Inflazyme Pharmaceuticals Ltd.
NEX BOARD : IZP.H

Inflazyme Pharmaceuticals Ltd.

February 29, 2008 18:00 ET

Inflazyme Pharmaceuticals Ltd. Announces Financial Results for the Quarter Ended December 31, 2007

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Feb. 29, 2008) - Inflazyme Pharmaceuticals Ltd. (NEX:IZP.H) today reported its financial results for the third quarter ended Dec. 31, 2007.

Results of operations for the quarter ended December 31, 2007

The net income for the third quarter ended December 31, 2007 was $1,492,000 ($0.01 per common share) compared to a net loss of $5,683,000 ($0.05 per common share) for the third quarter ended December 31, 2006. In the current quarter the Company recorded a gain on the sale of its patents and licenses held for sale of $3,325,000 and also had a lower loss from operations compared to the corresponding quarter last year. The loss from operations for the quarter was $1,869,000 compared to $5,746,000 for the same quarter last year. This lower loss for the current period of approximately $3,900,000 reflects the termination of research and development activities earlier in the year and the write down of patents and licenses in the prior years' quarter. Offsetting these decreases were the employee termination expenses recognized in the current quarter.

Research and development

The Company discontinued substantially all of its research and development (R&D) activities in February 2007 and for the quarter ended December 31, 2007 the Company had no research and development expenses versus $3,442,000 in research and development expenses for the corresponding quarter last year. Consequently the decrease in R&D reflects no contract research and development expenses, no personnel expenses and no laboratory related expense for the current quarter.

General and administration expenses

For the quarter ended December 31, 2007, general and administration expenses (G&A) were $907,000 compared to $775,000 in same quarter of the prior year. The increase of $132,000 was due to higher professional fees and overhead costs partially offset by lower personnel expenses. Personnel expenses were $344,000 for the current quarter, a decrease of $110,000 from the corresponding quarter last year. The decrease resulted from the staff terminations that were effected in February 2007. Professional fees were $305,000 for the current quarter, an increase of $167,000 compared to the corresponding quarter last year. Professional fees increased partly because of patent related expenses of $68,000 and were included in general and administration expenses. In the corresponding quarter last year these expenses were capitalized as patent and licenses or they were allocated to research and development. The balance of the increase in professional fees relates to higher consulting and legal fees. In addition, overhead costs were not allocated to R&D this quarter resulting in additional costs of $90,000 charged to G&A.

In the current quarter, the Company decided to further reduce head count from five to two employees. Costs representing required severance and other employee separation costs for these three employees were $924,686. These amounts were paid in January 2008 when the terminations took effect.

Amortization

For the quarter ended December 31, 2007, amortization expense was $37,000 compared to $281,000 in the corresponding quarter of the prior year. The amortization expense decreased in the current quarter primarily due to lower property, equipment and patent net asset base. There were no additions during the current quarter. No amortization was taken on the patent and license held for sale for the current quarter ended in accordance with Canadian generally accepted accounting principles.

Gain on sale of patents

During the quarter, on November 18, 2007, the Company completed the sale of substantially all of its research and development assets to Biolipox AB, a private Swedish pharmaceutical company. The sale involved the Company's patents and licenses related to its phosphodiesterase inhibitors, the LSAIDs™ and its protein therapeutics technology.


The Company received $4 million upon closing of the transaction, and an additional $7 million is to be paid upon the successful achievement of certain milestones as follows: (i) $1.5 million upon a decision to enter a Phase 2b clinical study with a phosphodiesterase inhibitor; (ii) $2.5 million upon a decision to initiate a Phase 3 study with a phosphodiesterase inhibitor; and (iii) $3 million upon a decision to begin a Phase 3 clinical study with an LSAID™. The purchaser will also pay a royalty of 1.25% of net sales on the first phosphodiesterase inhibitor commercialized. In addition to these amounts the Company is to receive up to 35% of the proceeds from the subsequent sale of its protein therapeutics technology if these assets are sold within 12 months of the transaction closing. The Company reported a gain for the quarter of $3,325,068 related to this sale.

There can be no assurance that the milestones, royalty and payments related to the sale of the protein technology will be achieved.

