Ondine Biomedical Inc.
TSX : OBP
AIM : OBP

Ondine Biomedical Inc.

March 31, 2011 08:00 ET

Ondine Biomedical Announces 2010 Year End Financial Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - March 31, 2011) - Ondine Biomedical Inc., formerly Ondine Biopharma Corporation (the "Company" or "Ondine") (TSX:OBP)(AIM:OBP) a medical technology company developing photodisinfection based products, today announced its financial results for the year ended December 31, 2010. All amounts herein are stated in Canadian dollars unless otherwise indicated and the number and the prices of the Company's securities disclosed herein have been adjusted, where applicable, to reflect the share consolidation described below.

"During 2010 Ondine made considerable progress towards its objective of validating its technology as an effective therapy for treating a wide range of topical infections through commercially viable photodynamic disinfection products," said Carolyn Cross, Chairman and CEO. "Our priorities for the year included the introduction of a cordless hand held laser and enhanced photosensitizer formulation for Periowave™ which was achieved in May 2010 together with our business partner, Periowave Dental Technologies Inc. We have also been working to make inroads into the Canadian Healthcare-Associated Infection market for our MRSAid™ nasal decolonization product and to prepare for a clinical study, expected to start in mid 2011, of our photodynamic system to prevent ventilator associated pneumonia. We were also pleased by our ability to set up and sell a majority interest in Sinuwave Technologies Corporation, a company which holds the exclusive rights to the use of our photodisinfection technology for the treatment of chronic sinusitis. For 2011, we intend to continue to focus on these new product priorities and as well as evolving our management team to help us meet our strategic goals and operating targets."

HIGHLIGHTS

- Received acceptance of filing notification from the FDA for the Periowave™ PMA Submission

- Sold a majority interest in Sinuwave Technologies Corporation (STC), formerly a wholly–owned subsidiary of the Company, for cash, royalties and a potential milestone payment. STC is developing the Sinuwave™ product, a photodisinfection treatment for the chronic sinusitis market;

- Launched two new products for the dental market, a convenient cordless hand held laser and a reformulated photosensitizer with advanced handling properties;

- Raised gross proceeds of $1.5 million through two equity financings and received a loan of $0.5 million;

- The Company's US subsidiary was awarded a grant under the Qualifying Therapeutic Discovery Project (QTDP) tax credit program.

2010 FINANCIAL RESULTS

For the year ended December 31, 2010 (the "Current Year") the Company recorded a loss of $3.26 million, or $0.40 per common share, a decrease of $1.34 million (29%) when compared with the loss of $4.60 million, or $0.83 per common share, for the year ended December 31, 2009 (the "Prior Year"). Product sales revenue for Periowave™ laser base stations (LBS), hand held lasers (HHL) and treatment kits (TKS) for the Current Year was $0.45 million generating a gross margin of $0.13 million (30.1%), compared to product sales of LBS and TKS of $0.58 million and gross profit margin of $0.36 million (62.3%) for the Prior Year. The lower sales and gross margins during the Current Year, as compared to the Prior Year, primarily reflect the Company's position during 2010 as supplier to Periowave Dental Technologies, Inc., the company that purchased Ondine's dental healthcare business in June of 2009. The Company prepares its consolidated financial statements in accordance with Canadian generally accepted accounting principles.

DEVELOPMENTS DURING 2010

Disposition

In September 2010, Ondine sold a majority interest in its then wholly owned subsidiary, Sinuwave Technologies Corporation ("STC"), for US$660,000 ($678,414) to a private equity investor group (the "STC Sale"). STC is developing the Sinuwave™ product, a photodisinfection treatment for the chronic sinusitis market. Immediately subsequent to the STC Sale, the private equity investor group completed an initial financing in STC for US$550,000. As a result of the sale, the initial financing transaction and certain related transactions, Ondine retained a 19.6% equity interest in STC immediately subsequent to the closing of the transactions. The private equity investor group also committed to provide STC with additional financing totaling US$1.1 million in 2 tranches and has the right to invest a further US$1.1 million in Sinuwave on exercise of share purchase warrants. Subsequent to December 31, 2010, STC closed a US$550,000 private placement with the private equity investor; completing the first tranche of the financing commitment. The Company did not participate in this financing and as a result thereof the Company's equity interest in STC was reduced to 17.6% (15.32% fully diluted).

