Ambrilia Biopharma Inc.
TSX : AMB

Ambrilia Biopharma Inc.

March 22, 2006 08:59 ET

Ambrilia Announces Fiscal 2005 Results and Appointment of Three New Board Members

MONTREAL, QUEBEC--(CCNMatthews - March 22, 2006) - Ambrilia Biopharma Inc. (formerly Procyon Biopharma Inc.) (TSX:AMB), a biotechnology company developing innovative therapeutics in the fields of cancer and infectious diseases, announced today its fiscal 2005 results and the appointment of three new members to its Board of Directors.

"2005 was equally a challenging and fruitful year for Procyon Biopharma, marked by the corporate restructuring of the Company at the beginning of the year, the successful acquisition of a novel anti-cancer technology, TVT-Dox, as well as the achievement of important milestones in our lead product candidates' development in HIV/AIDS and oncology," said Hans J. Mader, President and Chief Executive Officer of Ambrilia Biopharma Inc. " More recently, the successful completion of the acquisition of Cellpep S.A. with a concurrent financing of $18.1 million, leading to the creation of Ambrilia Biopharma Inc., marked an exciting and transformational event in Procyon's history and paves the way for growth and profitability," he continued. "Furthermore, we are pleased to welcome three new members to our Board, seasoned business executives from Europe and the U.S., who will add solid expertise and offer guidance as we execute Ambrilia's business strategy. Finally, I wish to extend our sincere appreciation to Dr. Phil Gold, Dr. Chandra J. Panchal and Mr. Hans C. Fluehler for their dedication and service as departing board members of the Company," he concluded.

APPOINTMENT OF NEW BOARD MEMBERS

Three new members were appointed to Ambrilia's Board of Directors. Joining the Board are Dr. Bonabes De Rouge, Dr. Philip S. Tabbiner and Mr. Francois Lombard. The new Board members will replace Dr. Phil Gold, Mr. Hans C. Fluehler and Dr. Chandra J. Panchal.

Dr. Bonabes De Rouge, former President and Chief Executive Officer of Cellpep S.A. and currently Senior Executive Vice-President and Chief Scientific Officer of Ambrilia Biopharma Inc., brings more than 30 years of experience in the international pharmaceutical industry where he occupied numerous scientific executive positions namely with Servier and Beaufour-Ipsen. During the last 20 years, he developed a solid expertise in peptide development and is a seasoned manager of the entire drug development process at the international level. Dr. Philip S. Tabbiner, currently Chief Operating Officer of Theragenex, is a veteran of the pharmaceutical and diagnostics industry. He has served in executive positions with Chiron, Bayer Healthcare, Dupont-Merck, aaiPharma and BioCentrex. Over his 25-year career he has worked in nearly every commercial facet of the pharmaceutical and diagnostics businesses. Mr. Francois Lombard, currently President and Chief Executive Officer of Turenne Capital Partenaires, brings an extensive background in finance, investment and portfolio management. Mr. Lombard started his career at the World Bank in Washington and he served in project financing executive positions at CCF and CDC-Participations. He was also the founder of Epargne Partenaires S.A. which he sold to CCF Charterhouse in 1997.

2005 HIGHLIGHTS AND OUTLOOK FOR 2006

On March 1, 2006, Procyon announced the closing of the merger via acquisition with Cellpep S.A., a French private biotechnology company developing therapeutics in oncology and infectious diseases, under which the Company acquired substantially all of the outstanding securities of Cellpep in exchange for a number of common shares equal to $39.1 million in value (as at January 19, 2006). A $18.1 million concurrent private placement of special warrants and units was also completed successfully, with investors from both North America and Europe. Subsequent to the approval of its shareholders on February 24, 2006, Procyon changed its corporate name to Ambrilia Biopharma Inc. and its shares continue to be traded on the Toronto Stock Exchange under the new ticker symbol: AMB

PPL-100 IN CLINICAL DEVELOPMENT

We were pleased to report valuable and promising preclinical results for PPL-100, showing its excellent safety profile, its high oral bioavailability and its favorable cross-resistance profile when compared to commercially-available protease inhibitors. Furthermore, results of a one year in vitro resistance selection study conducted in collaboration with Professor Mark Wainberg of the McGill University AIDS Center showed that PPL-100 possesses a potentially high genetic barrier against the HIV virus, thus making it more difficult for the virus to develop resistant strains.

