Ambrilia Biopharma Inc.
TSX : AMB

Ambrilia Biopharma Inc.

November 14, 2006 08:01 ET

Ambrilia Announces Third Quarter 2006 Results and Provides Update on Lead Development Programs

MONTREAL, QUEBEC--(CCNMatthews - Nov. 14, 2006) - Ambrilia Biopharma Inc. (TSX:AMB), a biopharmaceutical company developing innovative therapeutics in the fields of cancer and infectious diseases, announced today its third quarter 2006 results, as well as the conversion of its 4,000,000 Series 1 First Preferred Share and provided an update on its lead development programs.



THIRD QUARTER 2006 HIGHLIGHTS

- On October 12, concluded an exclusive worldwide licensing agreement
for Ambrilia's lead HIV/AIDS product PPL-100 and its HIV Protease
Inhibitor (PI) Program with Merck & Co.,Inc., a pharmaceutical
world leader in the fight against HIV/AIDS, in return for milestone
payments of up to US$ 232 million, including a US$ 17 million
upfront payment.

- Presented data on PPL-100, at three of the most prestigious
conferences in the fields of HIV/AIDS and infectious diseases: the
15th International HIV Drug Resistance Workshop (June 13-18,
Sitges, Spain), the XVI International AIDS Conference (August 13-
18, Toronto), and the 46th ICAAC (Interscience Conference on
Antimicrobial Agents and Chemotherapy) held in San Francisco last
September 27-30.

- Reported positive results of a pivotal human pharmacokinetic study
of Ambrilia's new prolonged release formulation of Octreotide.

- Welcomed a new member to Ambrilia's Board of Directors, Luc
Tanguay, Senior Executive Vice-President and Chief Financial
Officer of Theratechnologies Inc., a seasoned manager with a strong
knowledge of the biotechnology industry.

- On October 19, put into effect a share consolidation, as approved
by Ambrilia's shareholders last February, in a ratio of one for ten
common shares.


CONVERSION OF SERIES 1 FIRST PREFERRED SHARES

In accordance with the provisions governing the 4,000,000 outstanding Series 1 First Preferred Shares of Ambrilia ("Preferred Shares") issued on January 4, 2002 to Biovail Corporation Inc. ("Biovail"), Biovail has recently requested their redemption by the Company at their issue price of $ 4,000,000. In accordance with such provisions, Ambrilia has elected not to redeem the Preferred Shares, but to convert them into common shares of the Company. Consequently, all of the outstanding Preferred Shares will be so converted, effective November 16, 2006, at a market-based conversion price of $4.13 per common share, as stipulated in the Preferred Shares, which will result in 968,523 common shares of Ambrilia being issued to Biovail.

"Ambrilia has attained a key milestone with the licensing of its PPL-100 and PI Program to Merck & Co.,Inc. and I feel confident that Merck will advance successfully the development of PPL-100, which could represent significant progress for patients and physicians in the fight against HIV/AIDS," said Hans J. Mader, President and Chief Executive Officer of Ambrilia. "This major deal solidifies financially the Company, without dilution, and will allow us to invest cash resources in the development of our portfolio. For Ambrilia, other potential opportunities such as Octreotide and PCK3145 are within reach in a near future. I believe that investing in these and other selected development programs today is crucial to Ambrilia's sustainable, long-term growth," he concluded.

INFECTIOUS DISEASES UPDATE

PPL-100, a promising HIV protease inhibitor: Exclusive worldwide rights granted to Merck & Co. in return for milestone payments that could total up to US$ 232 million

On October 12, Ambrilia granted Merck the exclusive worldwide rights to its lead compound against HIV/AIDS, PPL-100, and to its Protease Inhibitor (PI) Program. In return Ambrilia received an upfront licensing fee of US$ 17 million on signing and is now eligible for cash payments totaling up to $US 215 million upon successful completion of development, clinical, regulatory and sales milestones, and royalties on all future product sales. The first of the milestone payments (US$ 3 million) will be based on the successful completion of a Phase I repeat dose pharmacokinetic study (Phase Ib), the results of which are expected in late November. Merck will then assume all subsequent development costs related to PPL-100.