Ondine and STC have entered into a memorandum of understanding, pursuant to which Ondine will i) receive monthly consulting revenue for management and research and development services in support of the development of Sinuwave™ product; ii) have the right and obligation to manufacture products for STC for the chronic sinusitis application on a cost plus basis; and iii) be entitled to milestone payments totaling US$250,000 based on the achievement of certain development milestones. Ondine is also entitled to receive royalties on STC sales of Sinuwave™ product pursuant to the terms of an intellectual property license agreement.

Share Capital, Equity and Debt Financings

Effective October 14, 2010, the Company consolidated all of its issued and outstanding common shares on the basis of fifteen (15) "old" common shares for one (1) "new" common share (the "Share Consolidation"). Outstanding stock options and warrants were similarly adjusted by the consolidation ratio.

Financing transactions during 2010 were as follows:

- During April 2010, the Company raised gross proceeds of $828,000 through two tranches of a non-brokered private placement by issuing 920,000 units at $0.90 per unit. Each Unit consists of one common share of the Company and one share purchase warrant entitling the holder to acquire one common share of the Company at an exercise price of $1.125 with 835,332 of the warrants expiring on April 5, 2011 and 84,666 on April 23, 2011;

- In June 2010, the Company received a loan advance of $500,000 from Carolyn Cross, Chairman and CEO of the Company. The loan, as amended, was due on December 31, 2010 and is secured by a first charge on the proceeds of any future financing transaction. The loan was interest free until the due date and thereafter the principal amount bears interest at a rate of 5% per annum payable monthly. The loan was not repaid on the due date and is therefore currently due on demand; and

- During December 2010, the Company raised gross proceeds of $667,550 through a non-brokered private placement by issuing 1,027,000 units at $0.65 per unit. Each Unit consists of one common share of the Company and one share purchase warrant entitling the holder to acquire one common share of the Company at an exercise price of $0.75 expiring on June 24, 2012.

Product

- During the quarter ended September 30, 2010 the Company shipped the initial commercial order of its latest products to its business partner, Periowave Dental Technologies Inc. (PDT Inc.). These products, which are for the dental market, consist of a convenient cordless handheld laser ("HHL") and a reformulated photosensitizer with advanced handling properties.

Grant

- In November 2010, the Company announced its Bothell, Washington based subsidiary, Ondine Research Laboratories, Inc. ("ORL") has been awarded a grant in the amount of US$244,479 under the Qualifying Therapeutic Discovery Project (QTDP) tax credit program. ORL was awarded funding to support continuing research and development for the MRSAid™ product for non-antibiotic nasal decolonization of Staphylococcus aureus and methicillin-resistant Staphylococcus aureus ("MRSA"). Cash grants were awarded based on a competitive application process after evaluation by the National Institutes of Health and the Internal Revenue Service.

Management Changes

- June 2010: Terry Holland ceased to be a director of the Company by not standing for re-election at the annual general meeting of the shareholders held on that date. Mr. Holland made significant contributions to the Company at both board and operating levels helping to guide Ondine into becoming a manufacturer and leader in the field of photodynamic therapy.

RECENT DEVELOPMENTS

Grant

In January 2011, the Company announced that University College London (UCL) Professors Ivan P. Parkin and Michael Wilson and colleagues, in collaboration with Ondine, have been awarded a Medical Research Council (MRC) Developmental Pathway Funding Scheme Award of £1 million to develop a light activated antimicrobial application for the prevention of catheter-associated infections such as urinary tract infections. This two and one-half year project was initiated at the beginning of February 2011. The project is intended to build on existing fundamental basic and pre-clinical research findings to enable a clinic study for this PDD application and is intended to enhance the exclusive license that Ondine has with UCLB, the business development arm of UCL, on Light-Activated Antimicrobial Agents nanoparticle conjugates and mixtures.