Last December, we received regulatory approval from the Therapeutic Products Directorate of Health Canada to initiate the first-in-man Phase I study with PPL-100. In addition, the Company was delighted to be granted in January 2006 a $1.0 million contribution from the National Research Council Canada Industrial Research Assistance Program (NRC-IRAP) for the clinical development of PPL-100. The study is currently being conducted in a U.S. Food and Drug Administration-approved contract research facility in Canada and we expect results to be available in the second half of 2006.

PROGRESS FOR PROSTATE CANCER TREATMENT AND DIAGNOSTIC: PCK3145 AND PSP94

The U.S. dose-finding study for PCK3145, our non-toxic peptide for the treatment of advanced metastatic cancer, showed equally promising preliminary results as the U.K. Phase IIa amendment. Preliminary results indicated that a once-weekly administration of PCK3145 had an effect on the metastatic enzyme MMP-9 regulation. It is now the intention to out-license PCK3145 to a co-development partner, with the aim of financing the planned Canadian and U.S. Phase IIb studies and further clinical development, in return for a sharing of revenues.

On the diagnostic front, we were pleased to announce the findings of an extensive study, conducted by Dr. Robert K. Nam of the Sunnybrook and Women's College Health Sciences Center, University of Toronto, with the PSP94 (Prostate Secretory Protein of 94 amino acids) immunoassay for the diagnosis and prognosis of prostate cancer, which showed that the Company's PSP94 was better at detecting aggressive prostate cancer than the commercially-available markers PSA (Prostate Specific Antigen) and FTPSA (Free to Total PSA ratio). This Toronto study, to be published in the April 2006 edition of the prestigious Journal of Urology, complements the efforts of our partner, Medicorp, which is currently marketing for research purposes the three PSP94 assays developed by Ambrilia. Also, the Company plans to license the PSP94 assay to a co-development and marketing partner, aiming for the test to become a commercial serological marker to be used in combination with PSA for seeking out patients with aggressive prostate cancer, which can be fatal.

BUILDING VALUE WITHIN THE PORTFOLIO: ACQUISITION OF TVT-DOX

In June 2005, Ambrilia completed the acquisition of Bioxalis Medica Inc., a Montreal-based biopharmaceutical company committed to the discovery and development of targeted liposomes for cancer treatment, and a concurrent non-brokered financing of $3.5 million by way of a private placement of convertible debentures. This acquisition added not only new drug development expertise to the existing scientific team, but a promising anti-cancer technology to the Company's oncology portfolio: TVT-Dox, a tumor vasculature targeting system for the treatment of solid tumors. Preclinical studies will be initiated with the intention to file an investigational new drug application in 2008.

FINANCIAL RESULTS

Year ended December 31, 2005 compared with the year ended December 31, 2004

The net loss for the year ended December 31, 2005 amounted to $12,910,034 or $0.14 per common share, compared with a net loss of $18,023,056 or $0.23 per common share for the year ended December 31, 2004. The reduction in the net loss was primarily due to the restructuring that occurred in January 2005 and the resulting decrease in spending in 2005 on research and development, together with the write-down in 2004 of $1.6 million in the carrying value of intellectual property resulting from the Company's decision to discontinue research activities related to its ANsA technology.

Revenues for 2005 amounted to $274,346, compared with $334,473 in 2004. The lower level of revenues in 2005 resulted primarily from a decrease in interest income earned in 2005 as a result of reduced average levels of cash, which more than offset the effect of higher interest rates.

Gross research and development expenses for 2005 amounted to $8,331,698, compared with $12,709,113 in 2004. The decrease of $4,377,415 or 34% from 2004 reflected the reduced level of spending in the year, primarily due to decreases of $3.3 million for Fibrostat® and $0.9 million for PCK3145. Research and development tax credits were lower in 2005 at $880,000, compared with $1,157,869 in 2004. The decrease reflected the impact of the reduced research and development expenses. Research and development expenses in 2005 represented 60% of total expenses before tax credits and the write-down of carrying value of intellectual property, compared with 71% in 2004. This also reflected the significant reduction in research and development expenses, while a decrease in general and administrative expenses was more than offset by an increase in borrowing costs.

General and administrative expenses for 2005 were $3,457,896, a decrease of $318,328 or 8% over the total of $3,776,224 incurred in 2004. The decrease resulted primarily from a reduction in consulting fees.

