Bioxel Pharma Inc.
TSX VENTURE : BIP

Bioxel Pharma Inc.

November 29, 2007 11:53 ET

Bioxel Pharma Inc.: Third-Quarter 2007 Results

- $3.6 M Private Placement - Signature of Major Paclitaxel Supply Agreements - Docetaxel Registration in the U.S. and Canada

SAINTE-FOY, QUEBEC--(Marketwire - Nov. 29, 2007) - Bioxel Pharma Inc. (TSX VENTURE:BIP), a leading manufacturer of taxane active pharmaceutical ingredients (APIs) and developer of targeted oncology drugs, today announced its results for the third quarter ended September 30, 2007.

"We successfully focused on numerous initiatives in the third quarter. First, we closed a private placement that led to the injection of $3.6 million into our Corporation, despite the fact that capital markets remain shaky since the ABCP crisis. While consolidating our financial bases, we won three paclitaxel supply agreements with world-renowned pharmaceutical companies. These initial contracts could translate into even larger orders in upcoming quarters. Furthermore, considering that some of our customers are still encountering delays in marketing their paclitaxel drugs, the increased number of countries where our DMF is registered definitely means we will be ready to support them in tapping these new markets. Finally, we strengthened our positioning for the near-term opening of the generic docetaxel market by registering our Docetaxel Master Drug File (DMF) with the U.S. FDA and Health Canada," indicated Pascal Delmas, President and Chief Executive Officer of Bioxel.

THIRD-QUARTER HIGHLIGHTS AND SUBSEQUENT EVENTS

Closing of $3.6 Million Financing

On November 21, 2007, Bioxel announced the closing of a $3.6 million private placement of convertible unsecured debentures, bearing interest at 15% and due in 2014. As part of the offering, holders received an aggregate of 22,868,750 warrants for the purchase of an equal number of common shares at an exercise price of $0.16 per share for a period of two years from the closing date and, for each subsequent year, of 10% higher than the conversion price in the preceding year. The debentures will not be redeemable prior to November 21, 2009. On and after that date, the debentures will be redeemable by the Corporation, subject to the fulfilment of certain conditions. Interest on the debentures is payable semi-annually as of May 2008. Subject to certain conditions, the Corporation will have the option to pay such interest by delivering common shares on the basis of prevailing market prices. The net proceeds from the offering will be primarily used to fund commercialization, product development including docetaxel, and working capital.

Docetaxel Development and DMF Registration

The development and marketing of its docetaxel is a keystone of Bioxel's growth as the Sanofi-Aventis patents to docetaxel will expire as of 2008, gradually paving the way for the generic market to Taxotere®. Docetaxel is the active ingredient in Taxotere®, a chemotherapeutic drug marketed by Sanofi-Aventis that generated sales of over US$2 billion in 2006.

After registering its Docetaxel Master Drug File (DMF) with the U.S. Food and Drug Administration (FDA) on June 21, 2007, the Corporation also registered this DMF with Health Canada on July 31, 2007. Bioxel benefits from strong intellectual property and early regulatory registrations and is hence solidly positioned to offer its worldwide partners a reliable and sustainable docetaxel procurement solution as soon as the market opens up.

Extended Registration of Paclitaxel

In regard to paclitaxel, Bioxel extended its DMF registration to seven more countries, bringing to 20 and 26 respectively the total number of countries in the European Union and internationally in which its DMF has been registered. The Corporation thereby continues to achieve milestones toward securing a strong commercial footprint in Europe, a market estimated at some 200 kilograms of paclitaxel annually.

The Corporation also filed a certificate of suitability application with the European Directorate for the Quality of Medicines & Health Care (EDQM). This initiative follows the July 2007 implementation of a new European standard of paclitaxel quality. Bioxel's paclitaxel complies with this new standard and the Corporation expects to obtain its certificate of suitability in 2008. This certification will simplify and accelerate Bioxel's paclitaxel registration and distribution process in Europe. These regulatory advances are key steps leading to the wide-range commercialization of its product.

Development of International Market

In recent months, Bioxel has started to reap the benefits of its intensive international market development efforts, winning several major paclitaxel orders. In mid-July, the Corporation announced that it had expanded its presence in the Asian taxanes market through a first significant delivery of paclitaxel in this region. The sale of paclitaxel valued at $200,000 was made to a South-East Asian generic pharmaceutical company that is one of the fastest growing companies in the region and has a market presence extending into Europe, North America, Latin America and the Asia-Pacific zone. This customer has product registrations in more than 50 countries, including for oncology drugs. Further negotiations are under way with this customer for the procurement of commercial quantities of paclitaxel in anticipation of the marketing of a generic drug in the United States and Europe.