Debt financing

In March 2011, the entered into an agreement with Carolyn Cross pursuant to which Ms. Cross advanced the Company an additional C$500,000. This loan is due on July 1, 2011, is secured by a first charge on the proceeds of any future financing transaction, and is interest free until the due date, but thereafter, the principal amount will accrue interest at a rate of 5% per annum payable monthly.

FINANCIAL REVIEW

Consolidated statements of operations for the fourth quarter of 2010 ("Fourth Quarter 2010") compared to the fourth quarter of 2009 ("Fourth Quarter 2009") are as follows (unaudited – in thousands except per share amounts):

  Three months ended
December 31,
  2010
$
2009
$
Revenue    
Product sales 191 39
Cost of sales 163 23
Gross Margin 28 16
Consulting revenue 349 215
Royalty revenue 14 18
  391 249
Expenses (recovery)    
Research and development 838 782
General and administration 469 538
Marketing and sales 7 (10)
Depreciation and amortization 74 68
(Recovery)/write-down of inventory deposit (58) 87
  (1,330) (1,465)
Other    
Loss on sale of investment (15)
Loss on disposal of equipment (21)
Grant income 247
Equity loss on long-term investment (21)
Foreign exchange gain (loss) 8 (3)
  234 (39)
Loss before income taxes (705) (1,255)
Income tax recovery (expense) 14 29
Loss and comprehensive loss for the period (691) (1,226)
Basic and diluted loss per common share (0.08) (0.19)
Weighted average number of shares outstanding 8,582 6,436

The $1.34 million decrease in loss for the Current Year, when compared to the Prior Year, was primarily due to i) an increase of $0.61 million in consulting revenue; ii) a decrease of $0.43 million in marketing and sales ("M&S") expenses; iii) a $0.64 million loss on sale of investment that occurred during the Prior Year, while no comparable transaction occurred during the Current Year; iv) the Current Year including $0.25 million of government grant income, while there was no grant income in the Prior Year; and v) a $0.15 million change resulting from a write-down of an inventory deposit in the Prior Year compared to a recovery in the Current Year. These decreases in loss were partially offset by i) an increase of $0.41 million in research and development ("R&D") expenses; ii) the decrease of $0.23 million in gross margin described above; and iii) a decrease of $0.10 million in gain on sale of assets. The Company recognized a $0.58 million gain on sale of assets during Current Year in connection with the STC Sale on September 13, 2010, compared with a gain of $0.68 million for Prior Year recognized in connection with the sale of the Company's dental business to PDT Inc. that occurred on June 5, 2009 (the "Dental Sale").

The $0.54 million decrease in loss for Fourth Quarter 2010, when compared to Fourth Quarter 2009, was primarily due to i) an increase of $0.13 million in consulting revenue; ii) the Fourth Quarter 2010 including $0.25 million of government grant income, while there was no grant income in the Fourth Quarter 2009; and v) a $0.15 million change resulting from a write-down of an inventory deposit in Fourth Quarter 2009 compared to a recovery in Fourth Quarter 2010.

Sales during the Current Year consisted of Periowave™ product, primarily laser base stations and cordless hand held lasers, sold to PDT Inc. under a manufacturing and supply agreement entered into in June of 2009 as part of the Dental Sale. During the Prior Year the Company's sales consisted of Periowave™ product, primarily treatment kits, sold to three distributors in Canada and to a distributor in the United Kingdom. The margins obtained on the sales in the Current Year were lower than the margins obtained on the Company's sales during the Prior Year reflecting the Company's position as supplier to PDT Inc. resulting from the Dental Sale in June 2009. The gross margin percentage for the Current Year reflects the sale in the first quarter of 2010 of laser base stations that had previously been written off by the Company and accordingly there was no cost of sales in connection with the sale of that product. The gross margin percentage that will be earned on the Company's future sales under the manufacturing agreement with PDT Inc. referred to above will be lower than the gross margin percentage realized during the Current Year.

