $0.32 million resulting from the elimination of those expenses during the last half of the Current Year due to the Dental Sale. The bulk of the reduction of R&D expenses related to activities no longer required in the Fourth Quarter 2009. The reduction in G&A expenses resulted primarily from a reduction in salaries and wages, due to a reduction in staff, being partially offset by an increase in consulting fees due to the transaction costs of the acquisition of APT. In addition, Fourth Quarter 2008 included a $0.14 million write-down of capital assets that was not duplicated in Fourth Quarter 2009. These decreases in loss were partially offset by a $0.12 million decrease in gross margin, primarily due to the decrease in sales, and Fourth Quarter of 2009 including a write-down of inventory deposit of $0.09 million that did not occur in Fourth Quarter 2008. Sales during Fourth Quarter 2009 were less than Fourth Quarter 2008 principally due to the closing of the Dental Sale on June 5, 2009 as the assets acquired by purchaser, PDT, included product inventory.

The Company intends to continue to focus its resources on development of a selective number of new applications of its platform PDD technology, principally the MRSAid™ product for decolonization of MRSA in the anterior nares and the product for in situ disinfection of endotracheal tubes to prevent ventilator-associated pneumonia (VAP), which was acquired in December 2009 as part of the acquisition of APT. During Fourth Quarter 2009, the Company continued to invest in research and development including, among other things, the continued development of our MRSAid™ product and the tasks that enabled the Company to file a PMA submission with the FDA for the marketing Periowave™ in the United States. The Company believes that the experience gained in the preparatory work required for the PMA submission, including extensive development of the quality management system and the worldwide clinical study work done to date, is expected to be of benefit in obtaining regulatory approval for the new PDD products currently under development.

As at December 31, 2009 the Company had cash and cash equivalents totaling $1.05 million compared with $1.03 million as at December 31, 2008. During the Current Year the Company used cash of approximately $3.44 million for operating activities; received an interest free loan of $0.4 million from Carolyn Cross, Chairman and CEO, that was repaid during the year; received net cash proceeds of $1.70 million from the issuance of equity securities; $0.62 million from the Dental Sale; and $1.14 million from the sale of the Grafton Fund investment.

Based on the Company's current level of activities and its future plans, the Company will need to raise additional capital in the near term to continue with its planned operating activities. Although there has been some improvement in certain sectors of the capital markets, the Company continues to believe that future market conditions may make it more difficult and time consuming than normal for companies at its stage of development to secure additional funding. Assurances cannot be given that additional funding will be available on terms that are acceptable to the Company. In the interim, the Company will continue to control its expenses and defer capital outlays in order to extend the period it can operate utilizing its existing cash balances. Should the Company be unable to obtain additional cash in a timely manner, it would have to severely curtail or cease its activities and their can be no assurances that the Company would be able to continue in business.

As at December 31, 2009 the Company had 110,548,457 common shares outstanding.

Additional analysis of the Company's financial results for the Current Year, including analysis of the results for the three months ended December 31, 2009, is included in our management's discussion and analysis of financial condition and results of operations (MDA) for the year ended December 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. 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; 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 December 31 (Expressed in Canadian dollars)
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2009 2008
$ $
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ASSETS
Current
Cash and cash equivalents 1,055,773 1,033,248
Accounts receivable 152,929 416,352
Inventories 205,512 283,877
Prepaid expenses and deposits 143,796 321,202
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Total current assets 1,558,010 2,054,679
Capital assets 451,094 651,878
Intangible assets 610,012 239,853
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2,619,116 2,946,410
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 1,102,681 1,334,572
Income taxes payable 1,482 37,800
Current portion of deferred tenant inducement 46,437 45,276
Deferred revenue 95,391 -
Future income tax 32,576 82,355
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Total current liabilities 1,278,567 1,500,003
Deferred tenant inducement, net of current
portion 62,711 109,149
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Total liabilities 1,341,278 1,609,152
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Shareholders' equity
Share capital 54,767,640 51,336,368
Contributed surplus 5,191,921 4,087,139
Deficit (58,681,723) (54,086,249)
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Total shareholders' equity 1,277,838 1,337,258
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2,619,116 2,946,410
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Ondine Biopharma Corporation
CONSOLIDATED STATEMENTS OF LOSS
AND COMPREHENSIVE LOSS

