Covalon Technologies Ltd.
TSX VENTURE : COV

Covalon Technologies Ltd.

January 28, 2008 16:12 ET

Covalon Releases 2007 and 2008 Q1 Financial Results

MISSISSAUGA, ONTARIO--(Marketwire - Jan. 28, 2008) - Covalon Technologies Ltd. ("Covalon" or the "Company) (TSX VENTURE:COV) today released its financial results for the year ended September 30, 2007 (audited) and for the period ending December 31, 2007 (unaudited, prepared by management).

The Company's highlights for the year ended September 30, 2007 are as follows:

- Cash used in operating activities for the year 2007 was ($146,210) compared to ($2,116,806) for the same period in 2006;

- Total Product Sales Revenues increased by $346,873 or 36.9% over the previous year to $1,285,673;

- Net loss for the year 2007 was $3,076,377 compared to net loss of $2,204,990 for the same period in 2006;

- Covalon lost $0.05 per share for the year 2007 which is the same loss compared to the same period in 2006;

- Biostep™ filing for CE mark submitted in EU, and for Therapeutic Products Directorate approval in Canada;

- Biostep™ Ag filing submitted for Therapeutic Products Directorate approval in Canada.

The Company's highlights for the first quarter ending December 31, 2007 are as follows:

- Total Revenues increased by 139% or $540,598 over the first quarter of 2007 to $930,893;

- Total Product Sales Revenues increased by $269,568 or 80% over the first quarter of 2007 to $607,335;

- Gross profit as a percentage of sales was 44% in the first quarter of 2008, a 3% improvement compared to the same period last year;

- Regulatory expenses increased by $150,221 or 181% over the first quarter of 2007 to $233,274;

- Research and Development increased by $325,675 or 282% over the first quarter of 2007 to $441,131;

- Net loss before research and development expenses decreased by 18% over the first quarter of 2007 of $234,876;

- Net loss increased by 68% over the first quarter of 2007 to $676,007;

- Loss per share of $0.01 was the same as the first quarter of 2007;

- The headcount at the end of the first quarter of 2008 was 25 compared to 15 over the same period last year, an increase of 67%.

Covalon's three platform technologies in: 1) medical device coatings, 2) collagen matrices and 3) therapeutic angiogenesis (EPAS1), allow the Company solid access to key market sectors. The Company's therapeutic angiogenesis (EPAS1) platform is achieving significant milestones. Covalon has shown that EPAS1-modified cells can be effectively and efficiently manipulated to produce essential growth factors required for improved angiogenesis. The program offers the potential for an exciting, minimally invasive alternative to open heart surgery for those suffering from congestive heart failure. Covalon's antimicrobial coating technology continues to provide opportunities in addressing the growing problem with hospital acquired infections. And, the Company's collagen wound dressings are finding broad application in hospitals and acute care facilities in the USA. Recent rulings by the Centers for Medicare and Medicaid Services (CMS) in the USA will require hospitals and other related facilities to focus specifically on reducing the incidence of 1) urinary tract infections, 2) pressure ulcers and 3) vascular catheter associated infections, with a view toward improvement of patient outcomes. Covalon currently has in distribution products that address the need for reducing urinary tract infections and pressure ulcers and the Company is actively seeking a partner for application of its antimicrobial coating on vascular catheters.

In March 2007, the Company entered into a five year, worldwide exclusive distribution agreement for collagen-based dressings with Smith & Nephew Inc. The major financial component is the global sale of its proprietary wound care products. The arrangement included an up-front exclusivity payment of US$2 million over the five-year term, in addition to sales revenue. The partnership with Smith & Nephew has shown an improvement in Covalon's top line sales growth. Covalon will continue to strengthen its relationship with Smith & Nephew over the life of the agreement.

It is Management's intention to pursue solid distribution arrangements for Covalon's other proprietary technologies and product applications based on the distribution model it entered into with Smith & Nephew Inc. Covalon's CEO, Dr. Frank DiCosmo said, "Covalon has been uniquely positioned as the go-to Company for both antimicrobial medical coatings as well as for collagen-based wound care products. Our number-one job continues to be to deliver exceptional and unique products for improving patients' well-being and clinical outcome. Fiscal 2007 was a year of increasing performance and solid execution and growth in almost all aspects of Covalon's business. In the first quarter ended December 31, 2007, the Company continued to lay the ground work in developing the commercialization of its three technology platforms. Covalon has made significant investments in people and additional resources in research and development, marketing, regulatory and quality systems in order to offer new, high quality products quickly and effectively. While our business continues to focus on and strengthen our current platforms and products, we expect to leverage our core competencies in areas such as convergent medical devices, pharmaceuticals and cell therapy biotechnology. The broad applicability of our technology distribution models will allow Covalon to participate in diverse product offerings. Some of the opportunities we are focusing on in the coming fiscal year are in: antimicrobial coatings for vascular access, collagen matrices for hemostatic dressings, antimicrobial ocular dressings, antimicrobial coatings for orthopedic implants, as well as therapeutic angiogenesis."

The Company's consolidated financial statements and MD&A for the year ended September 30, 2007 and first quarter ending December 31, 2007 are available on SEDAR at www.sedar.com and on the Company's website at www.covalon.com.

About Covalon Technologies Ltd.

Covalon Technologies Ltd. is a developer of advanced medical products which has patented therapeutic biomaterials for wound care and surgical applications, and coatings for medical devices. Polymer chemistry and surface coating technology have been combined to create a range of time-release drug delivery platforms that can be applied to many medical devices. A variety of applications for this technology have been identified and specific products have been developed. These products feature solutions to many of the problems caused by the material properties of the medical devices currently offered by most manufacturers and suppliers.

Caution Regarding Forward-looking Statements

The MD&A contains forward-looking statements which reflect the Company's current expectations regarding future events. The forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan, "estimate", "expect", "intend" and statements that an event or result "may", "will", "should", "could" or "might" occur or be achieved and other similar expressions. These forward-looking statements involve risk and uncertainties, including the difficulty in predicting product approvals, acceptance of and demands for new products, the impact of the products and pricing strategies of competitors, delays in developing and launching new products, the regulatory environment, fluctuations in operating results and other risks, any of which could cause results, performance, or achievements to differ materially from the results discussed or implied in the forward-looking statements. Many risks are inherent in the industry; others are more specific to the Company. Investors should consult the "Risks & Uncertainties" section of this MD&A as well as the Company's ongoing quarterly filings for additional information on risks and uncertainties relating to these forward-looking statements. Investors should not place undue reliance on any forward-looking statements. Management assumes no obligation to update or alter any forward-looking statements whether as a result of new information, further events or otherwise.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release. The TSX Venture Exchange has neither approved nor disapproved of the contents of this release.

Contact Information

  • Covalon Technologies Ltd.
    Frank DiCosmo, Ph.D
    President and CEO
    (905) 568-8400
    (905) 568-5200 (FAX)
    Email: fdicosmo@covalon.com
    or
    Covalon Technologies Ltd.
    Francis K. Lindayen, CA
    Chief Financial Officer
    (905) 568-8400
    (905) 568-5200 (FAX)
    Email: flindayen@covalon.com
    Website: www.covalon.com