Amortization expense amounted to $986,086 in 2005, compared with $1,118,378 in 2004. The decrease reflected primarily a reduction due to the write-off of the carrying value of the ANsA technology in 2004, partially offset by the added amortization resulting from the Bioxalis Medica acquisition on June 29, 2005.

Interest expense on long-term debt for 2005 amounted to $840,804, compared with $374,170 in 2004. The increase resulted from the additional interest on the Biolevier loan, on which an additional $4,000,000 was drawn down in December 2004, and on the $3,500,000 issue of 7% convertible debentures on June 29, 2005.

A write-down of $179,698 was recorded in 2005 as a result of the Company's decision to discontinue development of Fibrostat®. Although the Company intends to either dispose of or outlicense the technology, the proceeds to be obtained, if any, cannot be estimated at this time. Consequently, the net book value of the technology at June 30, 2005 was written off.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents and short-term investments on hand at December 31, 2005 totalled $5,360,158, compared with $15,720,424 at December 31, 2004. In addition to the cash and cash equivalents and short-term investments of $5,360,158 at December 31, 2005 and the $1,000,000 still available under the Biolevier loan facility, an amount of approximately $1,500,000 is expected to be received in the near future for investment tax credits relating to prior periods.The reduction of $10,360,266 in 2005 resulted primarily from the cash outflow of $13,040,195 that was required to finance operating activities for the year. This cash outflow included an increase of $2,720,771 in non-cash working capital, resulting primarily from increases of $1,378,001 in accounts receivable, due to an advance of $1,500,000 made in connection with the acquisition of Cellpep S.A., $1,080,566 in investment tax credits recoverable and $558,108 in prepaid expenses, due to the inclusion of $569,311 of payments related to the acquisition of Cellpep S.A.. This amount will be included in the cost of the Cellpep acquisition in the first quarter of 2006, when the transaction was closed. An increase of $295,904 in accounts payable and accrued liabilities partially offset the above items.

The cash outflow required to finance operating activities was partially funded by the net proceeds of $3,162,398 from the issue of convertible debentures and warrants in June 2005. In addition, $253,311 of cash was obtained on the acquisition of Bioxalis Medica. An amount of $276,074 was utilized for the purchase of intellectual property and property, plant and equipment, while $179,131 of expenses were incurred for the Bioxalis Medica acquisition and $275,000 was used to repay long-term debt of Bioxalis.

Management believes that it will have sufficient funds available, including the amount of $1 million still available under the Biolevier loan facility, an amount of approximately $1,500,000 expected to be received in the near future for investment tax credits, the $18.1 million equity financing that closed on March 1, 2006 and milestones to be received from existing contracts with licensees for Octreotide, to support its ongoing activities for at least the next 24 months.



Ambrilia Biopharma Inc.
CONSOLIDATED BALANCE SHEETS

As at December 31

2005 2004
$ $
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ASSETS
Current assets
Cash and cash equivalents 417,953 319,382
Short-term investments 4,942,205 15,401,042
Accounts receivable 1,707,890 271,973
Investment tax credits recoverable 2,202,487 685,000
Prepaid expenses 668,428 110,320
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9,938,963 16,787,717
Property, plant and equipment 600,653 808,504
Intellectual property 8,165,089 5,180,795
Deferred financing costs 993,563 909,500
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19,698,268 23,686,516
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities 1,798,126 1,066,787
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1,798,126 1,066,787
Biolevier loan facility 10,122,969 9,417,393
Convertible debentures 2,157,022 50,000
Preferred shares 4,000,000 4,000,000
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18,078,117 14,534,180
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Shareholders' equity
Share capital 65,004,736 61,461,900
Warrants 2,952,462 2,904,038
Contributed surplus 4,866,469 3,995,794
Equity component of convertible debentures 1,920,914 1,005,000
Deficit (73,124,430) (60,214,396)
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1,620,151 9,152,336
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19,698,268 23,686,516
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Ambrilia Biopharma Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND DEFICIT

