Bioxel Pharma Inc.
TSX VENTURE : BIP

Bioxel Pharma Inc.

August 22, 2005 13:30 ET

Bioxel Pharma Announces Results for the First Half of 2005

SAINTE-FOY, QUEBEC--(CCNMatthews - Aug. 22, 2005) - Bioxel Pharma Inc. (TSX VENTURE:BIP), a leading manufacturer of taxane APIs and developer of targeted oncology drugs, today announced results for the second quarter and first six months ending June 30, 2005.

"After setting the stage for a renewed strategy, the second quarter gave Bioxel's team the opportunity to pursue and focus its efforts on three key objectives: (i) grow paclitaxel sales; (ii) improve production efficiency and lower fixed expenses; and (iii) invest in the development of new taxanes and oncology drugs. As you can see, our first six month's results attest to the effectiveness and soundness of our strategy. We are committed to staying on this track in the coming months," said Pascal Delmas, the Corporation's President and Chief Executive Officer.

HIGHLIGHTS FOR THE FIRST SIX MONTHS

Consolidating our business base and increasing gross margin

Sales of paclitaxel totaled $831,000 in the first half of 2005, despite the deferral of Cell Therapeutics' order backlog, thus confirming the strength of the Corporation's commercial development. The negotiations initiated during the first semester aimed at diversifying Bioxel's customer base should yield benefits in the second half through sales realized with new European generic customers. The Corporation's profit margin rose to 22% for the first six months of this year, as opposed to a gross loss of $531,000 in 2004.

Significant decrease in operating loss

The operating loss for the first half of 2005 was down 44% to $1 million, with the combined positive impact of lower paclitaxel commercial manufacturing costs and fixed cost-cutting measures. The monthly burn rate for the first six months of 2005 fell to $168,000 from $300,000 a year earlier.

Investments yielding value in the short term

Bioxel's goal is to expand its product line in order to pave the way for growth over the short and medium term. After filing patents to manufacture taxanes by semi-synthesis, the Corporation focused on pilot scale-up of the new processes. What is at stake is important: this process will improve our competitive edge and allow us to benefit from the opening of a new generic market in 2007 - docetaxel - a blockbuster marketed by Sanofi-Aventis. Concurrently, the pharmaceutical development of new taxane-based anticancer drugs continued as planned and should shortly lead to the filing of patents. Initial results obtained in animals have been positive, giving Bioxel confidence about carrying on the work.

FINANCIAL HIGHLIGHTS

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

Second Quarter

Bioxel kept up its momentum of the first quarter and posted revenues of $335,000 subsequent to the sale of paclitaxel to generic manufacturers. The profit margin was 24% for the second quarter, up over the first quarter of 2005. Administrative expenses were kept under $400 000 for a second consecutive quarter, which reflects the lowest quarterly level in a year.

First Half

Financial Results

The Corporation recorded sales of $831,000 during the six-month period ended June 30, 2005, compared with $1.0 million for the equivalent period of 2004. The lower sales were due to the deferral of Cell Therapeutics' order backlog. The gross margin totaled $184,000, up from a gross loss of $531,000 a year earlier. This clear improvement of $714,000 was attributable to the lower costs resulting from start-up of the commercial paclitaxel manufacturing unit in June 2004. The Corporation's higher gross margin and fixed operating cost-cutting measures enabled it to greatly reduce its operating loss and net loss in comparison with the first half of 2004.

Research and development expenses totaled $214,000 for the first half ended June 30, 2005, up from $192,000 in the first six months of 2004. This $22,000 increase related to the decision to refocus the Corporation's research and development on projects yielding value in the near term, particularly producing taxanes by semi-synthesis.

Administrative expenses went from $824,000 to $708,000, this major reduction of $116,000 being related to the lower total payroll, professional fees and public corporation costs. Selling expenses also declined, from $223,000 on June 30, 2004 to $199,000 as of June 30, 2005.

Financial expenses amounted to $322,000 as of June 30, 2005, compared with $307,000 in 2004. This increase of $15,000 was due mainly to the interest expenses associated with the new loans obtained in 2004, i.e. the Biolevier loan from Investissement Quebec and an equipment loan, combined with lower interest expenses on the debenture subsequent to the amended agreement arranged in 2004.

Amortization expenses grew by $296,000 to $545,000, up from $249,000 due to the amortization of the commercial-scale purification equipment beginning in June 2004.

Overall, the Corporation posted a net loss of $2.0 million or $0.04 per share for the six-month period ended June 30, 2005, compared with $2.6 million or $0.06 per share in 2004.

At the close of the second quarter of 2005, the Corporation showed a year-to-date deficit of $22.5 million and a contributed surplus of $2.1 million related to the change in the Canadian accounting standard regarding the stock option incentive plan and the cancellation of warrants. Shareholders' equity and convertible debentures totaled $4.4 million, compared with $6.1 million as of December 31, 2004.

Cash Position and Sources of Financing

Besides the cash and cash equivalents from its current business operations, the Corporation's financial resources have so far been derived from the issue of share capital, convertible debentures, loans to finance the purchase of property, plant and equipment, tax credits receivable, subsidies from various sources and an Investissement Quebec loan under the BioLevier program. As the Corporation is in the commercial development stage, it intends to continue funding its operations using these same sources.

