Bioxel Pharma Inc.
TSX VENTURE : BIP

Bioxel Pharma Inc.

August 22, 2006 10:21 ET

Bioxel Pharma: Results for the Second Quarter of 2006

Bioxel Continues to Implement its Expansion Strategy in Europe and Achieves Significant Progress in the Scale-Up of its Semi-Synthetic Taxane Manufacturing Process

SAINTE-FOY, QUEBEC--(CCNMatthews - Aug. 22, 2006) - Bioxel Pharma Inc. (TSX VENTURE:BIP), a leading manufacturer of taxane active pharmaceutical ingredients and developer of targeted oncology drugs, today announced its results for the second quarter ended June 30, 2006.

"The salient events of the first half of 2006 are fundamentally consistent with the growth objectives disclosed at the beginning of the year. To fully leverage Bioxel's assets, we continued to implement our value enhancement strategy which will enable us to accelerate our revenue growth in the second half of 2006," said Pascal Delmas, President and Chief Executive Officer of the Corporation.

SECOND-QUARTER HIGHLIGHTS

Expansion of European Market and Delivery of Initial Commercial Lots of Paclitaxel to a European Generic Drug Manufacturer Bioxel had further success as a result of its market expansion efforts in Europe. Through European generic drug manufacturers who are customers of the Corporation, six new generic pharmaceutical companies have effectively listed Bioxel's paclitaxel in their product registrations. This brings to eight the number of European Union (EU) countries where Bioxel's product is being marketed. The Corporation's goal is to serve all of the major EU countries by 2007.

Under the terms of the contract, Bioxel began delivery of the first lots of paclitaxel to Europe during the second quarter of 2006. The pace of these deliveries will be stepped up in the second half.

Overall Financing of $7.4 Million

The gradual exercise of warrants provided the Corporation with a further $2.7 million in financing during the second quarter of 2006. This additional financing enhanced the private placement of common shares by $4.7 million in February 2006. Bioxel thereby raised a total of $7.4 million in the first half of 2006. These proceeds will enable the Corporation to increase its market share through international expansion and to accelerate the industrial development of new taxane products manufactured through semi-synthesis, in particular docetaxel.

Scale-Up of Semi-Synthetic Taxane Manufacturing

Two letters of agreement were executed with manufacturers of active pharmaceutical ingredients (APIs) during the second quarter of 2006. Under the terms of these agreements, the selected companies will perform the industrial scale-up of the semi-synthetic taxane manufacturing process developed and patented by Bioxel. In 2007, the Corporation will benefit from a common manufacturing platform capable of synthesizing paclitaxel and docetaxel, two products that will be added to the naturally-sourced paclitaxel it currently markets.

In parallel with the semi-synthetic industrialization program, Bioxel is carrying on discussions with potential business partners that are interested in exploiting this new and highly efficient manufacturing process for their own taxane drug needs.


FINANCIAL HIGHLIGHTS

Operating Results

The Corporation recorded revenues of $308,000 during the six months ended June 30, 2006, compared with $831,000 for the equivalent period of 2005. Gross profit totaled $71,000, down from $184,000 a year earlier. This shortfall can be explained by the existence of paclitaxel inventories currently in use by Bioxel's North American customers and the usual ordering delays that followed the execution of supply agreements between the Corporation and its European customers as a result of the listing of Bioxel's product in their registration dossier. Pursuant to the agreements entered into by the Corporation, the initial deliveries of paclitaxel in Europe began in the second quarter of 2006. Paclitaxel sales will accelerate in the second half of the year.

Research and development expenses totaled $370,000 for the six-month period ended June 30, 2006, compared with $214,000 for the first half of 2005. This $156,000 increase can be attributed to development initiatives aimed at expanding Bioxel's taxane product mix, more specifically the pilot scale-up of the docetaxel manufacturing processes.

Selling expenses decreased from $199,000 as at June 30, 2005 to $179,000 as at June 30, 2006. This $20,000 reduction can primarily be explained by a change in compensation structure. Administrative expenses went from $708,000 to $655,000, this $53,000 decline being due to lower payroll and public corporation expenses.

Financial expenses went from $394,000 as at June 30, 2005 to $348,000 by the same date in 2006, this $46,000 reduction was due mainly to interest expenses associated with the convertible debentures.

Amortization expenses totaled $469,000 as of June 30, 2006, down from $473,000 at the close of the second quarter of 2005, a decrease of $4,000.

Overall, the Corporation incurred an equivalent net loss of $2.0 million for the six-month periods ended June 30, 2005 and 2006 ($0.03 per share in 2006 and $0.04 per share in 2005).