Years ended December 31

2005 2004
$ $
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REVENUES
License revenue - 9,617
Interest and other income 274,346 324,856
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274,346 334,473
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EXPENSES
Research and development 8,331,698 12,709,113
Research and development tax credits (880,000) (1,157,869)
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Net research and development 7,451,698 11,551,244
General and administrative 3,457,896 3,776,224
Amortization of property, plant and
equipment 248,553 318,018
Amortization of intellectual property 614,884 698,383
Amortization of deferred financing fees 122,649 101,977
Accretion on convertible debentures 115,522 -
Interest on long-term debt 840,804 374,170
Financial charges 13,679 4,261
Loss on disposal of property, plant and
equipment 7,032 -
Restructuring charges 172,279 -
Foreign exchange gains (40,314) (92,663)
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13,004,682 16,731,614
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Loss before write-down of intellectual
property (12,730,336) (16,397,141)
Write-down of carrying value of
intellectual property 179,698 1,625,915
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Net loss for the year (12,910,034) (18,023,056)
Deficit, beginning of year (60,214,396) (42,191,340)
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Deficit, end of year (73,124,430) (60,214,396)
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Basic and diluted loss per share (0.14) (0.23)
Weighted average number of common shares
outstanding 89,667,516 80,016,090
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Ambrilia Biopharma Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31

2005 2004
$ $
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OPERATING ACTIVITIES
Net loss for the year (12,910,034) (18,023,056)
Items not affecting cash
Amortization of property, plant
and equipment 248,553 318,018
Amortization of intellectual property 614,884 698,383
Amortization of deferred financing fees 122,649 101,977
Write-down of carrying value of
intellectual property 179,698 1,625,915
Loss on disposal of property,
plant and equipment 7,032 -
Accretion on convertible debentures 115,522 -
Write-down of investment - 7,001
Loan interest capitalized 716,458 374,170
Interest paid by issue of common shares 122,836 -
Non-cash license revenues - (4,417)
Services paid by issuance of stock options 462,978 909,588
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(10,319,424) (13,992,421)
Net change in non-cash balances relating
to operations (2,720,771) (167,735)
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Cash flows related to operating activities (13,040,195) (14,160,156)
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INVESTING ACTIVITIES
Acquisition of intellectual property (259,423) (199,256)
Acquisition of property, plant and
equipment (16,651) (91,845)
Proceeds from disposal of property, plant
and equipment 10,882 -
Cash and cash equivalents obtained on
acquisition of business 253,311 -
Business acquisition expenses (179,131) -
Maturities of short-term investments 20,361,312 9,440,494
Purchase of short-term investments (9,902,475) (15,401,042)
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Cash flows related to investing activities 10,267,825 (6,251,649)
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FINANCING ACTIVITIES
Issuance of convertible debenture 3,500,000 330,000
Issue of units - 17,250,000
Unit issue expenses - (1,618,214)
Issue of common shares - 296,935
Issuance of long-term debt - 4,000,000
Repayment of long-term debt (10,882) -
Repayment of long-term debt assumed in
an acquisition (275,000) (4,207)
Debt issuance costs (343,177) -
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Cash flows related to financing activities 2,870,941 20,254,514
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Net increase (decrease) in cash and cash
equivalents 98,571 (157,291)
Cash and cash equivalents, beginning of year 319,382 476,673
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Cash and cash equivalents, end of year 417,953 319,382
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ABOUT AMBRILIA BIOPHARMA

Ambrilia Biopharma Inc. (TSX:AMB) is a global, biopharmaceutical company developing innovative therapeutics in the fields of oncology and infectious diseases. Ambrilia's product portfolio includes early to mid-stage products and two late-stage, value-added specialty generics. Early to mid-stage products include PCK3145, a non-toxic peptide soon to enter a Phase II North American trial for the treatment of advanced metastatic prostate cancer; TVT-Dox, a tumor vasculature targeting technology for the treatment of solid tumors for which an IND filing is expected in 2008; and PPL-100, a protease inhibitor for the treatment of drug-resistant HIV/AIDS which is at the clinical stage. The first value-added specialty generic product is a long acting formulation of the drug Octreotide, used in the treatment of acromegaly and certain digestive tumors, and is expected to be launched in Europe in 2007 and in the U.S. in 2008. The second product is a sustained-release formulation of Goserelin, used primarily in hormone-sensitive prostate cancer, and is expected to be launched in Europe in 2008. With these late-stage products, Ambrilia Biopharma expects to accelerate its path to profitability and enhance its global position by generating potential revenues through U.S. and European sales of Octreotide and Goserelin. Common shares of Ambrilia are traded on the Toronto Stock Exchange under the ticker symbol AMB. Ambrilia's head office, Research and Development and Manufacturing facilities are located in Montreal with a regional office in France.

Foward-looking statements

This press release contains forward-looking statements that reflect the Company's current expectation regarding future events. The forward-looking statements involve risks and uncertainties. Actual events could 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. 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.

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