For the years ended December 31 (Expressed in Canadian dollars)
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2009 2008
$ $
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REVENUE
Product sales 581,527 912,326
Cost of sales 219,192 726,490
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Gross margin 362,335 185,836
Consulting revenue 430,471 -
Royalty revenue 18,233 -
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811,039 185,836
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EXPENSES
Research and development 2,845,867 4,516,247
General and administration 1,964,310 3,398,195
Marketing and sales 443,608 2,018,389
Depreciation and amortization 251,224 340,825
Write-down of inventory deposit 87,323 232,000
Write-down of capital assets - 143,000
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(5,592,332) (10,648,656)
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Other income/(expense)
Sale of Dental Business 683,388 -
Loss on sale of investment (644,455) -
Loss on disposal of equipment (21,481) -
Interest and miscellaneous income 13,808 155,533
Foreign exchange gain 95,514 37,566
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126,774 193,099
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Loss before income taxes (4,654,519) (10,269,721)
Income tax recovery 59,045 -
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Loss and comprehensive loss for the year (4,595,474) (10,269,721)
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Basic and diluted loss per common share (0.06) (0.17)
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Weighted average number of common shares
outstanding 82,724,439 61,275,413
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Ondine Biopharma Corporation

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Expressed in Canadian dollars)
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Accum-
ulated
Other Total
Contrib- Compre- Share-
Number of Share uted hensive holders'
Common Capital Surplus Deficit Income Equity
Shares $ $ $ $ $
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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:
Exercise
of
options 331,501 82,875 - - - 82,875
Stock-based
compen-
sation - - 678,962 - - 678,962
Reall-
ocation of
contr-
ibuted
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
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Balance,
December
31, 2008 61,359,176 51,336,368 4,087,139 (54,086,249) - 1,337,258
Common
shares
issued for
cash (net
of issue
costs) :
February
2009
Private
Placement 8,620,168 497,671 - - - 497,671
Units
issued for
cash (net
of issue
costs)
June 2009
Private
Placement 8,395,275 503,054 347,293 - - 850,347
December
2009
Private
Placement 8,000,000 253,644 144,113 - - 397,757
Common
shares
issued for
acquis-
ition
of an
invest-
ment 14,851,250 1,714,669 27,870 - - 1,742,539
Common
shares
issued
(net of
issue
costs) for
acquis-
ition
of APT 8,856,458 438,927 - - - 438,927
Common
shares
issued
for
research
and
develop-
ment
agree-
ment 466,130 23,307 - - - 23,307
Stock-
based
compen-
sation - - 585,506 - - 585,506
Loss for
the year - - - (4,595,474) - (4,595,474)
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Balance,
December
31,
2009 110,548,457 54,767,640 5,191,921 (58,681,723) - 1,277,838
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Ondine Biopharma Corporation

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31 (Expressed in Canadian dollars)
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2009 2008
$ $
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OPERATING ACTIVITIES
Loss for the year (4,595,474) (10,269,721)
Add items not affecting cash:
Depreciation and amortization 251,224 340,825
Gain on sale of assets (683,388) -
Loss on sale of investment 644,455 -
Write-down of inventory deposit 87,323 -
Write-down of capital assets - 143,000
Loss on disposition of capital assets 21,481 -
Stock-based compensation 585,506 678,962
Deferred tenant inducement (45,277) (33,916)
Future income tax expense (49,779) 15,329
Changes in non-cash working capital items
relating to
operations:
Accounts receivable 263,423 237,096
Inventory 29,348 286,684
Prepaid expenses and deposits 111,195 205,318
Accounts payable and accrued liabilities (117,831) (539,288)
Income taxes payable (36,318) 7,035
Deferred revenue 95,391 -
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Cash used in operating activities (3,438,721) (8,928,676)
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FINANCING ACTIVITIES
Loan proceeds 400,000 -
Repayment of loan (400,000) -
Issuance of common shares and warrants, net
of issue costs 1,702,270 82,875
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Cash provided by financing activities 1,702,270 82,875
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INVESTING ACTIVITIES
Net redemptions of short-term investments - 5,608,040
Purchase of capital assets (1,451) (96,997)
Proceeds from sale of assets 622,732 -
Proceeds from sale of investment 1,137,695 -
Acquisition of intangible asset - (172,239)
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Cash provided by investing activities 1,758,976 5,338,804
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Net increase/(decrease) in cash and cash
equivalents 22,525 (3,506,997)
Cash and cash equivalents, beginning of year 1,033,248 4,540,245
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Cash and cash equivalents, end of year 1,055,773 1,033,248
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