In addition, Ambrilia is now positioned to receive significant 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 Ambrilia's HIV Protease Inhibitor Program.

This was a very significant milestone for Ambrilia and a further validation of the potential of PPL-100 as a best in class HIV protease inhibitor with many advantages; excellent safety and tolerability, favorable cross-resistance profile, high genetic barrier and finally a possible once-a-day dosage without ritonavir (another PI used as a boosting agent). Today, there is a pressing need for better tolerated and more convenient and effective PIs. PPL-100 could bring significant revenues based on its competitive advantages in a global HIV/AIDS market which is estimated to reach US$ 9 billion(i) in 2011 (projected time of launch of PPL-100). (i) Decision Resource - 2004 HIV Infectious Diseases Study #68, Frost & Sullivan 2004, Strategic Analysis World HIV Market, 2006 DataMonitor - Pipeline insight HIV

ONCOLOGY UPDATE

Octreotide, an added-value specialty generic: Positive pivotal PK results

Octreotide, Ambrilia's added-value specialty generic for the treatment of acromegaly is an easily reconstituted, prolonged-release equivalent of Novartis's Sandostatin® LAR (long-acting release). Just recently, the Company announced the positive results of a pivotal PK study designed to evaluate the absorption, distribution and metabolism of Octreotide in comparison to Sandostatin® LAR in human subjects.

The data generated in a controlled study in healthy volunteers performed in a FDA (U.S. Food and Drug Administration) approved clinical centre showed that Ambrilia's formulation has a bioavailability superior to that of Sandostatin LAR® at the same dose. Sandostatin LAR®'s data sheet recommends injections of the product every four weeks. Ambrilia's product bioavailability will allow for longer time intervals between injections, from 13 per year to 8-9 per year. This could improve patient compliance, and reduce the discomfort and costs associated with injections. In addition, the study supports the better stability and ease of use of Ambrilia's patented formulation, as compared to Sandostatin LAR®.

This PK study will be part of the international file designed to obtain registration of Ambrilia's Octreotide worldwide. Ambrilia is currently setting up small clinical studies of its formulation in acromegaly patients, as scheduled in the development plan of the product. Completion of these studies is expected around mid 2007. Filing for approval in Europe and then North America by Ambrilia's licensees will follow shortly thereafter.

Ambrilia will manufacture the product at its cGMP (Good Manufacturing Practices) facility in Montreal, Canada and supply the finished product to its commercial partners for sale in the U.S., E.U. and some other countries at a contractually fixed price.

Goserelin, a potential first-to-market generic: In house formulation optimization ongoing

Goserelin, Ambrilia's specialty generic for the treatment of hormone-sensitive prostate cancer, is the potential first-to-market equivalent of Astra Zeneca's Zoladex®. Latest research and development activities allowed Ambrilia to manufacture four different formulations of the final product and complete the animal kinetic assays. Those assays confirmed the 3-month sustained release of the product. In house optimization of the formulation is now ongoing. The human pharmacokinetic, single dose study is expected to be initiated in 2007, followed by a Canadian and European multi-center study in prostate cancer patients anticipated to begin in the second half of 2007. If there are no unexpected delays in this timeline, regulatory filing in Europe should be completed by the first half of 2008.

PCK3145, a non-toxic anti-cancer peptide: U.S. pilot study high dose results expected in H1/2007

PCK3145, Ambrilia's therapeutic peptide with signal transduction mediated effects on tumor metastasis indicated for hormone-resistant prostate cancer, is currently undergoing clinical evaluation at the Memorial Sloan Kettering Institute in New York. An amendment to the U.S. pilot study protocol investigating a higher dose and an uninterrupted prolonged administration of four months is now ongoing. It is anticipated that a higher dose may potentially give added clinical benefit to such patients with late stage disease as well as show a potential early indication of efficacy. Results of this study are expected to be available in the first half of 2007.