The Corporation's cash and temporary investment amounted to $1.1 million as of June 30, 2005, compared with $3.2 million as of December 31, 2004. Working capital totaled $3.2 million as of June 30, 2005, down from $4.3 million as of December 31, 2004. This decline in cash and cash equivalents was attributable mainly to the cash flows used by operating activities. The Corporation also has an authorized operating line of credit of $500,000, secured by a first ranking movable hypothec on accounts receivable and inventories, which was unused as of June 30, 2005.

During the first half of 2005, Bioxel's operating activities used cash flows of $1.9 million, reflecting an operating loss of $1.0 million including non-cash items and a $919,000 increase in working capital requirements. Cash flows used for operations were mainly focused on commercial development efforts, research and development and the underlying administrative costs.

Investing activities used cash flows of $429,000, consisting of $390,000 to purchase property, plant and equipment for the commercial-scale paclitaxel production and semi-synthesis process, and $39,000 in patent filing legal fees.

Finally, financing activities provided cash flows of $260,000, pursuant to the fixed schedule for long-term debt repayments, combined with a consideration of $643,000 corresponding to the third instalment of the loan granted by Investissement Quebec under the BioLevier program.

OUTLOOK

The operational priority in the second half of the current fiscal year will be to meet the demand for paclitaxel from European generic companies and innovative North American companies on which Bioxel has focused its strategy. Its sales will not suffice to offset the deferred order backlog from Cell Therapeutics initially expected in 2005. However, sales growth should accelerate in the second half and the Corporation reiterates its objective of generating positive cash flows in 2006.

Bioxel will also focus on turning around its operations through strict raw material purchasing policies and will look at delocalized outsourcing solutions in order to increase its profit margins and strengthen its competitive edge.

The development of taxanes produced by semi-synthesis will intensify. The Corporation also expects to benefit from a first injectable taxane-based prototype formulation by the fourth quarter. These projects should yield new sources of revenue through licensing and supply agreements with pharmaceutical companies specializing in oncology drugs.

Finally, the Corporation will continue to explore any opportunity for strategic partnerships and for consolidating its commercial position and accelerating its growth.



Bioxel Pharma Inc.
Selected Financial Data (Unaudited)

Quarter Ended Six Months Ended
June 30, June 30,
Earnings 2005 2004 2005 2004
$ $ $ $

Revenues 335,546 1,020,022 831,358 1,040,251
Production costs 253,843 1,239,185 647,550 1,570,637
Gross profit (loss) 81,703 (219,163) 183,808 (530,386)
Research and development
expenses 102,612 64,521 214,432 191,916
Selling expenses 99,030 119,157 199,331 222,882
Administrative expenses 382,847 464,286 707,703 823,971
Financial expenses 166,764 162,650 322,065 306,740
Stock-based compensation 22,133 202,249 173,573 272,419
Exchange loss 11,900 41,294 539
Amortization 271,243 115,025 544,621 248,775
Interest income (6,871) (19,313) (722)

Net loss 967,955 1,347,051 1,999,898 2,596,906

Net loss and diluted
net loss per share 0.02 0.03 0.04 0.06

Weighted average number
of shares outstanding 54,183,057 44,020,684 54,163,022 44,020,684


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As of June 30, As of December 31,
Balance Sheet 2005 2004
(audited)
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$ $

Cash 232,405 181,714
Temporary investment 850,000 3,000,000
Other current assets 3,772,875 3,677,752
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Total current assets 4,855,280 6,859,466
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Property, plant and equipment 4,986,883 5,000,824
Other long-term assets 1,055,386 1,143,714
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Total assets 10,897,549 13,004,004
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Current liabilities 1,618,084 2,599,152
Long-term debt 2,374,396 2,556,812
BioLevier note payable 2,450,111 1,737,270
Liability component of
convertible debentures 2,009,307 1,834,310
Shareholders' equity 2,445,651 4,276,460
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Total liabilities and
shareholders' equity 10,897,549 13,004,004
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ABOUT BIOXEL PHARMA

Bioxel Pharma Inc. is an emerging leader in biopharmaceuticals, focused on developing, manufacturing and marketing naturally derived taxanes, including paclitaxel. Taxanes are used in drug products for the treatment of cancer and other diseases, including psoriasis, rheumatoid arthritis, Alzheimer's disease and cardiovascular disease. The Corporation sells cGMP paclitaxel and is building a portfolio of other taxane APIs and taxane-based proprietary products for improved cancer therapy.

This announcement includes forward-looking statements that involve a number of risks and uncertainties, the outcome of which could materially and/or adversely affect future results. These include risks and uncertainties that could affect Bioxel's products under development such as regulatory factors, technological developments and competitive factors. Achievement of the objectives set forth in this release is subject to these risks and uncertainties. The Corporation's results, or the measures it adopts, could differ materially from those indicated or underlying these statements, or could have an impact on the realization of financial projections.

The TSX Venture Exchange accepts no responsibility for the adequacy or accuracy of this press release.

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