Bioxel Pharma Inc.
TSX VENTURE : BIP

Bioxel Pharma Inc.

April 04, 2006 12:50 ET

Bioxel Pharma Announces Fiscal 2005 Results

SAINTE-FOY, QUEBEC--(CCNMatthews - April 4, 2006) - Bioxel Pharma Inc. (TSX VENTURE:BIP), a leading manufacturer of taxane active pharmaceutical ingredients (APIs) and developer of targeted oncology drugs, today announced results for the fiscal year ended December 31, 2005.

"Bioxel's 2005 fiscal year was highlighted by the implementation of three key strategic initiatives: broadening our customer base through accelerated international expansion, enhancing our product mix, and lowering our production costs," said Pascal Delmas, the Corporation's President and Chief Executive Officer. "These initiatives will be stepped up in 2006 with a focus on a single goal: to secure and accelerate profitable revenue growth. Today, we are delighted to disclose the first tangible results of this value enhancement plan."



2005 HIGHLIGHTS:

- Significant breakthrough in the European market upon the execution
of three paclitaxel manufacturing and supply agreements with a
pharmaceutical company in the clinical development phase and two
major European generic drug manufacturers;

- First direct sales of paclitaxel in Europe targeted to the hospital
market;

- Filing of two patents for a non-infringing paclitaxel and docetaxel
synthesis processes represents the year's most promising
development for the medium and long term. This enables Bioxel to
expand its product mix and to secure a highly favorable position to
take advantage of the opening market opportunity for generic
Taxotere® in 2008. The originator drug is marketed by Sanofi-
Aventis. The active ingredient is docetaxel;

- Start-up of work focused on the pilot scale-up of the processes to
manufacture paclitaxel and docetaxel through semi-synthesis;

- Signing of an injectable taxane-based drug development agreement in
partnership with Montreal and Toronto universities;

- Revenues of $1.8 million during a year affected by the deferral of
Cell Therapeutics' paclitaxel orders. Revenues generated by other
Bioxel's customers increase by 52% over the previous year;

- Significant improvement in financial performance:

- First fiscal year yielding a gross profit, which totals 19% as a
percentage of sales as a result of a reduction in manufacturing
costs;

- The operating loss and net loss are reduced by 30% and 17%
respectively under the combined effect of an improved profit
margin and lower fixed expenses.

SUBSEQUENT EVENTS:

- Bioxel successfully completes a private placement of common shares
for proceeds of $4.7 million;

- The exercise of warrants at the revised price of $0.34 provides the
Corporation with an additional $1.1 million in financing effective
March 27, 2006.


Geographic and segmented diversification:
Europe and generic pharmaceutical companies

During fiscal 2005, the Corporation initiated commercial discussions with new European partners. These discussions have culminated in the execution of two paclitaxel manufacturing and supply agreements with generic Taxol® manufacturers in late 2005 and early 2006. Europe is expected to account for a major share of revenues in the second half of 2006. Bioxel is now well positioned in North America and Europe with established partners offering promising growth potential.

The Corporation also tightened its business relations with innovative pharmaceutical companies focused on the development of new taxane-based products. These efforts paid off as a paclitaxel purchase agreement worth approximately $1 million was signed with a new customer in the fourth quarter of 2005. Management is confident such customers will yield recurring sales within the short and medium term.

It should be pointed out that in 2005 Bioxel was affected by the decision of one of its customers, Cell Therapeutics, to postpone the U.S. registration of Xyotax®, its paclitaxel-based drug. Clinical trials on Xyotax® continue, but Cell Therapeutics' order backlog, which represented $5 million in potential paclitaxel sales in 2005, failed to materialize. Bioxel expects its revenues to fluctuate considerably in upcoming quarters. These fluctuations are of a circumstantial nature, as paclitaxel sales have yet to reach a steady pace of growth.

Conversely, the Corporation is pleased with the growth in sales generated by its other customers which in 2005 were up more than 50% over 2004.


