Ambrilia Biopharma Inc.
TSX : AMB

Ambrilia Biopharma Inc.

May 15, 2009 13:42 ET

Ambrilia Reports First Quarter 2009 Results

ATTENTION BUSINESS/FINANCIAL/HEALTH EDITORS

MONTREAL, QUEBEC--(Marketwire - May 15, 2009) - Ambrilia Biopharma Inc. (TSX:AMB) today announced its financial results for the first quarter ended March 31, 2009, and provided a review of the recent developments.

PROGRAM UPDATE

Octreotide

Study 303, involves clinical centers in both Europe and the USA and is proceeding as planned. It is designed to evaluate the 30mg, 20mg and 10mg dosage forms of Ambrilia's octreotide acetate (C2L) in acromegalic patients.

Top line results of Study 302, an open label extension of Study 301 in which all patients were administered C2L, were previously announced. Analysis following the 24-week extension treatment period provided longer term safety data (up to one year on C2L) as well as supportive efficacy data. A decision was recently taken not to collect further data in this group of patients.

The Company depends on its commercial partners to file for marketing authorization. The C2L clinical development program continues to progress and the Company expects some regulatory filings to be initiated during 2009. Ambrilia aims at extracting the maximum value from this asset during 2009.

Goserelin

Ambrilia announced last year that it had initiated a clinical program of its 3-month depot formulation of Goserelin in prostate cancer patients. In parallel, the Company has succeeded in developing a 1-month formulation of Goserelin, intended for the treatment of prostate cancer and several gynaecological indications.

Non-core programs

In December 2008, the Company entered into a 9-month exclusive license option agreement with ZBx Corporation granting ZBx the worldwide rights to develop, manufacture and commercialize the PSP94 technology. At any time during this evaluation period, ZBx is entitled to exercise its option, upon which Ambrilia would be eligible to receive up to a total of US$ 3.62 million with the achievement of development and commercialization milestones, plus royalties on sales as well as a percentage share from any sublicenses. ZBx is covering all costs associated with the evaluation period and will cover future costs associated with the further development, manufacturing and commercialization if it exercises its option.

NGR- Directed Delivery platform is Ambrilia's means to specifically deliver a therapeutic drug to tumours. The first proof-of-concept was demonstrated with a cytotoxic agent in both in-vitro and in-vivo animal models. Discussions are being held with potential partners to divest this technology.

PCK3145 is a non-toxic therapeutic peptide for the treatment of advanced metastatic prostate cancer. The mechanism of action suggests that PCK3145 exhibits both anti-metastatic and anti-angiogenic properties. A favorable safety profile and clinically relevant benefits primarily in terms of disease stabilization were observed in several patients. Discussions are being held with potential partners to divest this technology.

Anti-virals

Ambrilia's virology research programs have been put on hold, while the Company implements its divestment strategy.

Ambrilia's antiviral portfolio is comprised of small molecules and peptides with activity against HIV integrase, HIV entry, HCV polymerase and HCV entry. In addition, Ambrilia has an early stage program targeting Influenza A.

Acquisitions and Divestitures

At the end of 2008, the Board of Directors approved a strategic review that could have a significant impact on the level of future losses. This review explores all strategic options available to the Company to protect and enhance shareholder value, including the divestment or licensing of the Company's technologies, strategic partnership transactions and the sale or merger of the Company. The Board of Directors has established a committee of independent directors to consider and analyze all possible options. There can be no assurance that the review will result in any specific strategic or financial transactions and no timetable has been set for its completion.

RESULTS OF OPERATIONS

As at March 31, 2009, there was substantial doubt as to the Company's ability to continue as a going concern without having access to additional financial resources.

The Company has incurred significant operating losses since its inception and its anticipated level of future net annual expenditures exceeds its cash and cash equivalents as at March 31, 2009. Further, based on the Company's current projections, it is unlikely that it will be in compliance with its debt covenants beginning in the second quarter of 2009 which would result in Investissement Quebec ("IQ") having the right to demand immediate repayment of the Biolevier loan facility. Management is actively pursuing initiatives to avoid a breach of the debt covenants and to obtain a waiver from IQ. To-date the Company has financed its cash requirements primarily by issuing common shares and debt instruments, by licensing arrangements and through investment tax credits and interest income. It is currently attempting to monetize its assets through sale or licensing transactions. The Company is also seeking other alternatives, including strategic partnership transactions and the sale or merger of the Company. Ambrilia's ability to continue as a going concern is subject to its ability to successfully implement these plans. There can be no assurance that these plans will materialize on a timely basis or on satisfactory terms. If the Company is unable to obtain additional financial resources, management may be required to further curtail the Company's operations.

Quarter ended March 31, 2009 compared with the Quarter ended March 31, 2008

The Company incurred a net loss of $5,391,691 or $0.11 per common share for the first quarter of 2009, compared with a net loss of $7,305,950 or $0.15 per common share for the same quarter last year. The prior period results were restated to reflect the retrospective application of a new accounting standard relating to goodwill and intangible assets which came into effect on January 1, 2009.