Furthermore, we continue to actively pursue discussion with potential co-development/licensing partners for PCK3145.

PSP94 immunoassay: Prognostic value confirmed by an extensive study conducted by Virginia Urology

On November 2, Ambrila announced the findings of an extensive study on 185 patients conducted in collaboration with Dr. Dharam Ramnani, Laboratory Director at the Virginia Urology Pathology Laboratory, Richmond, Virginia, with its PSP94 (Prostate Secretory Protein of 94 amino acids) immunoassay for the diagnosis and prognosis of prostate cancer suggesting its reliability as a prognostic test for relapse following radical prostatectomy (surgical operation to remove the prostate gland and surrounding tissues) for prostate cancer. Findings of this study were published in the October 15th issue of Clinical Cancer Research (Vol. 12, pp. 6018 - 6022).

We were pleased to have the prognostic value of PSP94 confirmed since there is a need for reliable markers to complement the actual standard of prostate specific antigen (PSA) testing and allow for better prostate cancer management. The PSP94 assay has the potential to be a very advantageous and reliable test in predicting prostate cancer recurrence in patients who have undergone surgery (radical prostatectomy). As well, Ambrilia had previously shown the diagnostic value of its PSP94 immunoassay as a reliable marker for seeking out patients with aggressive prostate cancer which can be fatal (as previously announced on December 2, 2005).

Ambrilia is in discussions with diagnostic companies for the co-development and marketing of PSP94 as a global diagnostic/prognostic marker for prostate cancer. At the same time, the Company is preparing a European submission with the aim of obtaining a CE marking for PSP94, within the next few months.

FINANCIAL RESULTS

Quarter ended September 30, 2006 compared with the Quarter ended September 30, 2005

The Company incurred a net loss of $6,174,436 or $0.22 per common share for the third quarter of 2006, compared with a net loss of $3,156,878 or $0.34 per common share for the same quarter last year. The acquisition of Ambrilia France on March 1, 2006, represented the merger of two companies of similar size and the results for the current quarter, which fully include those of Ambrilia France, thus reflect this growth.

Revenues for the third quarter of 2006 were $134,611, compared with $46,611 in the corresponding quarter last year. The higher revenues resulted primarily from an increase in interest income, due to an increase in interest rates in the current quarter compared to the third quarter of 2005.

Gross research and development expenses amounted to $3,025,841 in the third quarter of 2006, compared with $1,788,168 in the same quarter last year. The increase of $1,237,673 resulted primarily from the R&D expenditures on Octreotide and Goserelin added as a result of the acquisition of Ambrilia France, as well as higher spending on PPL-100 and a provision for 2006 bonuses. These were only partially offset by reduced expenditures for PCK3145 and government assistance of $230,281 under the National Research Council Canada Industrial Research Assistance Program ("IRAP") to fund the technologies of a clinical program. Funding for up to $980,000 of research expenditures is being provided by an IRAP contribution, of which $469,479 had been received by September 30, 2006. Tax credits increased to $389,042 in the current quarter from $120,000 in the corresponding quarter last year, due to the higher level of expenses in the current quarter.

General and administrative expenses amounted to $1,656,614 in the third quarter of 2006, an increase of $691,225 over the total of $965,389 for the same quarter last year. Expenses at our regional office in Paris, together with a provision for 2006 bonuses and higher professional fees, were the principal reason for the increased expenses.

Amortization expense increased to $2,177,128 in the current quarter from $278,656 in the same quarter last year. The increase resulted almost entirely from the added amortization on intellectual property arising from the acquisition of Ambrilia France on March 1, 2006.

Intellectual property amounted to $54,137,812 at September 30, 2006 compared with $8,165,089 at December 31, 2005. This increase of $45,972,723 was due to the acquisition of Ambrilia France, which increased intellectual property by $50,521,809. This amount is being amortized over a period of 7 years.