Semi-synthetic taxanes:
Strengthening the product mix

The broadening of Corporation's product portfolio is aimed at building and accelerating its sales growth over the medium and long term. In 2005, Bioxel filed two patents covering the manufacture of paclitaxel and docetaxel APIs through semi-synthesis. The Corporation is currently focused on the commercial scale-up of these new manufacturing processes. Bioxel is well positioned to take advantage of the opening market opportunity for generic docetaxel beginning in 2008. Docetaxel is the active ingredient in a blockbuster drug sold by Sanofi-Aventis under the Taxotere® trademark, which generates aggregate annual sales of approximately US$2 billion.

Bioxel enjoys major competitive advantages in this regard: unique intellectual property, secure access to 9-DHB (the starting material used in the manufacture of docetaxel), a large inventory of 9-DHB, an efficient patented manufacturing process, and reliable industrial supply solutions that will be operational in 2006.

Bioxel has initiated discussions for the supply of docetaxel with several pharmaceutical companies and generic product manufacturers over the past year. At this stage, the Corporation is building on a strategy of partnerships with players capable of taking the lead in producing generic Taxotere®.

Financial results that set the stage for the future:
Tight cost management, improving margins

Paclitaxel sales amounted to $1.8 million, down from 2004 due to the deferral of Cell Therapeutics' order backlog. Despite this circumstantial decline in revenues, Bioxel recorded its first-ever gross profit which stood at 19% as a percentage of sales, as opposed to a gross loss of 11% in 2004. This strong growth can be explained by the dramatic reduction in its paclitaxel production costs subsequent to the start-up of its commercial manufacturing chain.

In 2006, the Corporation will continue to reduce its production costs by further diversifying the supply of its product intermediates and broadening its taxane mix.

Due to the overall reduction in operating costs, coupled with lower fixed costs, the overall operating loss for 2005 was down by 30% at $2.0 million, while the net loss was cut by 17% to $3.6 million.

FINANCIAL HIGHLIGHTS

The information below should be read in conjunction with the selected financial data included herein.

Fourth Quarter

Bioxel achieved revenues of $721,000 during the fourth quarter of 2005, the highest sales level for the year, up from $667,000 in the fourth quarter of 2004. The Corporation recorded a gross profit of $104,000, compared with $109,000 in the equivalent period of 2004. Administrative expenses were reduced to $259,000, to a one-year quarterly low, from $426,000 in the same period of 2004. Finally, Bioxel incurred a net loss of $843,000 in the fourth quarter of 2005, compared with $852,000 in the corresponding period of 2004.

Operating Results

Paclitaxel production operations yielded sales of $1.8 million during fiscal 2005, compared with $2.3 million in 2004. This decline is due mainly to the deferral of Cell Therapeutics' order backlog. Concurrently, sales generated by Bioxel's other customers grew by 52%.

The gross profit margin improved significantly as the Corporation posted a gross profit of $343,000 (19% as a percentage of sales) for fiscal 2005, as opposed to a gross loss of $263,000 (-11% of sales) a year earlier. This clear improvement of $606,000 was attributable to the lower ongoing costs of manufacturing as compared with the June, 2004 start-up costs of the commercial paclitaxel manufacturing unit.

Research and development expenses declined slightly over the past year, from $471,000 in 2004 to $432,000 in 2005, as a result of a reduction in external consultant costs and streamlining of the project portfolio. The objective of this streamlining, which was initiated in 2004, was to prioritize research and development projects enabling Bioxel to expand its taxane mix within the short and medium term.

Administrative expenses went from $1,626,000 to $1,275,000, this major $351,000 reduction being due to lower payroll, professional fees and public corporation expenses. Selling expenses also declined by $65,000, from $411,000 on December 31, 2004 to $346,000 as at December 31, 2005, as a result of changes in the compensation structure and a decrease in consulting fees.