In connection with the Dental Sale, the Company and PDT Inc. entered into a management services agreement effective from the closing date, June 5, 2009. The consulting revenue received by the Company from PDT Inc. under this agreement, together with the consulting revenue earned from PDT Inc. in connection with a research and development agreement and the consulting revenue earned under the agreement with STC referred to above, accounts for the increase in consulting revenue for the Current Year, as compared to the Prior Year. The reduction in M&S expenses resulted from the elimination of substantially all of those expenses subsequent to the closing of the Dental Sale. The bulk of the increase in R&D expenses was due to an increase in consulting and professional fees, primarily in connection with the development of the Company's product for in situ disinfection of endotracheal tubes to prevent ventilator-associated pneumonia (VAP). This product was acquired by the Company in December 2009 as part of the acquisition of Advanced Photodynamic Technologies, Inc.

The Company intends to continue to focus its resources on development of a select number of new applications of its platform PDD technology. In addition to the applications referred to above, during the Current Year the Company continued to invest in research and development of, among other things, our MRSAid™ product for decolonization of pathogenic bacteria, such as methicillin-resistant Staphylococcus aureus (MRSA) in the anterior nares and in the Periowave™ PMA submission, primarily in connection with a number of FDA audits of certain of the Company's clinical studies. The PMA was submitted by the Company on behalf of PDT Inc. to obtain FDA approval for the sale of the Periowave™ system in the United States for the treatment of periodontitis in adults as an adjunct to standard methods of care. The PMA submission is seeking market approval for the laser base station and the original formulation of the photosensitizer. The Company is now also supporting the development of the Sinuwave product under contract with STC.

As at December 31, 2010 the Company had cash and cash equivalents totaling $0.88 million compared with $1.06 million as at December 31, 2009. Accounts payable and accrued liabilities at December 31, 2010 were $1.4 million compared with $1.1 million at December 31, 2009. During the Current Period, the Company used cash of approximately $2.72 million for operating activities and $0.18 million for purchase of capital assets; received cash of $1.56 million, net of issuance costs, from the issuance of equity in two private placements and on the exercise of share purchase warrants; received a loan advance of $0.5 million; and received net cash proceeds of $0.66 million from the STC Sale.

Based on the Company's current level of activities and its future plans, the Company will need to raise additional capital in the near term to continue with its planned operating activities. Although there has been some improvement in certain sectors of the capital markets, the Company continues to believe that future market conditions may make it more difficult and time consuming than normal for companies at its stage of development to secure additional funding. Assurances can not be given that additional funding will be available on terms that are acceptable to the Company. In the interim, the Company will continue to control its expenses and defer capital outlays in order to extend the period it can operate utilizing its existing cash balances. Should the Company be unable to obtain additional cash in a timely manner, it would have to severely curtail or cease its activities and their can be no assurances that the Company would be able to continue in business.

As at December 31, 2010 the Company had 9,573,267 common shares outstanding.

Additional analysis of the Company's financial results for the Current Year, including analysis of the results for the three months ended December 31, 2010, is included in our management's discussion and analysis of financial condition and results of operations (MDA) for the year ended December 31, 2010, which will be available on the Company's website and on www.sedar.com.

About Ondine Biomedical Inc.

Ondine is developing non-antibiotic therapies for the treatment of a broad spectrum of bacterial, fungal and viral infections. The Company is focused on developing leading edge products utilizing its patented light-activated technology, primarily for the healthcare-associated infection (HAI) market. Photodisinfection provides broad-spectrum antimicrobial efficacy without encouraging the formation and spread of antibiotic resistance. The Company is based in Vancouver, British Columbia, Canada, with a research and development laboratory in Bothell, Washington, USA. For additional information, please visit the Company's website at: www.ondinebio.com.