Interest on long-term debt was $302,191 in the third quarter of 2006, compared to $242,558 in the same quarter last year. The increase was due to the interest expense on the Biolevier loan, which increased as a result of the loan interest being capitalized and added to the outstanding balance of the loan, as well as to the increase in interest rates compared to the third quarter of 2005. The foreign exchange gain for the third quarter of 2006 amounted to $42,369, compared to a gain of $17,057 in the same quarter last year. The amount in the current quarter reflects primarily the translation gain on the consolidation of Ambrilia France.

As a consequence of the intellectual property arising on the acquisition of Ambrilia France, a future income tax liability of $9,694,945 was recorded on March 1, 2006 as part of the acquisition equation for accounting purposes. This amount is being drawn down over a term of up to the 7-year period during which the intellectual property is being amortized. This resulted in a future income tax recovery on the consolidated statement of operations of $585,514 for the third quarter of 2006. This was partially offset by a foreign exchange loss for the current quarter of $56,615 relating to the future income tax liability.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents and short-term investments totaled $8,536,294 at September 30, 2006, compared with $5,360,158 at December 31, 2005. The increase of $3,176,136 resulted from the net proceeds of $16,864,781 obtained from the March 1, 2006 financing. This amount was partially offset by the utilization of $11,281,704 to finance operating activities for the first nine months of 2006, including an increase of $265,017 in non-cash working capital. This increase in non cash working capital was after deducting an increase in deferred revenues of $564,900 for a milestone payment received in July 2006. In addition, a net amount of $630,598 was used in the period for additional property, plant and equipment and intellectual property. In addition, cash expenses of $1,979,031 were incurred in connection with the acquisition of Ambrilia France on March 1, 2006, which was carried out on a share exchange basis. Cash of $174,625 was obtained with the acquisition.

On July 28, 2006, Ambrilia received a milestone payment of $564,900 (US$500,000) under a US licensing agreement with a major US pharmaceutical company for Octreotide. The payment became due upon the Company manufacturing sterile batches of Octreotide which met stability and cGMP compliance, as per the FDA guidelines.

A loan agreement entered into in December 2002 expanded the Company's financing base by providing it with a loan facility of $10 million obtained under the Biolevier program of the Government of Quebec, from which an amount of $9 million has been drawn to-date. The balance of this facility has been cancelled. $2 million of the outstanding balance is to be repaid within 60 days of receipt of the US$17 million upfront licensing fee received in October 2006 from its licensee for PPL-100.

In accordance with the provisions governing the 4,000,000 outstanding Series 1 First Preferred Shares of the Company (the "Preferred Shares"), the holder of such shares has recently requested, subsequent to the end of the third quarter of 2006, their redemption by the Company at their issue price of $ 4,000,000. In accordance with such provisions, the Company has elected not to redeem the Preferred Shares, but to convert them into common shares of the Company. Consequently, all of the outstanding Preferred Shares will be so converted, effective November 16, 2006, at a market-based conversion price of $4.13 per common share, as stipulated in the Preferred Shares, which will result in 968,523 common shares of the Company being issued to the holder of the Preferred Shares.

Cash, cash equivalents and short term investments at September 30, 2006 amounted to $8.5 M which, together with the upfront licensing fee of $19.2 M (US$ 17 M) received in October, increased to $ 27.7 M. Based on the Company's current rate of spending, management expects to have sufficient cash to support its ongoing activities for at least the next 18 months.



AMBRILIA BIOPHARMA INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)

As at
September 30, December 31,
2006 2005
$ $
---------------------------------------------------------------------

ASSETS
Current assets
Cash and cash equivalents 6,578,654 417,953
Short-term investments 1,957,640 4,942,205
Accounts receivable 672,165 1,707,890
Investment tax credits recoverable 1,486,972 2,202,487
Prepaid expenses 178,005 668,428
---------------------------------------------------------------------
10,873,436 9,938,963
Long-term receivables 883,858 -
Property, plant and equipment 1,843,391 600,653
Intellectual property 54,137,812 8,165,089
Deferred financing fees 1,019,822 993,563
---------------------------------------------------------------------