Financial expenses amounted to $818,000 in 2005, compared with $804,000 in 2004, this slight $14,000 increase being due mainly to financing fees, the amortization of financing expenses and interest on long-term debt. Capitalized interest expenses totaled $366,000 in 2005, down from $465,000 in 2004. Such capitalized interest expenses derive from the BioLevier financing from Investissement Quebec and interest on convertibles debentures capitalized until July 2005.

Amortization of property, plant and equipment and intangible assets increased by $282,000 to $955,000 in 2005, up from $673,000 a year earlier as a result of amortization of the commercial-scale purification equipment brought on-stream as of June 2004.

Two other items had an impact on the Corporation's financial results. The first was a $20,000 exchange gain as at December 31, 2005, compared with $127,000 as at December 31, 2004, due mainly to the year-end conversion of the outstanding note payable into U.S. dollars. The second item was an expense of approximately $209,000 in 2005, versus $293,000 in 2004, related to the recognition of option awarding expenses in accordance with the recommendations of Canadian Institute of Chartered Accountants (CICA) Handbook Section 3870, "Stock-Based Compensation and Other Stock-Based Payments".

After accounting for all these variations, the Corporation incurred a net loss of $3.6 million or $0.07 per share for the fiscal year ended December 31, 2005, compared with $4.4 million or $0.09 per share in 2004.

Cash Position and Sources of Financing

Bioxel had working capital of $1.6 million as at December 31, 2005, compared with $4.3 million as of December 31, 2004. Operating activities used cash flows of $2.1 million, down from $2.7 million in 2004. This reduction is due mainly to cost-cutting efforts and the positive impact of commercial-scale paclitaxel manufacturing over a full fiscal year.

Investing activities used cash flows of $411,000 in 2005, compared with $3.2 million in 2004. This sharp decline can be explained mostly by the 2004 purchase of property, plant and equipment for the commercial-scale purification of paclitaxel.

During fiscal 2005, financing activities used cash flows of $187,000 pursuant to the long-term debt repayment schedule and the receipt of a consideration of $643,000 from Investissement Quebec. This consideration corresponds to the third instalment of the loan extended by Investissement Quebec in connection with the BioLevier program.

Cash, cash equivalents and marketable securities totaled $440,000 as of December 31, 2005, compared with $3.2 million as of December 31, 2004. This lower amount is due mainly to the decrease in cash flows used by operating activities. The Corporation also has an authorized line of credit of $500,000, secured by a first ranking movable hypothec on accounts receivable and inventories, which was unused as of December 31, 2005. It should be pointed out that Bioxel was engaged in a round of financing at the close of fiscal 2005 (see "Subsequent Events" section).

Inventories amounted to $2.8 million as of December 31, 2005, up by $451,000 over the end of fiscal 2004 as a result of the combined effect of a greater inventory of finished products and further use of the biomass. Accounts receivable totaled $738,000 at the close of fiscal 2005, compared with $1.2 million at year-end 2004. This variation can be explained primarily by the recognition of research and development tax credits and government assistance receivable in 2005.

The net value of property, plant and equipment amounted to $4.5 million at the close of fiscal 2005, due mainly to the purchase of property, plant and equipment for the semi-synthesis process coupled with amortization of the commercial-scale taxane production equipment.



As of December 31, 2005, long-term debt totaled $2.8 million,
consisting primarily of:

- $1.4 million in equipment loans at a variable rate of 6.65%; and
- $1.0 million in notes payable without interest.


Furthermore, the BioLevier loan from Investissement Quebec amounted to $2.5 million as at December 31, 2005. Interest on this loan is being capitalized over a 24-month period and the loan is repayable as of June 2007 using cash flows from operations.

As of December 31, 2005, the Corporation posted a year-to-date deficit of $24.2 million and contributed surplus of $2.2 million related to the change in the Canadian accounting standard for the stock option incentive plan and the cancellation of warrants. Shareholders' equity and convertible debentures totaled $2.9 million, compared with $6.1 million as at December 31, 2004.

