Inflazyme Pharmaceuticals Ltd.
TSX : IZP

Inflazyme Pharmaceuticals Ltd.

November 07, 2005 17:05 ET

Inflazyme Pharmaceuticals Ltd.: Financial Results for the Quarter Ended September 30, 2005; Inflazyme Strengthens Financial Position

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Nov. 7, 2005) - Inflazyme Pharmaceuticals Ltd. (TSX:IZP) today announced its second quarter financial results for the period ended September 30, 2005, which reflect the recent corporate reorganization that generated approximately $7 million in non-dilutive funding.

Corporate Reorganization Proceeds

On September 20, 2005, Inflazyme initiated a corporate reorganization that culminated on October 27, 2005 with the sale of a wholly-owned subsidiary. The total proceeds realized from the disposal of the subsidiary were $6.8 million, net of expenses of approximately $470,000. This additional funding, plus our working capital at September 30, 2005, is expected to fund the operations of Inflazyme, at our current expenditure level, until the end of calendar 2007. Previously, our cash reserves were sufficient until Q1 2007.

This non-diluting funding occurred through the sale of a wholly-owned subsidiary, the disposal of which does not affect our future business in any way. Inflazyme still retains all its intellectual property assets: the LSAIDs™, the PDE4 inhibitors, Mirococept® (APT070), Prodaptin™, and ATH. The LSAIDs™ and the PDE4 inhibitors are central to our Company's future and we are continuing to explore further opportunities to strengthen our cash position through the sale or out-licensing of our remaining non-core assets.

At the same time, we continue to exercise financial prudence and our burn rate for the quarter was consistent with the guidance previously provided at approximately $700,000 per month.

Progress with our LSAID™ - IPL512,602

During this quarter, we received encouraging feedback from the Pulmonary Drug Division of the FDA confirming that the agency would consider the use of quality of life (QoL) measures and other patient-reported outcomes among the primary endpoints for Phase III studies. You may recall that in the Phase IIa study conducted earlier with IPL512,602, statistical significance was seen in several secondary endpoints including asthma QoL measures and the reduced need for rescue medication. Hence, such patient-reported outcomes measures are intended to be used in future studies with IPL512,602, and are similar to those employed to support efficacy in pivotal trials with other approved asthma products.

We expect IPL512,602 to advance into a Phase IIb clinical study by early next year and we are actively seeking a strategic partner to continue the further development and commercialization of our product.

Progress with our PDE4 Inhibitor - IPL455,903

IPL455,903 is partnered with Helicon Therapeutics, Inc. as a potential treatment for learning and memory disorders. We have been advised by them, that the Phase Ib, multi-dose clinical safety study with IPL455,903 is on track, and we anticipate announcing the results of this study before the end of the year. In addition, they have also advised us that the Phase IIa study is also on schedule and is expected to begin early next year. Helicon is responsible for all clinical studies through to Phase IIa, at which point Inflazyme has the option to buy back into the program to form a joint venture for the continued development of the product.

In May 2005, we announced the results of the single dose study with IPL455,903. It was demonstrated that the drug was safe and well tolerated and importantly, no signs of emesis were observed. Emesis is a side effect that has been associated with other PDE4 inhibitors in clinical development, even after a single dose has been administered. This effect has hampered the successful development of this particular class of drugs.

We are making good progress in advancing another PDE4 inhibitor toward pre-clinical development in the area of inflammation. We look forward to sharing further news with you as this program advances.

Results of operations for the quarter ended September 30, 2005

The net income for the quarter ended September 30, 2005 was $534,555 ($0.01 per common share) compared to a net loss of $6,163,236 ($0.06 per common share) in the corresponding quarter in the prior year. The net income for the period relates primarily to a dilution gain of $3,310,101, arising from the corporate reorganization, and a reduction in research and development, general and administration, and amortization expenses. Interest and licensing revenue were both lower during the current quarter compared to the prior period. Also, restructuring costs of $596,488 and a loss on disposal of assets held for sale of $86,572 were recognized in 2004 while no such expenses occurred in 2005.

On September 20, 2005, the Company initiated a corporate reorganization that culminated in the sale of a wholly-owned subsidiary on October 27, 2005. On September 20, 2005, the Company transferred the net assets of the subsidiary to a new wholly-owned subsidiary. Following completion of the net asset transfer, the Company received an initial payment of $3,430,000 related to the sale of the original subsidiary. The carrying value of the subsidiary immediately following the transfer of the net assets was nominal and accordingly a gain of $3,310,101 (net of $119,899 in related costs) was recognized in the consolidated statement of operations.