At the end of the first half of 2006, the Corporation posted a year-to-date deficit of $26.2 million and contributed surplus of $2.3 million related to the change in the Canadian accounting standard regarding stock-based compensation and the cancellation of warrants. Shareholders' equity and convertible debentures totaled $8.0 million, up from $2.9 million as at December 31, 2005.

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 also plans to increase the proportion of cash flows from its business operations, specifically the sale of taxane products. Furthermore, the Corporation has an authorized line of credit of $1,000,000, secured by a first ranking movable hypothec on accounts receivable and inventories, which was unused as of June 30, 2006.

The Corporation had cash and a temporary investment of $4.7 million as at June 30, 2006, compared with $440,000 as at December 31, 2005. Working capital amounted to $6.6 million as at June 30, 2006, up from $1.6 million as at December 31, 2005. This increase in liquidity is due primarily to the closing of the $4.7 million financing and the exercise of 7,980,271 warrants at a revised price of $0.34, for total proceeds of $2.7 million as of June 30, 2006.

Operating activities used cash flows of $1.9 million in the first half of 2006, reflecting the net loss of $1.2 million including non-cash items and a $694,000 increase in working capital requirements. Cash flows used for operations were primarily focused on business development efforts, research and development and the underlying administrative costs.

Investing activities used cash flows of $420,000 and were made primarily in connection with the development of the semi-synthetic taxane manufacturing process.

Financing activities provided cash flows of $6.6 million. This increase is attributable to the closing of a private placement of $4.7 million and the exercise of warrants at a revised price of $0.34, for total proceeds of $2.7 million and issuance expenses of $453,000. In addition, repayments of $443,000 were made pursuant to the Corporation's long-term debt repayment schedule.

OUTLOOK

After a first-half decline in revenues, Bioxel will return to sales growth in the second half of 2006 due notably to the greater needs of its European customers. The Corporation will also accelerate the industrial scale-up of its new taxane products which will provide it with additional revenue streams in 2007.

Thus, in a favorable business environment, Bioxel is resolved to continue implementing its market expansion and value enhancement policy. This policy, which is focused on broadening its customer base, further improving its competitive edge and increasing investments aimed at rapidly building up its product mix, is yielding benefits. The Corporation is confident it can create conditions conducive to the structural, sustainable and profitable growth of its business.



Bioxel Pharma Inc.
Selected Financial Data

Quarter Ended Six Months Ended
June 30, June 30,
(Unaudited) (Unaudited)
Earnings 2006 2005 2006 2005
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$ $ $ $
Revenues 306,998 335,546 307,810 831,358
Cost of goods sold 235,947 253,843 236,555 647,550
Gross profit 71,051 81,703 71,255 183,808
Research and
development expenses 218,066 102,612 369,575 214,432
Selling expenses 103,194 99,030 179,069 199,331
Administrative
expenses 370,174 382,847 655,040 707,703
Stock-based
compensation 32,500 22,133 191,677 173,573
Financial expenses 172,681 199,890 347,868 394,013
Exchange loss (gain) (34,989) 11,900 (33,874) 41,294
Amortization 228,198 238,117 469,447 472,673
Interest income (46,360) (6,871) (63,609) (19,313)
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Net loss 972,413 967,955 2,043,938 1,999,898
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Net loss and diluted
net loss per share 0.01 0.02 0.03 0.04
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Weighted average
number of
shares outstanding 78,735,426 54,183,057 71,821,690 54,163,022
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As at As at
June 30, December 31,
Balance 2006 2005
(Unaudited) (Audited)
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$ $

Cash 249,682 440,330
Temporary investment 4,428,824
Other current assets 3,993,315 3,584,997
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Total current assets 8,671,821 4,025,327
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Property, plant and equipment 4,518,782 4,538,391
Other long-term assets 878,510 1,023,462
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Total assets 14,069,113 9,587,180
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Current liabilities 2,088,515 2,388,332
Long-term debt 1,355,554 1,782,783
BioLevier note payable 2,653,303 2,544,355
Liability component of
convertible debentures 1,236,935 1,221,402
Shareholders' equity 6,734,806 1,650,308
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Total liabilities
and shareholders' equity 14,069,113 9,587,180
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ABOUT BIOXEL PHARMA

Bioxel Pharma Inc. is an emerging leader in biopharmaceuticals, focused on developing, manufacturing and marketing taxane pharmaceutical ingredients. 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 develops a portfolio of other generic taxane APIs and taxane-based proprietary products for improved cancer therapy.

The TSX Venture Exchange has not reviewed the contents of this press release and accepts no responsibility for the adequacy or the accuracy thereof.

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.

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