Revenues for the first quarter of 2009 were $18,739, compared with $260,490 in the corresponding quarter last year. The lower revenues resulted primarily from the reduced level of interest on available cash and short-term investments, due to a combination of lower cash and short-term investments on hand and lower interest rates.

Research and development expenses amounted to $2,101,611 in the first quarter of 2009, compared with $3,098,438 in the same quarter last year. The decrease of $996,827 resulted primarily from reduced expenditures on the non-core technologies, as well as on goserelin and peptide research, partially offset by higher expenditures on C2L octreotide. Research and development tax credits declined to $48,000 in the current quarter from $293,823 in the corresponding quarter last year. The decrease in the current quarter reflects the lower level of spending in Canada and the closure of the Company's operations in France.

General and administrative expenses amounted to $1,156,875 in the first quarter of 2009, a decrease of $549,694 over the total of $1,706,569 for the same quarter last year. The reduction was primarily due to lower compensation costs, professional fees and occupancy costs, partially offset by higher legal fees.

Business development expenses amounted to $62,584 in the first quarter of 2009, compared to $286,944 for the same quarter last year. The decrease of $224,360 was primarily due to lower compensation costs and consulting fees in the current quarter. The business development expenses incurred in the first quarter of 2008 were included with research and development and general and administrative expenses and have been reclassified for comparative purposes in the financial statements for the first quarter of 2009.

Amortization expense decreased to $1,416,010 in the current quarter from $2,299,318 in the same quarter last year. The decrease resulted primarily from the reduced amortization on intellectual property following the write-down of the carrying value in September and December 2008.

Accretion expense on long-term debt amounted to $125,895 in the first quarter of 2009 compared to $113,607 in the same quarter of 2008. This ongoing non-cash accounting charge for imputed interest will increase the carrying value of long-term debt to face value by the maturity date of each item.

Interest on long-term debt was $197,119 in the first quarter of 2009, compared to $257,362 in the same quarter last year. The decrease was due to the reduction in interest expense on the Biolevier loan as a result of the lower Canadian prime rate in the current quarter compared to the first quarter of 2008.

Restructuring charges in the first quarter of 2009 amounted to $378,406, compared to $608,901 in the same quarter last year. The amount in the current quarter represented the completion of the restructuring process resulting from the decision taken by the Company to close its operations in France. The restructuring charges incurred in the first quarter of 2008 reflected a decision by the Company to streamline its operations, resulting in the departure of the Executive Vice-President, Business Development, Licensing and IP.

As a consequence of the intellectual property arising on the acquisition of Ambrilia France, a future income tax liability of $9,787,526 was recorded in 2006, with additional amounts of $315,275 and $604,356 added in 2008 and 2007, respectively, primarily through the exercise of acquisition warrants to acquire additional shares of Ambrilia France. This future income tax liability 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 $439,292 for the first quarter of 2008, together with a foreign exchange gain on the future income tax liability of $189,851. Drawdown of the future income tax liability was completed in the fourth quarter of 2008. Consequently, there is no future income tax recovery in the current quarter.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents totalled $3,240,477 at March 31, 2009, compared with $8,335,164 at December 31, 2008. The decrease of $5,094,687 resulted from the utilization of $5,101,303 to finance operating activities for the first quarter of 2009, including an increase of $1,255,697 in non-cash working capital. In addition, an amount of $6,616 was generated in the period from the sale of surplus equipment.

Excluding changes in working capital, operating activities utilized $3.8 million of cash in the current quarter. The average burn rate in the quarter was $1.3 million per month, compared with $1.8 million in the first quarter last year.

OUTSTANDING SHARE DATA

As of May 1, 2009, the number of common shares outstanding is 48,580,612, unchanged from December 31, 2008. The number of stock options outstanding at May 1, 2009 is 1,525,391, a decrease of 68,045 from December 31, 2008. The decrease resulted from 66,295 options having been forfeited and 1,750 options having expired. In addition, 15,877,037 warrants are outstanding on May 1, 2009, unchanged from December 31, 2008.



AMBRILIA BIOPHARMA INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)

As at

March 31, December 31,
2009 2008
$ $
Restated
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ASSETS
Current assets
Cash and cash equivalents 3,240,477 8,335,164
Accounts receivable 153,468 238,846
Investment tax credits recoverable 2,367,278 2,418,663
Prepaid expenses 320,308 182,973
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6,081,531 11,175,646
Property, plant and equipment 1,626,818 1,751,157
Intellectual property 20,956,563 22,254,850
Other long-term assets 400,000 400,000
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29,064,912 35,581,653
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and
accrued liabilities 3,957,877 5,207,076
Deferred license revenues 1,107,190 1,113,116
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5,065,067 6,320,192
Biolevier loan facility 8,352,646 8,322,914
Convertible debentures 3,018,690 2,922,527
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16,436,403 17,565,633
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Shareholders' equity
Share capital 139,508,548 139,508,548
Warrants 8,610,715 8,610,715
Contributed surplus 8,922,754 8,918,574
Equity component of
convertible debentures 1,920,914 1,920,914
Deficit (146,334,422) (140,942,731)
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12,628,509 18,016,020
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29,064,912 35,581,653
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AMBRILIA BIOPHARMA INC.
CONSOLIDATED STATEMENTS OF OPERATIONS, COMPREHENSIVE LOSS AND DEFICIT
(unaudited)

