Ambrilia Biopharma Inc.
TSX : AMB

Ambrilia Biopharma Inc.

November 14, 2008 08:00 ET

Ambrilia Reports Third Quarter 2008 Results

MONTREAL, QUEBEC--(Marketwire - Nov. 14, 2008) - Ambrilia Biopharma Inc. (TSX:AMB) today reported its financial results for the third quarter ended September 30, 2008, and provided a review of the recent developments.

RECENT HIGHLIGHTS

- Positive 24-week extension Phase III ("Study 302") top line results for its proprietary prolonged-release formulation of Octreotide C2L.

- Decision to prioritize divestment strategy of monetizing (selling or licensing) its clinical assets C2L and goserelin before year-end along with cost-cutting actions which result in a hold on its antiviral R&D activities, significant reduction in cash consumption and a 33% decrease in headcount.

- Success in manufacturing a final 1-month formulation of Goserelin intended for the treatment of prostate cancer and several gynecological indications.

- Initiation of the Phase I/II clinical program of the novel 3-month Goserelin formulation in prostate cancer patients.

PROGRAM UPDATE

During this third quarter, the Company has continued to advance the development of its two major programs, Octreotide and Goserelin long acting formulations.

Octreotide

Ambrilia has reported the completion of a 24 weeks extension of its phase III study ("study 302") of C2L, the Company's long acting 30 mg Octreotide dosage form; the results support the ability of C2L 30 mg administered every six weeks to replace Sandostatin® LAR 30 mg administered every four weeks, with similar benefits on the markers and symptoms of acromegaly, and no increase in adverse events.

The other phase III study of C2L ("study 303"), which is designed to evaluate the 20 mg and 10 mg dosage forms is proceeding as scheduled, and involves clinical centres in Europe and in the USA.

The Company has reassessed its timelines and now expects regulatory filings to be initiated during the first half of 2009.

Goserelin

Ambrilia has initiated in July 2008 its first Phase I/II multicenter study designed to assess the hormonal efficacy, pharmacokinetic (PK) and safety of its 3-month depot formulation of Goserelin in hormone-sensitive prostate cancer patients.

In parallel, the Company has succeeded in developing a 28-day formulation of Goserelin, intended for the treatment of prostate cancer and several gynaecological indications.

Non-core programs

Divestment activities to monetize oncology assets are progressing well and the Company is aiming to conclude partnerships by the end of 2008, as previously announced.

ANTI-VIRALS

Ambrilia's virology research programs have provisionally been put on hold, while the Company implements its divestment strategy of monetizing C2L and Goserelin. This resulted in significant reduction in cash consumption, and a 33% decrease in headcount.

"Faced with a difficult economical environment, we successfully implemented the strategic changes that are necessary to optimally position the Company to execute its major transactions," said Dr Philippe Calais, President and CEO. "The Company has further tightened the management of its expenses and finances, in order to extend the use of its cash during 2009."

RESULTS OF OPERATIONS

Quarter ended September 30, 2008 compared with the Quarter ended September 30, 2007

The Company incurred a net loss of $9,781,358 or $0.20 per common share for the third quarter of 2008, compared with a net loss of $6,145,067 or $0.19 per common share for the same quarter last year.

Revenues for the third quarter of 2008 were $106,369, compared with $183,268 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 $2,317,157 in the third quarter of 2008, compared with $2,726,247 in the same quarter last year. The decrease of $409,090 resulted primarily from reduced expenditures on the non-core technologies which the Company intends to out-license or divest, as well as on goserelin and peptide research. Goserelin expenses were higher in the third quarter last year due to higher purchases of pharmaceutical raw materials. Research and development tax credits increased to $272,375 in the current quarter from $226,112 in the corresponding quarter last year. The increase in the current quarter reflects the higher rate of tax credits available in France effective January 1, 2008.

General and administrative expenses amounted to $1,036,927 in the third quarter of 2008, a decrease of $373,532 over the total of $1,410,459 for the same quarter last year. The variation was primarily due to lower compensation costs and consulting fees, partially offset by higher legal fees.

Business development expenses amounted to $141,080 in the third quarter of 2008, compared to $242,522 for the same quarter last year. The decrease of $101,442 was primarily due to lower compensation costs in the current quarter. These amounts are segregated on the statement of operations for the first time in 2008 and were previously included with research and development and general and administrative expenses.

Amortization expense increased to $2,400,303 in the current quarter from $2,270,265 in the same quarter last year. The increase resulted primarily from the added amortization on intellectual property arising from the acquisition of additional shares of Ambrilia France in September 2007 and March 2008, under the terms of the original offer to Ambrilia France shareholders made in January 2006. The final tranche was acquired in March 2008.

Interest on long-term debt was $235,165 in the third quarter of 2008, compared to $267,499 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 third quarter of 2007.

Restructuring charges in the third quarter of 2008 amounted to $302,374 and resulted from a decision by the Company to prioritize its divestment strategy of monetizing its clinical assets C2L and goserelin, along with cost-cutting actions which resulted in a hold being placed on its antiviral R&D activities, a significant reduction in cash consumption and a 33% reduction in headcount. All related severance costs have been recorded in the current period.