Liquidity and Capital Resources

At December 31, 2007 the Company's cash and cash equivalents totaled $4.9 million compared to $5.4 million at March 31, 2007. Working capital at December 31, 2007 was $3,835,000 compared to $3,439,000 at March 31, 2007. The increase in working capital primarily reflects the net proceeds of $4,646,000 from the sale of assets held for sale and the decrease in accounts payable and accrued liabilities of $1,653,000. The accounts payable and accrued liabilities balance at December 31, 2007 was $1,418,000.

The Company used $977,000 to fund operations during the quarter ended December 31, 2007 compared with $2,392,000 for the same quarter last year. Cash from investing activities for the quarter ended December 31, 2007 was $3,931,000 compared to cash used in investing activities of $61,000 for the corresponding quarter in the prior year. In the current quarter, the cash from investing activities relates to the proceeds from the sale of patents.

Recent Developments Affecting Inflazyme

On January 15, 2008 the Company announced a proposed merger with Z-Tech (Canada) Inc., a private development stage medical device company located in Toronto. Z-Tech has developed a novel technology for breast cancer screening which, if approved, would provide an alternative to standard mammography for breast cancer screening in certain segments of the female population. The proposed merger would entail a merger of the businesses and assets of both companies. If approved, Inflazyme shareholders would exchange their shares for shares in a new combined entity called Z-Tech Medical Corp. which intends to continue only the business and operations of Z-Tech (Canada) Inc.

Inflazyme shareholders will receive an estimated $4.5 million, subject to certain adjustments, in Z-Tech Medical Corp. shares. Inflazyme shareholders have been invited to vote on this transaction at a Special Meeting of Securityholders at 9.00am on April 3, 2008, at the Marriott Pinnacle Downtown Hotel, 1128 West Hastings Street, Vancouver. The proposed merger is subject to shareholder and regulatory approval and is expected to close on or about April 8, 2008, if approved.

The closing of this transaction is also contingent on, among other things, the completion of a private placement of $13 million gross proceeds, with $3 million from an existing Z-Tech (Canada) investor and $10 million from new investors, concurrent with, or prior to, the closing of the transaction. Inflazyme has agreed to a $300,000 break fee if the merger agreement is terminated due to a superior proposal or due to a willful breach of its covenants or representations in the agreement.

About Inflazyme

Inflazyme Pharmaceuticals is a biopharmaceutical company pioneering medical breakthroughs to transform the lives of patients with respiratory and inflammatory diseases worldwide. Further information on the Company may be obtained from its website at www.inflazyme.com.

Statements in this news release other than historical information are forward-looking statements subject to risks and uncertainties. Actual results could differ materially depending on factors such as the availability of resources, the timing and effects of regulatory actions, the strength of competition, the outcome of litigation and the effectiveness of patent protection. Additional information regarding risks and uncertainties is set forth in the current Annual Information Form for Inflazyme on file with the Canadian Securities Commissions.



Inflazyme Pharmaceuticals Ltd.
Consolidated Balance Sheets

(Unaudited)
December 31, March 31,
2007 2007
-------------- --------------

Assets

Current assets
Cash and cash equivalents $ 4,873,680 $ 5,461,316
Accounts receivable 111,049 109,944
Assets held for sale - 680,760
Prepaid expenses 268,201 257,402
-------------- --------------

5,252,930 6,509,422

Property and equipment 46,632 176,833

-------------- --------------
$ 5,299,562 $ 6,686,255
-------------- --------------
-------------- --------------

Liabilities

Current liabilities
Accounts payable and accrued liabilities $ 1,417,749 $ 3,070,645

Deferred licensing revenue - 229,950
-------------- --------------
1,417,749 3,300,595
-------------- --------------

Shareholders' equity

Capital stock 141,212,889 141,212,889

Contributed surplus 2,222,773 2,204,392

Deficit (139,553,849) (140,031,621)
-------------- --------------
3,881,813 3,385,660

-------------- --------------
$ 5,299,562 $ 6,686,255
-------------- --------------
-------------- --------------

On behalf of the board

Michael Liggett (signed) Louis Drapeau (signed)
------------------------ ----------------------
Acting President and CEO Director
Director


Inflazyme Pharmaceuticals Ltd.
Consolidated Statements of Operations and Deficit
(Unaudited)

For the Three Months Ended For the Nine Months Ended
--------------------------------------------------------------
December 31, December 31, December 31, December 31,
2007 2006 2007 2006
--------------------------------------------------------------

Revenues
Licensing
revenue $ - $ 9,581 $ 31,642 $ 28,827
--------------------------------------------------------------