Within less than three weeks, Bioxel won two major orders for paclitaxel deliverable as of the fourth quarter. The first stems from a multinational pharmaceutical company in the final stage of Phase III clinical trials on an innovative paclitaxel-based drug. Valued at approximately $800,000, this sale is the Corporation's largest paclitaxel order ever from a pharmaceutical multinational. Bioxel's paclitaxel will be incorporated in this customer's New Drug Application (NDA), allowing its use in commercial manufacturing and distribution once the product has obtained market approval. The Corporation estimates that after initial market penetration of this new product for its primary indication in the U.S. market alone, the customer's paclitaxel volume requirements could be in excess of $10 million annually. Steady sales and procurement volumes for this customer are expected to begin in 2008, in preparation for the commercial launch of its NDA product.

The second paclitaxel order, the largest so far from a leading European pharmaceutical company, was landed about 10 days subsequent to the end of the third quarter. Worth approximately $700,000, this order will be used in the manufacture of a generic paclitaxel drug already approved and marketed in Europe. Product deliveries under the order will be spread throughout 2008.

These contracts attest to Bioxel's ability to win orders and capture market share in a competitive business environment. The Corporation stands apart with its high-quality products, reliable procurement and strong intellectual property, allowing it to look forward to healthy growth of its taxane sales.

FINANCIAL HIGHLIGHTS

Overall Third-Quarter Performance and Subsequent Event

Third-quarter revenues totaled $471,000. The operating (EBIT) loss amounted to $426,000, compared with $389,000 for the corresponding period of 2006. As of September 30, 2007, the Corporation posted a net loss of $978,000, compared with a loss of $821,000 in the third quarter of 2006.

On November 21, 2007, the Corporation announced the closing of a private placement of convertible unsecured debentures due in 2014. An aggregate of $3,659,000 in principal amount of 15% convertible unsecured debentures was issued.

Operating Results

The Corporation recorded third-quarter revenues of $471,000, compared with $517,000 for the equivalent period of 2006. Revenues for the nine-month period ended September 30, 2007 totaled $753,000, down from $824,000 for the same period in 2006. This decline of slightly over 8% is due mainly to the delays encountered by Bioxel's customers in qualifying and registering their generic drugs, particularly in Europe. Third-quarter cost of goods sold and operating expenses amounted to $776,000, holding virtually steady with the value of $780,000 incurred in the equivalent period of 2006. For the first nine months of the current fiscal year, such costs totaled $1.89 million and remained comparable to those of $1.85 million for the same period in 2006.

Research and development (R&D) expenses totaled $121,000 for the third quarter of 2007, being comparable to those of $125,000 for the corresponding period of 2006. For the first nine months, R&D expenses went from $495,000 in 2006 to $308,000 in 2007. This $187,000 reduction is due to the increase in R&D tax credits and the decrease in professional fees and supply costs compared with the equivalent period of 2006.

The third-quarter operating (EBIT) loss amounted to $426,000, compared with $389,000 a year earlier. This 9.5% increase is due primarily to the delays encountered by Bioxel's customers in qualifying and registering their generic drugs, particularly in Europe. For the first nine months, the operating (EBIT) loss totaled $1.4 million, versus $1.5 million for the corresponding period of 2006, reflecting a positive variation of approximately 5%.

Financial expenses amounted to $130,000 for the third quarter of 2007, down from $180,000 for the equivalent period of 2006. Financial expenses totaled $480,000 for the first nine months of 2007, compared with $528,000 a year earlier. These variations are due mainly to the increase in repayment charges related to the BioLevier loan from Investissement Quebec and the decrease in interest on an equipment loan.

Third-quarter amortization amounted to $219,000, down by $44,000 from $263,000 in the third quarter of 2006. Amortization totaled $652,000 for the first nine months of 2007, down by $80,000 from $732,000 for the corresponding period of 2006.

Fluctuations in the Canadian dollar in relation to the U.S. dollar had a positive impact of $20,000 for the third quarter, compared with $600 for the equivalent period of 2006. For the nine months ended September 30, 2007, the exchange gain totaled $60,000, up from $33,000 for the same period in 2006. A $123,000 inventory writedown was recorded for the third quarter of 2007, bringing the total writedown for the first nine months of fiscal 2007 to $177,000. This writedown was recorded to reflect the inventory replacement value.