Forward-Looking Statements:

Certain statements contained in this release containing words like "believe", "intend", "may", "expect" and other similar expressions, are forward-looking statements that involve a number of risks and uncertainties. Factors that could cause actual results to differ materially from those projected in the Company's forward-looking statements include the following: market acceptance of our technologies and products; our ability to obtain financing; our financial and technical resources relative to those of our competitors; our ability to keep up with rapid technological change; government regulation of our technologies; our ability to enforce our intellectual property rights and protect our proprietary technologies; the ability to obtain and develop partnership opportunities; the timing of commercial product launches; the ability to achieve key technical milestones in key products and other risk factors identified from time to time in the Company's public filings.

Ondine Biomedical Inc.
(Formerly Ondine Biopharma Corporation)
Incorporated under the laws of British Columbia

CONSOLIDATED BALANCE SHEETS

As at December 31 (Expressed in Canadian dollars)

  2010
$
2009
$
ASSETS    
Current    
Cash and cash equivalents 876,548 1,055,773
Accounts receivable 256,755 152,929
Inventories 232,957 205,512
Prepaid expenses and deposits 275,032 143,796
Total current assets 1,641,292 1,558,010
Capital assets 484,019 451,094
Intangible assets 408,762 610,012
Total assets 2,534,073 2,619,116
LIABILITIES AND SHAREHOLDERS' EQUITY    
Current    
Accounts payable and accrued liabilities 1,397,407 1,102,681
Deposit payable 131,860
Income taxes payable 4,506 1,482
Current portion of deferred tenant inducement 1,553 46,437
Loan payable 500,000
Deferred revenue 64,649 95,391
Future income tax 7,020 32,576
Total current liabilities 2,106,995 1,278,567
Deferred tenant inducement, net of current portion 147,891 62,711
Total liabilities 2,254,886 1,341,278
Shareholders' equity    
Share capital 55,899,080 54,767,640
Contributed surplus 6,318,625 5,191,921
Deficit (61,938,518) (58,681,723)
Total shareholders' equity 279,187 1,277,838
  2,534,073 2,619,116

Ondine Biomedical Inc.
(Formerly Ondine Biopharma Corporation)

CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

For the years ended December 31

(Expressed in Canadian dollars)

  2010
$
2009
$
REVENUE    
Product sales 448,674 581,527
Cost of sales 313,664 219,192
Gross margin 135,010 362,335
Consulting revenue 1,041,717 430,471
Royalty revenue 42,447 18,233
  1,219,174 811,039
EXPENSES    
Research and development 3,253,021 2,845,867
General and administration 1,891,508 1,964,310
Marketing and sales 15,275 443,608
Depreciation and amortization 298,296 251,224
(Recovery)/Write-down of inventory deposit (58,605) 87,323
  (5,399,495) (5,592,332)
Other income/(expense)    
Gain on sale of assets 579,675
Gain on settlement of debt 52,123
Sale of Dental Business 683,388
Loss on sale of investment (644,455)
Grant income 247,084
Loss on disposal of equipment (21,481)
Interest and miscellaneous income 22,082 13,808
Equity loss from long-term investment (20,880)
Foreign exchange gain 31,598 95,514
  911,682 126,774
Loss before income taxes (3,268,639) (4,654,519)
Income tax recovery 11,844 59,045
Loss and comprehensive loss for the year (3,256,795) (4,595,474)
Basic and diluted loss per common share (0.40) (0.83)
Weighted average number of common shares outstanding 8,198,978 5,514,963

Ondine Biomedical Inc.
(Formerly Ondine Biopharma Corporation)

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Expressed in Canadian dollars)