68,758,319 19,698,268
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities 2,985,811 1,798,126
Deferred revenues 3,384,461 -
Loan payable 707,492 -
---------------------------------------------------------------------
7,077,764 1,798,126
Minority interest 1 -
Biolevier loan facility 10,794,003 10,122,969
Convertible debentures 2,342,990 2,157,022
Future income tax liability 7,767,885 -
Preferred shares 4,000,000 4,000,000
---------------------------------------------------------------------
31,982,643 18,078,117
---------------------------------------------------------------------

Shareholders' equity
Share capital 109,239,307 65,004,736
Warrants 6,143,141 2,952,462
Contributed surplus 7,737,797 4,866,469
Equity component of convertible debentures 1,920,914 1,920,914
Deficit (88,265,483) (73,124,430)
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36,775,676 1,620,151
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68,758,319 19,698,268
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AMBRILIA BIOPHARMA INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(unaudited)

Three months Nine months
ended September 30, ended September 30,
2006 2005 2006 2005
$ $ $ $
---------------------------------------------------------------------

REVENUES

License revenue 6,857 - 15,845 -
Interest and
other income 127,754 46,611 419,636 221,347
---------------------------------------------------------------------
134,611 46,611 435,481 221,347
---------------------------------------------------------------------

EXPENSES
Research
and development 3,025,841 1,788,168 7,802,536 6,095,817
Research and
development
tax credits (389,042) (120,000) (978,106) (696,000)
---------------------------------------------------------------------
Net research
and development 2,636,799 1,668,168 6,824,430 5,399,817
General and
administrative 1,656,614 965,389 4,312,379 2,587,450
Amortization of
property, plant
and equipment 122,623 62,189 296,803 184,322
Amortization of
intellectual
property 2,014,217 181,181 4,738,959 429,377
Amortization of
deferred
financing fees 40,288 35,286 114,734 86,553
Accretion on
convertible
debentures 63,745 56,947 185,968 56,947
Interest on
long-term debt 302,191 242,558 854,784 586,244
Restructuring charges - - 251,120 172,279
Financial charges 43,838 8,828 85,523 12,920
Foreign exchange
losses (gains) (42,369) (17,057) 89,985 (23,278)
---------------------------------------------------------------------
6,837,946 3,203,489 17,754,685 9,492,631
---------------------------------------------------------------------
Loss before
write-down of
intellectual
property and
income taxes (6,703,335) (3,156,878) (17,319,204) (9,271,284)
Write-down of
carrying value
of intellectual
property - - - 179,698
---------------------------------------------------------------------
Loss before
income taxes (6,703,335) (3,156,878) (17,319,204) (9,450,982)

Future income
tax recovery 585,514 - 1,832,390 -
Foreign exchange
gain (loss) on
future income
tax liability (56,615) - 345,761 -
---------------------------------------------------------------------
528,899 - 2,178,151 -
---------------------------------------------------------------------

Net loss (6,174,436) (3,156,878) (15,141,053) (9,450,982)

Deficit, beginning
of period (82,091,047) (66,508,500) (73,124,430) (60,214,396)
---------------------------------------------------------------------

Deficit, end
of period (88,265,483) (69,665,378) (88,265,483) (69,665,378)
---------------------------------------------------------------------

Basic and
diluted loss
per share (0.22) (0.34) (0.64) (1.07)
---------------------------------------------------------------------

Weighted average
number of
common shares
outstanding 27,543,885 9,407,746 23,607,043 8,817,643
---------------------------------------------------------------------



AMBRILIA BIOPHARMA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)


Three months Nine months
ended September 30, ended September 30,
2006 2005 2006 2005
$ $ $ $
---------------------------------------------------------------------