The Corporation incurred a net loss of $978,000 or $0.01 per share for the third quarter of 2007, compared with a net loss of $821,000 or $0.01 per share for the corresponding period of 2006. For the nine-month period ended September 30, 2007, the net loss totaled $2.84 million, reflecting a slight improvement over the first nine months of fiscal 2006, when the loss amounted to $2.86 million ($0.04 per share in 2007 and $0.04 per share in 2006).

Shareholders' Equity

As of September 30, 2007, the Corporation posted a year-to-date deficit of $31.2 million and contributed surplus of $2.7 million pursuant to the Canadian accounting standards regarding stock-based compensation and the cancellation of warrants. The value of shareholders' equity and convertible debentures amounted to $3.6 million, compared with $6.1 million as of December 31, 2006.

Cash Position and Sources of Financing

The Corporation's financial resources are derived primarily from the issue of share capital, the exercise of warrants, convertible debentures, loans to finance the purchase of property, plant and equipment, income tax credits receivable, subsidies from various sources and an Investissement Quebec loan of up to $2.5 million under the BioLevier program. In the coming years, Bioxel plans to increase the proportion of cash flows from its business operations. The Corporation also has an authorized line of credit of $1.0 million, secured by a first ranking movable hypothec on accounts receivable and inventories.

As of September 30, 2007, the Corporation had a cash and cash equivalents deficiency of $163,000, as opposed to positive cash and cash equivalents of $2.6 million as of December 31, 2006. Working capital amounted to $931,000, compared with $4.4 million as of December 31, 2006.

Bioxel's operating activities used cash flows of $1.8 million during the nine months ended September 30, 2007, reflecting the net loss of $1.7 million excluding non-cash items and a $93,000 increase in working capital requirements. Cash flows used for operations were mainly allocated to business development efforts, research and development and administrative expenses. The monthly burn rate was $193,000 for the nine-month period ended September 30, 2007, compared with $194,000 for the same period a year earlier.

Investing activities used cash flows of $1.0 million and were made primarily in connection with the development of the semi-synthetic taxane manufacturing process.

Financing activities provided cash flows of $65,000. This inflow is attributable to the repayment of long-term debt contracted by the Corporation, combined with the use of bank indebtedness.

Outstanding Shares, Stock Options and Warrants

During the third quarter of 2007, 413,242 common shares were issued in consideration of a debt. The Corporation thus had 79,778,629 outstanding common shares as of September 30, 2007.

There were no changes in warrants during the third quarter. The number of outstanding warrants therefore stood at 1,201,541 as of September 30, 2007.

During the third quarter of 2007, 95,000 options expired, bringing to 3,975,185 the total number of options outstanding and exercisable under the terms of the stock option plan for employees and directors.

Subsequent Events

On November 21, 2007, the Corporation announced the closing of a private placement of convertible unsecured debentures due in 2014. An aggregate of $3,659,000 in principal amount of 15% convertible unsecured debentures was issued. The holders received an aggregate of 22,868,750 warrants to purchase an equal number of common shares at an exercise price of $0.16 per share for a period of two years from the closing date. The principal characteristics were as follows:

(i) Interest on the debentures is payable semi-annually on May 21 and November 21 of each year, commencing on May 21, 2008. Subject to the consent of the TSX Venture Exchange pursuant to applicable policies regarding the issuance of shares in payment of interest, the Corporation will have the option to pay such interest by delivering common shares on the basis of prevailing market prices;

(ii) The debentures will be convertible at the option of the holder at any time prior to the maturity date into common shares of the Corporation at a conversion price of $0.16 per common share in the first two years from the issuance date and for each subsequent year, of 10% higher than the conversion price in the preceding year;

(iii) The debentures will not be redeemable prior to November 21, 2009. On and after November 21, 2009, the debentures will be redeemable by the Corporation, subject to the fulfilment of certain conditions;

(iv) Provided the weighted average trading price for the common shares is 200% over the conversion price, the Corporation will be entitled to settle the redemption price in common shares on the basis of a price corresponding to 95% of the market price.

On maturity, holders of debentures may, at their option, elect to receive payment of the principal amount of the debentures together with the accrued interest in the form of common shares.