A write-down of the carrying value of intellectual property of $3,695,717 was recorded in the third quarter of 2008. This resulted from a review carried out by management as at September 30, 2008, which indicated that the write-down was required to reflect a reduction in the fair value of certain of the Company's oncology assets determined on a discounted expected cash flow basis. No write-down was deemed necessary for C2L and goserelin.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash resources are invested in Federal and provincial government treasury bills and bankers' acceptances and discount notes of major Canadian banks. Consequently, it has not been impacted by the liquidity crisis in financial markets.

Cash and cash equivalents and short-term investments totalled $11,692,808 at September 30, 2008, compared with $25,399,921 at December 31, 2007. The decrease of $13,707,113 resulted from the utilization of $13,378,556 to finance operating activities for the first nine months of 2008, including an increase of $3,515,990 in non-cash working capital. In addition, a net amount of $328,557 was used in the period for additional property, plant and equipment and intellectual property.

The Company is in the process of divesting its non-virology assets by sale or out-licensing and is aiming to do so by the end of 2008. As of September 29, 2008, the Company elected to favour this divestment strategy in order to strengthen its financial position and delay any future financing. It also decided to place a hold on its antiviral R&D activities, resulting in a 33% reduction in headcount and a significant reduction in cash consumption. Depending upon the success of the divestment strategy, the Company may not have sufficient cash to support its activities for the next 12 months and consequently may also require additional financial resources, which could be difficult to obtain in the short-term due to the ongoing crisis in financial markets. The Company may have to undertake significant reductions in its operations.

Outstanding Share Data

As of November 3, 2008 the number of common shares outstanding is 48,580,612, an increase of 1,065,296 from December 31, 2007. The increase results from the issue of 448,318 shares in connection with the acquisition of additional shares of Ambrilia France and 616,978 shares issued as payment of interest for the first half of 2008 on the convertible debentures. The number of stock options outstanding at November 3, 2008 is 1,604,257, an increase of 580,990 from December 31, 2007. The increase resulted from a total of 699,199 new options having been granted during the period, partially offset by 118,209 options forfeited. In addition, 15,877,037 warrants are outstanding on November 3, 2008, a decrease of 1,188,604 from December 31, 2007 resulting from the exercise of 448,318 acquisition warrants relating to the Ambrilia France acquisition and the expiry of 370,143 broker compensation warrants related to the March 1, 2006 private placement together with an equal number of warrants attached thereto.



AMBRILIA BIOPHARMA INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)

As at

September 30, December 31,
2008 2007
$ $
-------------------------------------------------------------------------

ASSETS
Current assets
Cash and cash equivalents 5,749,943 10,795,297
Short-term investments 5,942,865 14,604,624
Accounts receivable 238,101 411,892
Investment tax credits recoverable 1,042,766 642,352
Prepaid expenses 137,130 175,738
-------------------------------------------------------------------------
13,110,805 26,629,903
Long-term receivables 1,685,044 1,214,712
Property, plant and equipment 1,873,438 2,133,196
Intellectual property 40,150,755 48,657,580
-------------------------------------------------------------------------
56,820,042 78,635,391
-------------------------------------------------------------------------
-------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities 3,290,258 3,743,044
Deferred license revenues 1,123,101 3,527,958
-------------------------------------------------------------------------
4,413,359 7,271,002
Minority interest 1 1
Biolevier loan facility 8,293,287 8,205,038
Future income tax liability 3,198,071 4,347,762
Convertible debentures 2,829,480 2,568,034
-------------------------------------------------------------------------
18,734,198 22,391,837
-------------------------------------------------------------------------

Shareholders' equity
Share capital 139,508,253 137,951,135
Warrants 8,610,715 8,610,715
Contributed surplus 8,879,461 8,502,544
Equity component of convertible debentures 1,920,914 1,920,914
Deficit (120,833,499) (100,741,754)
-------------------------------------------------------------------------
38,085,844 56,243,554
-------------------------------------------------------------------------
56,820,042 78,635,391
-------------------------------------------------------------------------



AMBRILIA BIOPHARMA INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS, DEFICIT AND COMPREHENSIVE LOSS
(unaudited)
Three months ended Nine months ended
September 30, September 30,
2008 2007 2008 2007
$ $ $ $
-------------------------------------------------------------------------

REVENUES
License revenue 5,927 10,615 3,586,615 25,080
Interest revenue on
cash, cash
equivalents and
short-term
investments 95,642 171,751 480,555 537,759
Other income 4,800 902 14,052 31,191
-------------------------------------------------------------------------
106,369 183,268 4,081,222 594,030
-------------------------------------------------------------------------

EXPENSES
Research and
development 2,317,157 2,726,247 8,484,614 7,392,617
Research and
development tax
credits (272,375) (226,112) (855,842) (596,366)
-------------------------------------------------------------------------