Research and development expenses

Research and development expenses for the quarter ended September 30, 2005 were $1,242,984 versus $3,093,296 during the quarter ended September 30, 2004. The decrease was due to the reduction in personnel expenses through headcount reductions and the resultant reduction in laboratory activity. Contract research activity was lower during the second quarter this year compared to the corresponding quarter last year. The Adprotech acquisition in April 2004 resulted in the company incurring contract research costs related to its Phase I/II rheumatoid arthritis study with Mirococept® which were not incurred in the current quarter.

General and administration expenses

General and administration expenses for the quarter ended September 30, 2005 were $847,172 compared to $1,358,337 for the corresponding quarter of the prior year, a decrease of $511,165. The decrease was due to reduced facilities costs and lower professional fees.

Amortization expenses

The Company recorded $774,733 in amortization expense during the quarter ended September 30, 2005 compared to $1,253,425 during the corresponding period of the prior year. The amortization amount has decreased due to write-downs in the acquired intangible asset balances taken during fiscal 2005.

Liquidity and Capital Resources

At September 30, 2005, the Company's cash, cash equivalents and short-term investments totalled $15,376,480 compared to $15,860,738 at March 31, 2005. Working capital at September 30, 2005 was $14,037,423 compared to $15,057,698 at March 31, 2005. The decrease in working capital reflects the use of capital resources in the on-going operations of the business off-set by the proceeds realized from the corporate reorganization.

Cash and cash equivalents were $14,321,407 at September 30, 2005 compared to $15,650,334 at March 31, 2005 a decrease of $1,328,927. The decrease in cash and cash equivalents resulted from cash used to fund operating activities of $220,564, cash used in investing activities of $960,419 and cash used in financing activities of $147,944.

On October 27, 2005, Inflazyme disposed of its holdings in a wholly-owned subsidiary for proceeds of $3,625,580, net of commission expenses of $231,420. The total net proceeds realized after deferred expenses and commission, by Inflazyme, as a result of the disposal of the shares and the dilution gain is $3,515,681. This will be recorded in the quarter ending December 31, 2005.

Inflazyme believes that its working capital position at September 30, 2005, plus the proceeds realized from the disposal of the subsidiary, will enable the Company to fund operating expenses and capital requirements to the end of calendar 2007.

Conference Call

Inflazyme will host a conference call to discuss this announcement on Tuesday, November 8, 2005 at 6:00 a.m. Pacific Time/9:00 a.m. Eastern Time. To access the call, please dial 416-695-9753 or 1-877-888-3490. Audio replay of the conference call will be available until December 8, 2005 by calling 416-695-5275 or 1-888-509-0081.

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)
September 30 March 31

2005 2005
--------------------------
Assets

Current assets
Cash and cash equivalents $ 14,321,407 $ 15,650,334
Short-term investments 1,055,073 210,404
Interest receivable 28,076 18,451
Other receivables 77,982 132,988
Prepaid expenses 275,112 346,260
Tax credits recoverable 52,251 1,597,429
--------------------------
15,809,901 17,955,866

Deferred expenses 109,899 -
Property and equipment 2,193,512 2,701,098
Other assets 2,019,303 1,990,828
Acquired intangible assets 6,852,988 7,885,373
--------------------------

$ 26,985,603 $ 30,533,165
--------------------------
--------------------------

Liabilities

Current liabilities
Accounts payable and
accrued liabilities $ 1,757,568 $ 2,845,213
Current portion of
long-term debt 14,910 52,955
--------------------------
1,772,478 2,898,168

Deferred licensing revenue 287,439 306,601
--------------------------
2,059,917 3,204,769
--------------------------

Shareholders' equity

Capital stock
Issued
Series 1, Class A
preference shares - 21,957,676
Common shares 138,910,033 116,952,357
138,910,033 138,910,033
Contributed surplus 1,508,413 1,381,739
Deficit (115,492,760) (112,963,376)
--------------------------
24,925,686 27,328,396
--------------------------
$ 26,985,603 $ 30,533,165
--------------------------
--------------------------

On behalf of the board

Kevin Mullane (signed) Graham Wilson (signed)
--------------------- ---------------------
President & CEO Director
Director


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

For the Three Months Ended For the Six Months Ended
--------------------------- ---------------------------
September 30, September 30, September 30, September 30,
2005 2004 2005 2004
--------------------------- ---------------------------