Three months ended
March 31,
2009 2008
$ $
Restated
---------------------------------------------------------------------
REVENUES
License revenue 5,926 10,946
Interest revenue on cash, cash
equivalents and short-term investments 12,813 246,544
Other income - 3,000
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18,739 260,490
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EXPENSES
Research and development 2,101,611 3,098,438
Research and development tax credits (48,000) (293,823)
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Net research and development 2,053,611 2,804,615
General and administrative 1,156,875 1,706,569
Business development 62,584 286,944
Patent expenditures 51,276 174,063
Amortization of property,
plant and equipment 117,723 137,886
Amortization of intellectual property 1,298,287 2,161,432
Accretion on Biolevier loan facility 29,732 29,312
Accretion on convertible debentures 96,163 84,295
Interest on Biolevier loan facility 135,869 196,112
Interest on convertible debentures 61,250 61,250
Financial charges 11,431 2,694
Restructuring charges 378,406 608,901
Foreign exchange gains (42,777) (58,490)
---------------------------------------------------------------------
5,410,430 8,195,583
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Loss before income taxes (5,391,691) (7,935,093)

Future income tax recovery - 439,292
Foreign exchange gain on future
income tax liability - 189,851
---------------------------------------------------------------------
- 629,143
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Net loss and comprehensive loss
for the period (5,391,691) (7,305,950)

Deficit, beginning of period -
as previously reported (140,548,785) (100,741,754)
Adjustment on implementation
of new accounting standard (393,946) (1,242,978)
---------------------------------------------------------------------
Deficit, beginning of period
as amended (140,942,731) (101,984,732)
---------------------------------------------------------------------
Deficit, end of period (146,334,422) (109,290,682)
---------------------------------------------------------------------
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Basic and diluted loss per share (0.11) (0.15)
Weighted average number of common
shares outstanding 48,576,796 47,650,555
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AMBRILIA BIOPHARMA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three months ended
March 31,
2009 2008
$ $
Restated
---------------------------------------------------------------------

OPERATING ACTIVITIES
Net loss for the period (5,391,691) (7,305,950)
Items not affecting cash
Amortization of property,
plant and equipment 117,723 137,886
Amortization of intellectual property 1,298,287 2,161,432
Accretion on Biolevier loan facility 29,732 29,312
Accretion on convertible debentures 96,163 84,295
Future income tax recovery and
related exchange gain - (629,143)
Services paid by issuance
of stock options 4,180 204,281
---------------------------------------------------------------------
(3,845,606) (5,317,887)
Net change in non-cash balances
relating to operations (1,255,697) 28,338
---------------------------------------------------------------------
Cash flows related to
operating activities (5,101,303) (5,289,549)
---------------------------------------------------------------------

INVESTING ACTIVITIES
Acquisition of property,
plant and equipment - (110,893)
Proceeds from disposal of property,
plant and equipment 6,616 270
Maturities of short-term investments - 5,792,284
---------------------------------------------------------------------
Cash flows related to investing activities 6,616 5,681,661
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FINANCING ACTIVITIES
---------------------------------------------------------------------
Cash flows related to financing activities - -
---------------------------------------------------------------------

Net increase (decrease) in cash and
cash equivalents (5,094,687) 392,112
Cash and cash equivalents,
beginning of period 8,335,164 10,795,297
---------------------------------------------------------------------
Cash and cash equivalents,
end of period 3,240,477 11,187,409
---------------------------------------------------------------------
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AMBRILIA'S FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements that reflect the Company's current expectation regarding future events. There is a risk that expectations and forward looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on these forward-looking statements as they involve risks and uncertainties, which could make actual results differ materially from those projected herein and depend on a number of factors including, but not limited to, the outcome of the arbitration with Merck, 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. We refer you to the Risk Factors section of the Company's annual information form which contains a more exhaustive analysis of the risks and uncertainties that are generally connected to the business of the Company. 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, unless obligated to do so by applicable securities laws.

ABOUT AMBRILIA BIOPHARMA

Ambrilia Biopharma Inc. (TSX:AMB) is a biotechnology company focused on the discovery and development of novel treatments for viral diseases and cancer. The Company's strategy aims to capitalize on its broad portfolio and original expertise in virology. Ambrilia's product portfolio is comprised of oncology and antiviral assets, including two new formulations of existing peptides for cancer treatment, a therapeutic peptide for prostate cancer, a targeted delivery technology for cancer, an HIV protease inhibitor program (exclusive worldwide rights granted to Merck & Co., Inc.) as well as HIV integrase and entry inhibitors, Hepatitis C virus inhibitors and anti-Influenza A compounds. Ambrilia's head office, research and development and manufacturing facilities are located in Montreal.

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