Net research and
development 2,044,782 2,500,135 7,628,772 6,796,251
General and
administrative 1,036,927 1,410,459 4,231,987 5,850,700
Business
development 141,080 242,522 789,049 773,659
Patent expenditures 34,288 40,533 84,885 72,896
Amortization of
property, plant
and equipment 141,834 154,304 420,603 410,770
Amortization of
intellectual
property 2,258,469 2,115,961 6,712,891 6,246,234
Accretion on
Biolevier loan
facility 29,522 29,206 88,249 87,102
Accretion on
convertible
debentures 90,034 78,820 261,446 218,706
Interest on
Biolevier loan
facility 173,915 206,249 545,710 604,683
Interest on
convertible
debentures 61,250 61,250 183,750 183,750
Financial charges 8,278 10,349 19,323 48,806
Restructuring
charges 302,374 208,341 911,275 208,341
Write-down of
carrying value
of intellectual
property 3,695,717 - 3,695,717 -
Foreign exchange
(gain) loss 80,739 (354) 48,454 54,470
-------------------------------------------------------------------------
10,099,209 7,057,775 25,622,111 21,556,368
-------------------------------------------------------------------------
Loss before
income taxes (9,992,840) (6,874,507) (21,540,889) (20,962,338)

Future income tax
recovery 460,906 469,839 1,520,899 1,380,824
Foreign exchange
gain (loss) on
future income
tax liability (249,424) 259,601 (71,755) 568,759
-------------------------------------------------------------------------
211,482 729,440 1,449,144 1,949,583
-------------------------------------------------------------------------

Net loss and
comprehensive
loss for the
period (9,781,358) (6,145,067) (20,091,745) (19,012,755)
Deficit, beginning
of period (111,052,141) (88,331,583) (100,741,754) (75,463,895)
-------------------------------------------------------------------------
Deficit, end of
period (120,833,499) (94,476,650) (120,833,499) (94,476,650)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic and diluted
loss per share (0.20) (0.19) (0.42) (0.62)

Weighted average
number of
common shares
outstanding 48,572,980 32,113,545 48,066,222 30,656,308
-------------------------------------------------------------------------



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

Three months ended Nine months ended
September 30, September 30,
2008 2007 2008 2007
$ $ $ $
-------------------------------------------------------------------------
OPERATING
ACTIVITIES
Net loss for the
period (9,781,358) (6,145,067) (20,091,745) (19,012,755)
Items not affecting
cash
Amortization of
property, plant
and equipment 141,834 154,304 420,603 410,770
Amortization of
intellectual
property 2,258,469 2,115,961 6,712,891 6,246,234
Write-down of
carrying value
of intellectual
property 3,695,717 - 3,695,717 -
Loss on disposal
of property,
plant and
equipment - 944 - 944
Accretion on
Biolevier loan
facility 29,522 29,206 88,249 87,102
Accretion on
convertible
debentures 90,034 78,820 261,446 218,706
Interest paid by
issuance of
common shares - - 122,500 122,164
Future income tax
recovery and
related exchange
(gain) loss (211,482) (729,440) (1,449,144) (1,949,583)
Unrealized foreign
exchange gain on
loan payable - 1 - (2,450)
Services paid by
issuance of stock
options 32,467 91,969 376,917 499,978
Compensation paid
by issuance of
common shares - - - 100,000
-------------------------------------------------------------------------
(3,744,797) (4,403,302) (9,862,566) (13,278,890)
Net change in
non-cash balances
relating to
operations (1,064,448) 1,481,824 (3,515,990) (299,870)
-------------------------------------------------------------------------
Cash flows related
to operating
activities (4,809,245) (2,921,478) (13,378,556) (13,578,760)
-------------------------------------------------------------------------

INVESTING ACTIVITIES
Acquisition of
intellectual
property (10,641) (78,513) (193,535) (221,670)
Acquisition of
property, plant and
equipment (10,968) (213,877) (135,982) (787,335)
Proceeds from
disposal of
property, plant and
equipment 283 250 960 750
Purchase of
short-term
investments (3,974,085) - (10,705,663) (5,410,025)
Maturities of
short-term
investments 4,762,798 989,200 19,367,422 21,182,230
-------------------------------------------------------------------------
Cash flows
related to
investing
activities 767,387 697,060 8,333,202 14,763,950
-------------------------------------------------------------------------

FINANCING ACTIVITIES
Issuance of common
shares - - - 5,861,127
Share issuance costs - (11,126) - (200,253)
Repayment of loan
payable - - - (766,391)
-------------------------------------------------------------------------
Cash flows related
to financing
activities - (11,126) - 4,894,483
-------------------------------------------------------------------------

Net increase
(decrease) in cash
and cash
equivalents (4,041,858) (2,235,544) (5,045,354) 6,079,673
Cash and cash
equivalents,
beginning of
period 9,791,801 11,471,071 10,795,297 3,155,854
-------------------------------------------------------------------------
Cash and cash
equivalents, end
of period 5,749,943 9,235,527 5,749,943 9,235,527
-------------------------------------------------------------------------
-------------------------------------------------------------------------


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, 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 with a regional office in France.

Contact Information