Expenses

Research and
development - 3,441,729 (77,417) 7,097,772
General and
administration 907,477 775,372 2,868,011 2,775,263
Write-down of
patents and
licenses - 1,276,320 - 1,276,320
Employee
terminations 924,686 - 924,686 -
Amortization of
property,
equipment,
patents and
licenses 37,250 280,521 130,203 633,698
--------------------------------------------------------------

1,869,413 5,773,942 3,845,483 11,783,053
--------------------------------------------------------------

Loss from
operations (1,869,413) (5,764,361) (3,813,841) (11,754,226)
--------------------------------------------------------------

Interest
income 35,877 76,710 115,615 297,961

Gain on sale
of patents 3,325,068 - 3,325,068 -

Gain on sale of
fixed assets - 4,650 640,142 4,650

Gain on deferred
licensing
revenue - - 210,788 -

--------------------------------------------------------------
Income/(Loss)
for the
period 1,491,532 (5,683,001) 477,772 (11,451,615)

Deficit,
beginning
of period (141,045,381) (130,415,833) (140,031,621) (124,647,219)
--------------------------------------------------------------

Deficit, end
of period $ (139,553,849) $ (136,098,834) $ (139,553,849) $ (136,098,834)
--------------------------------------------------------------
--------------------------------------------------------------

Basic and
diluted loss
per common
share $ 0.01 $ (0.05) $ 0.00 $ (0.10)
--------------------------------------------------------------
--------------------------------------------------------------

Weighted
average
number of
common shares
outstanding 131,181,375 113,534,375 131,181,375 113,534,375
--------------------------------------------------------------
--------------------------------------------------------------


Inflazyme Pharmaceuticals Ltd.
Consolidated Statements of Cash Flows
(Unaudited)

For the Three Months Ended For the Nine Months Ended
------------------------------------------------------------
December 31, December 31, December 31, December 31,
2007 2006 2007 2006
------------------------------------------------------------
Cash flows
from
operating
activities
Income/(Loss)
for the
period $ 1,491,532 $ (5,683,001) $ 477,772 $ (11,451,615)
Items not
affecting
cash:
Amortization
of property,
equipment,
patents and
licenses 37,250 280,521 130,203 633,698
Gain on sale
of patents (3,325,068) - (3,325,068) -
Gain on sale
of fixed
assets - (4,650) (640,142) (4,650)
Gain on
deferred
licensing
revenue - - (210,788) -
Write-down
of patents
and licenses - 1,276,320 - 1,276,320
Deferred
licensing
revenue - (9,581) (19,162) (28,744)
Stock-based
compensation 7,248 12,716 18,381 69,841
------------------------------------------------------------
(1,789,038) (4,127,675) (3,568,804) (9,505,150)

Changes in
non-cash
working
capital 812,395 1,735,845 (1,664,803) 2,868,280
------------------------------------------------------------
(976,643) (2,391,830) (5,233,607) (6,636,870)
------------------------------------------------------------

Cash flows
from
investing
activities
Purchase of
property and
equipment - - - (4,235)
Patents and
licenses - (65,180) - (150,597)
Proceeds from
sale of
patents and
licenses 4,000,000 - 4,000,000 -
Selling
expenses on
sale of
patents and
licenses (69,141) - (69,141) -
Proceeds from
sale of fixed
assets - 4,650 715,112 4,650
------------------------------------------------------------
3,930,859 (60,530) 4,645,971 (150,182)

------------------------------------------------------------
Increase/
(Decrease)
in cash and
cash
equivalents 2,954,216 (2,452,360) (587,636) (6,787,052)

Cash and cash
equivalents,
beginning of
period 1,919,464 8,474,395 5,461,316 12,809,087
------------------------------------------------------------

Cash and cash
equivalents,
end of
period $ 4,873,680 $ 6,022,035 $ 4,873,680 $ 6,022,035
------------------------------------------------------------
------------------------------------------------------------

Supplemental
disclosure of
cash flow
information
Interest paid - - - -
Interest
received 31,053 66,063 115,615 209,203


The TSX Venture Exchange (NEX) does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Inflazyme Pharmaceuticals Ltd.
    Julie Rezler
    Sr. Director, Corporate Development
    Toll Free: 1-800-315-3660 or (604) 279-8511
    (604) 279-8711 (FAX)
    Email: ir@inflazyme.com
    Website: www.inflazyme.com