Revenue
Interest $ 79,762 $ 151,087 $ 173,158 $ 318,074
Licensing
revenue 9,581 73,795 19,162 83,376
--------------------------- ---------------------------
89,343 224,882 192,320 401,450
--------------------------- ---------------------------

Expenses
Research and
development 1,242,984 3,093,296 2,445,477 6,020,391
General and
administration 847,172 1,358,337 1,959,082 3,263,062
Amortization 774,733 1,253,425 1,627,246 2,267,528
Write-down
of acquired
intangible
assets - - - 2,335,797
Restructuring
expenses - 596,488 - 596,488
Loss on
disposal of
assets held
for sale - 86,572 - 146,458
Write-down
of other
assets - - - 48,090
Dilution
gain (3,310,101) - (3,310,101) -
Gain on
reversal of
lease
liability - - - (1,090,354)
--------------------------- ---------------------------
(445,212) 6,388,118 2,721,704 13,587,460
--------------------------- ---------------------------

Net income /
(loss) for
the period 534,555 (6,163,236) (2,529,384) (13,186,010)

Deficit,
beginning of
period (116,027,315) (91,878,475) (112,963,376) (84,855,701)
--------------------------- ---------------------------

Deficit, end
of period $(115,492,760) $(98,041,711) $(115,492,760) $(98,041,711)
--------------------------- ---------------------------
--------------------------- ---------------------------

Basic and
diluted loss
per common
share - (0.06) (0.02) (0.12)
--------------------------- ---------------------------
--------------------------- ---------------------------

Weighted-average
number of
common shares
outstanding 113,534,375 106,215,150 110,814,663 104,828,914
--------------------------- ---------------------------
--------------------------- ---------------------------


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

For the Three Months Ended For the Six Months Ended
--------------------------- ---------------------------
September 30, September 30, September 30, September 30,
2005 2004 2005 2004
--------------------------- ---------------------------
Cash flows
from
operating
activities
Net income /
(loss) for
the period $ 534,555 $ (6,163,236) $ (2,529,384) $(13,186,010)
Items not
involving
cash:
Amortization 774,733 1,253,425 1,627,246 2,267,528
Loss on
disposal of
assets held
for sale - 86,572 - 146,458
Write-down
of other
assets - - - 48,090
Write-down
of acquired
intangible
assets - - - 2,335,797
Licensing
revenue (9,581) (9,581) (19,162) (19,162)
Gain on
reversal of
lease
liability - - - (1,090,354)
Amortized
lease
liability - (54,518) - (109,036)
Stock-based
compensation 842 120,623 126,674 178,289
--------------------------- ---------------------------
1,300,549 (4,766,715) (794,626) (9,428,400)
Changes in
non-cash
working
capital 747,619 (1,044,432) 574,062 (1,965,960)
--------------------------- ---------------------------
2,048,168 (5,811,147) (220,564) (11,394,360)
--------------------------- ---------------------------

Cash flows
from
financing
activities
Repayment of
long-term
debt (13,151) (177,303) (38,045) (321,865)
Deferred
finance
expenses (109,899) - (109,899) -
--------------------------- ---------------------------
(123,050) (177,303) (147,944) (321,865)
--------------------------- ---------------------------

Cash flows
from
investing
activities
Short-term
investments (845,838) (208,816) (844,669) 243,682
Disposal of
assets held
for sale - 3,862 - 3,862
Cash from the
acquisition
of Adprotech - - - 7,345,992
Acquisition
costs -
Adprotech - - - (582,258)
Other assets (63,352) (30,439) (108,553) (97,771)
Purchase of
property and
equipment (1,366) (213,319) (7,197) (295,911)
--------------------------- ---------------------------
(910,556) (448,712) (960,419) 6,617,596

--------------------------- ---------------------------
Increase
(decrease)
in cash and
cash
equivalents 1,014,562 (6,437,162) (1,328,927) (5,098,629)

Cash and cash
equivalents,
beginning of
period 13,306,845 28,713,618 15,650,334 27,375,085
--------------------------- ---------------------------
Cash and cash
equivalents,
end of
period $ 14,321,407 $ 22,276,456 $ 14,321,407 $ 22,276,456
--------------------------- ---------------------------
--------------------------- ---------------------------

Supplemental
disclosure
of cash flow
information
Interest
paid 1,445 6,235 3,436 16,498
Interest
received 71,444 143,205 163,533 322,231
Issuance of
common
shares on
conversion
of Series 1,
Class A
preference
shares - - 21,957,676 -
Issuance of
common shares
on the
acquisition of
Adprotech
Limited net
assets - - - 19,533,445



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Contact Information

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