On November 21, 2007, the Corporation also announced that it had entered into an agreement with a holder of its 15% convertible debentures totaling $500,000 issued in July 2002 pursuant to which such holder agreed, subject to certain conditions, including obtaining all required regulatory approvals, to:

- cancel and forfeit the payment of the interest on the 2002 debentures accrued and unpaid since January 14, 2007;

- convert $150,000 or principal amount of 2002 debentures in 937,500 common shares and 937,500 warrants to purchase an equivalent number of common shares at a price of $0.16 per share for two years following the closing of the offering; and

- convert $350,000 of 2002 debentures into $350,000 of debentures and 2,187,500 warrants under the offering described above.

That brings the total amount of debentures issued as of the issuance date to $4,009,000.

OUTLOOK

Bioxel continues to reach milestones leading to the wide-range commercialization of its paclitaxel. The anticipated near-term approval of its customers' generic drugs should indeed translate into a gradual increase in paclitaxel orders in the coming months. The offering closed on November 21, 2007 gives the Corporation the leverage needed to finalize the industrialization and market launch of docetaxel. This second product will complete Bioxel's taxane portfolio in 2008 and provide it with new revenue streams. On the strength of the quality of the Corporation's products and the satisfaction of its customers, management is confident Bioxel will achieve its growth and earnings objectives.

Forward-Looking Statements

This document includes some forward-looking statements that reflect the Corporation's current expectations in regard to future events. These forward-looking statements depend on a number of factors and involve risks and uncertainties. Actual results could differ from those anticipated by Bioxel and described in this document. Investors are advised to refer to the Corporation's regular annual and interim reports and the filing of its Annual Information Form for further information about the risks and uncertainties associated with these forward-looking statements. The reader is warned not to unduly rely on Bioxel's forward-looking statements. The Corporation disclaims any obligation to revise or update the forward-looking statements contained herein.

This analysis was conducted by management based on the information available as of November 22, 2007. Additional information about the Corporation, including its press releases, annual reports, audited annual financial statements, unaudited interim financial statements and most recent Annual Information Form is available on SEDAR's website at www.sedar.com and Bioxel's website at www.bioxelpharma.com.

ABOUT BIOXEL PHARMA

Bioxel Pharma Inc. is an emerging leader in biopharmaceuticals, focused on developing, manufacturing and marketing taxane pharmaceutical ingredients and proprietary products for improved cancer therapy. Taxanes are used in drug products for the treatment of cancer and other diseases, including psoriasis, rheumatoid arthritis and cardiovascular disease.



BIOXEL PHARMA INC.
Selected Financial Data (Unaudited)

Earnings
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Three months ended Nine months ended
September 30, September 30,
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2007 2006 2007 2006
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Revenues $471,545 $516,719 $752,898 $824,529
Cost of goods sold
and operating expenses 776,461 780,444 1,887,154 1,851,108
Net Research and
development expenses 120,905 125,267 308,285 494,842
Stock-based compensation 100,000 25,625 174,223 217,302
Financial expenses 129,708 180,417 479,723 528,285
Exchange loss (gain) (20,308) 620 (59,675) (33,254)
Amortization of property,
plant & equipment and
intangible assets 219,305 262,833 651,666 732,280
Inventory write-down 123,414 176,636
Interest income 40 37,724 30,773 101,333
Net loss $977,900 $820,763 $2,835,804 $2,864,701
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Net loss and diluted net
loss per share $0.01 $0.01 $0.04 $0.04
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Weighted average number
of shares outstanding 79,702,269 79,365,387 79,478,915 74,363,888
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Balance Sheet
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As at September 30, As at December 31,
2007 2006
(unaudited) (audited)
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Cash $ $396,917
Temporary investment 2,249,151
Other current assets 3,992,541 4,756,871
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Total current assets 3,992,541 7,402,939
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Property, plant and equipement 5,055,228 4,645,615
Other long-term assets 991,227 865,139
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$10,038,996 $12,913,693
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Outstanding cheques in
excess of bank balance $163,176 $
Bank loan 920,000
Other current liabilities 1,977,547 3,007,301
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Total current liabilities 3,060,723 3,007,301
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Long-term debt 567,483 1,049,730
BioLevier note payable 2,803,303 2,803,303
Liability component of
convertible debentures 1,269,195 1,252,469
Shareholders' Equity 2,338,292 4,800,890
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Total liabilities and
shareholders' equity $10,038,996 $12,913,693
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