OPERATING ACTIVITIES
Net loss (6,174,436) (3,156,878) (15,141,053) (9,450,982)
Items not
affecting cash
Amortization of
property, plant
and equipment 122,623 62,189 296,803 184,322
Amortization of
intellectual
property 2,014,217 181,181 4,738,959 429,377
Amortization of
deferred
financing fees 40,288 35,286 114,734 86,553
Write-down of
carrying value
of intellectual
property - - - 179,698
Accretion on
convertible
debentures 63,745 56,947 185,968 56,947
Loan interest
capitalized 240,941 179,462 671,034 523,148
Interest paid by
issuance of
common shares - - 122,164 -
Future income tax
recovery and
related foreign
exchange gain (528,899) - (2,178,151) -
Services paid by
issuance of
stock options 36,820 108,576 172,855 362,633
---------------------------------------------------------------------
(4,184,701) (2,533,237) (11,016,687) (7,628,304)
Net change in
non-cash balances
relating to
operations 1,682,529 (919,332) (265,017) (1,843,180)
---------------------------------------------------------------------
Cash flows
related to
operating
activities (2,502,172) (3,452,569) (11,281,704) (9,471,484)
---------------------------------------------------------------------

INVESTING ACTIVITIES
Acquisition of
intellectual
property (42,712) (50,039) (189,873) (173,580)

Acquisition of
property, plant
and equipment (139,353) (4,145) (441,040) (14,778)
Proceeds on disposal
of property,
plant and equipment - - 315 11,153
Cash and cash
equivalents obtained
on acquisition
of business - - 174,625 253,311
Business
acquisition costs - (159,131) (1,979,031) (179,131)
Purchase of short-
term investments - (1,490,265) (3,935,960) (4,960,270)
Maturities of short-
term investments 1,978,320 1,987,180 6,920,525 17,388,222
---------------------------------------------------------------------
Cash flows related
to investing
activities 1,796,255 283,600 549,561 12,324,927
---------------------------------------------------------------------

FINANCING ACTIVITIES
Issuance of
common shares - - 18,095,904 -
Share issuance
costs (7,513) - (1,231,123) -
Debt issuance costs - (299,120) - (343,176)
Repayment of long-
term debt assumed
in an acquisition - (137,500) - (275,000)
Issuance of
convertible
debentures - - - 3,500,000
---------------------------------------------------------------------
Cash flows
related to
financing
activities (7,513) (436,620) 16,864,781 2,881,824
---------------------------------------------------------------------

Effect of exchange
rate changes
on cash (8,086) - 28,063 -
---------------------------------------------------------------------
Net increase
(decrease) in
cash and
cash equivalents (713,430) (3,605,589) 6,132,638 5,735,267
Cash and cash
equivalents,
beginning
of period 7,300,170 9,660,238 417,953 319,382
---------------------------------------------------------------------
Cash and cash
equivalents,
end of period 6,578,654 6,054,649 6,578,654 6,054,649
---------------------------------------------------------------------


CONFERENCE CALL INFORMATION

Ambrilia will be hosting a conference call on Tuesday, November 14 at 10:00 AM ET, to discuss its third quarter 2006 financial results and provide an update on its lead development programs. Interested parties may access the conference call by way of telephone or webcast. The numbers to access the conference call are 1(800) 733-7571 (toll free) or (416) 915-5785. The webcast will be available at www.ambrilia.com, Investors section, Conference calls and webcasts. A replay of the call will be available at www.ambrilia.com and the numbers to access the replay are (416) 640-1917 (local) and 1(877) 289-8525 (toll free) with access code 21209183.

ABOUT AMBRILIA BIOPHARMA

Ambrilia Biopharma Inc. (TSX:AMB) is a biopharmaceutical company developing innovative and proprietary early- to mid-stage therapeutics in the fields of oncology and infectious diseases. Ambrilia's product portfolio includes an anti-cancer therapeutic peptide (PCK3145), a novel anti-cancer therapy (TVT-Dox), two oncology specialty generics (Octreotide, Goserelin), the first of which is late-stage and value-added, and promising anti-HIV treatments (PPL-100, Integrase Inhibitor Program and other Anti-virals). Exclusive worldwide rights to PPL-100 and its related compounds have been granted to Merck & Co., Inc. in return for milestone payments that could total up to $US 232 million. 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

Ambrilia's forward-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.

www.ambrilia.com

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