 
Number of(1) Common Shares


Share Capital
$

Contributed Surplus
$

Deficit
$
Total
Shareholders' Equity
$
Balance, December 31, 2008 4,090,583 51,336,368 4,087,139 (54,086,249) 1,337,258
Common shares issued for cash (net of issue costs) :          
  February 2009 Private Placement 574,677 497,671 497,671
Units issued for cash (net of issue costs)          
  June 2009 Private Placement 559,685 503,054 347,293 850,347
  December 2009 Private Placement 533,333 253,644 144,113 397,757
Common shares issued for acquisition of an investment 990,083 1,714,669 27,870 1,742,539
Common shares issued (net of issue costs) for acquisition of APT 590,429 438,927 438,927
Common shares issued for research and development agreement 31,075 23,307 23,307
Stock-based compensation 585,506 585,506
Loss and comprehensive loss for the year (4,595,474) (4,595,474)
Balance, December 31, 2009 7,369,865 54,767,640 5,191,921 (58,681,723) 1,277,838
Units issued for cash (net of issue costs)          
  April 2010 Private Placement 919,998 504,994 314,797 819,791
  December 2010 Private Placement 1,027,000 409,815 251,527 661,342
Common shares issued for settlement of debt (net of issue costs) 63,179 58,519 58,519
Common shares issued for exercise of warrants 100,000 75,000 75,000
Common shares issued for contingent share consideration 93,225 55,936 55,936
Reallocation of contributed surplus as a result of warrant exercise 27,176 (27,176)
Stock-based compensation 587,556 587,556
Loss and comprehensive loss for the year (3,256,795) (3,256,795)
Balance, December 31, 2010 9,573,267 55,899,080 6,318,625 (61,938,518) 279,187

Ondine Biomedical Inc.
(Formerly Ondine Biopharma Corporation)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in Canadian dollars)

  2010
$
2009
$
OPERATING ACTIVITIES    
Loss for the year (3,256,795) (4,595,474)
Add items not affecting cash:    
      Depreciation and amortization 298,296 251,224
      Gain on sale of assets (579,675) (683,388)
      Gain on settlement of debt (52,123)
      Equity loss on investment 20,880
      Loss on sale of investment 644,455
      (Recovery)/Write-down of inventory deposit (58,605) 87,323
      Loss on disposition of capital assets 21,481
      Stock-based compensation 587,556 585,506
      Deferred tenant inducement 40,295 (45,277)
      Future income tax expense (25,555) (49,779)
Changes in non-cash working capital items relating to operations:    
      Accounts receivable (72,230) 263,423
      Inventory (27,445) 29,348
      Prepaid expenses and deposits (131,235) 111,195
      Accounts payable and accrued liabilities 432,376 (117,831)
      Deposit payable 131,860
      Income taxes payable 3,024 (36,318)
      Deferred revenue (30,742) 95,391
Cash used in operating activities (2,720,118) (3,438,721)
FINANCING ACTIVITIES    
Loan proceeds 500,000 400,000
Repayment of loan (400,000)
Issuance of common shares and warrants, net of issue costs 1,556,133 1,702,270
Cash provided by financing activities 2,056,133 1,702,270
INVESTING ACTIVITIES    
Purchase of capital assets (180,040) (1,451)
Proceeds from sale of assets 664,800 622,732
Proceeds from sale of investment 1,137,695
Cash provided by investing activities 484,760 1,758,976
Net  increase/(decrease) in cash and cash equivalents (179,225) 22,525
  Cash and cash equivalents, beginning of year 1,055,773 1,033,248
Cash and cash equivalents, end of year 876,548 1,055,773

The TSX Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Ondine Biomedical Inc.
    Carolyn Cross
    Chairman and CEO
    ccross@ondinebio.com
    www.ondinebio.com
    or
    Canaccord Genuity Limited, Nominated Adviser
    Mark Williams/Bhavesh Patel
    +4420 7050 6500