Outstanding Shares and Warrants

The Corporation had 57,535,547 outstanding common shares as of December 31, 2005. During the year, 1,100,000 new options were awarded while 1,200,000 options were cancelled, bringing to 3,897,591 the number of options awarded under the stock option plan for employees and directors. Of this total, 3,749,261 options are exercisable. Finally, 865,971 warrants expired over the past year, bringing to 9,380,526 the total number of outstanding warrants as at December 31, 2005.

Subsequent Events

On February 16, 2006, the Corporation completed a private placement of 13,817,366 common shares at a price of $0.34 per share, for total proceeds of $4.7 million. The Corporation also revised the exercise price for 7,980,271 warrants to $0.34. These warrants were issued pursuant to a September 16, 2004 private placement by the Corporation under which 8,041,246 units were distributed, each unit consisting of one common share and one warrant. These warrants will expire on April 13, 2006. Effective March 27, 2006, 3,235,000 of these warrants were exercised, yielding an additional $1.1 million in financing.

2006 Outlook

Management intends to continue focusing on developing the naturally-sourced paclitaxel market in Europe and the United States and to step up the development of taxanes produced through semi-synthesis in order to conclude new strategic partnerships with pharmaceutical companies over the next year.

In 2006, the Corporation will also further diversify the supply of its primary processing products in order to increase its profit margins and to make its manufacturing chain more competitive.

Bioxel is currently assessing various types of docetaxel manufacturing and marketing partnerships so as to fully leverage the value of its intellectual property and to rapidly launch this high-potential product once the Taxotere® generic drug market opens up in late 2007.

Risk Factors and Uncertainties

The Corporation's operations are subject to various risk factors and uncertainties that generally affect all of the companies working in the biotechnology sector. Bioxel Pharma's future profitability depends on its ability to capitalize on its marketing efforts, successfully develop its technologies and future products, retain highly qualified personnel, safeguard its intellectual property rights, secure strategic alliances and research partnerships, and sign licensing agreements. This process entails investing significant financial resources. Accordingly, the Corporation's ability to maintain the cash and cash equivalents needed to finance its operations is key to its future success, and as such represents a risk.



Bioxel Pharma Inc.
Selected Financial Data

Three Months Ended Year Ended
December 31, December 31,
(Unaudited) (Audited)
Earnings 2005 2004 2005 2004
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$ $ $ $
Revenues 720,634 666,683 1,834,000 2,352,190
Cost of goods sold 616,644 558,129 1,490,582 2,615,663
Gross margin (loss) 103,990 108,554 343,418 (263,473)
Research and development
expenses 76,869 118,253 431,692 471,592
Selling expenses 65,087 99,153 346,073 410,714
Stock-based compensation 35,660 21,000 209,233 293,419
Administrative expenses 258,998 425,795 1,275,003 1,626,209
Financial expenses 375,619 236,382 818,467 804,325
Amortization 144,876 201,001 955,251 672,655
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Net loss 842,562 851,824 3,645,852 4,401,710
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Net loss and diluted net
loss per share 0.02 0.01 0.07 0.09
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Weighted average number
of shares outstanding 57,535,547 54,142,764 55,698,569 47,395,672
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As at December 31, As at December 31,
Balance Sheet 2005 2004
(audited) (audited)
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$ $

Cash 440,330 181,714
Temporary investment 3,000,000
Other current assets 3,584,997 3,677,752
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Total current assets 4,025,327 6,859,466
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Property, plant and
equipment 4,538,391 5,000,824
Other long-term assets 1,023,462 1,143,714
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Total assets 9,587,180 13,004,004
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Current liabilities 2,388,332 2,599,152
Long-term debt 1,782,783 2,556,812
BioLevier note payable 2,544,355 1,737,270
Liability component of
convertible debentures 1,221,402 1,834,310
Shareholders' equity 1,650,308 4,276,460
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Total liabilities and
shareholders' equity 9,587,180 13,004,004
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Contact Information

  • Bioxel Pharma Inc.
    M. Pascal Delmas, Pharm.D, MBA
    President and Chief Executive Officer
    (418) 654-9666
    www.bioxelpharma.com