ProMetic Life Sciences Inc.

ProMetic Life Sciences Inc.

August 14, 2006 19:08 ET

ProMetic Reports on Second Quarter 2006 Financial Results

MONTREAL, QUEBEC--(CCNMatthews - Aug. 14, 2006) -




ProMetic Life Sciences Inc. (TSX:PLI) is pleased to update the financial community on its progress related to the corporate reorganization announced in November 2005 and to report on its financial results for the second quarter ended June 30(th), 2006. The Company is restructuring as a parent company with four pure-play operating units. Each distinct unit is pursuing a focused business plan and discrete funding funding such that investors will have the opportunity to take advantage of the specific risk/return profiles inherent in each operating unit.

ProMetic BioSciences Ltd (PBL)

The reorganization of PBL is now virtually complete and includes PLI's stake in Pathogen Removal and Diagnostic Technologies Inc. (PRDT), a joint venture between ProMetic and the American Red Cross. MacoPharma's P-Capt filter, which includes PRDT's resin is the first device to demonstrate reduction of TSE prions from whole blood. MacoPharma is expecting a commercial launch in the fall of 2006.

"The launch of the P-Capt filter combined with the agreements we anticipate concluding with prominent pharmaceutical companies and the launch of new bioseparation products this fall is expected to have a significant impact upon PBL's revenue growth" said Steve Burton, CEO of PBL.

Following the appointment of Dr. Burton to the position of CEO, this business unit has been actively recruiting senior management and directors in preparation for a public listing later this year.

ProMetic BioTherapeutics, Inc.(PBT)

The Company has completed the reorganization of its U.S. subsidiary PBT, to commercialize a technology platform developed under a collaborative agreement between ProMetic and the American Red Cross. Under a new agreement between ProMetic and American Red Cross, sixteen of American Red Cross's key scientists have joined the PBT organization and, amongst other projects, will continue to work on commercializing and licensing the Plasma Protein Purification System (PPPS) technology, which has been licensed exclusively to PBT. PBT's scientists will continue to work in American Red Cross's facilities in Rockville and Gaithersburg, Maryland.

In addition, PBT will have exclusive access to the resins and filters developed and manufactured by PBL for the field of plasma-derived proteins. "This will allow PBT to license to different parties worldwide its novel and proprietary processes while relying on the use of PBL's proven proprietary resins/filters," said Dr. Chris Bryant, COO of PBT.

"We have a rich pipeline of commercial agreements that will start to unfold during the third quarter of 2006", said Pierre Laurin, CEO of ProMetic. He added, "The strategic agreement with the American Red Cross leads to the establishment of a wholly owned subsidiary that can stand alone and moves us closer to our goal of generating significant value to our shareholders."

Mr. Laurin continued, "It was unfortunate that Hemosol was placed in receivership, but we are pleased that the accelerated arbitration process to address the scope of the License agreement with Hemosol is starting this week."

ProMetic BioSciences Inc. - Therapeutics

In June 2006, ProMetic secured financing of C$10.8 million from JP Morgan and Third Point LLC to be used in part for the development of the lead compound PBI-1402, an orally active drug for the treatment of anemia in cancer patients undergoing chemotherapy. Currently in Phase Ib/II, PBI-1402 clinical trial will be expanding to other centers in Canada and possibly off shore where there may be more cancer patients who conform to the protocol of the trials. ProMetic is also preparing for an anticipated U.S. expansion of its clinical program in 2007.

ProMetic BioSciences scientists achieved important milestones in the determination of PBI-1402's mechanism of action, further supporting our knowledge base on the activity of the drug on the production of red blood cells.

The Company plans to move its second drug under investigation, PBI-1393, into clinical trials in cancer patients in late 2006. PBI-1393 is a compound targeted for the treatment of selected cancers in combination with chemotherapy. It is now well established that cytotoxic T-lympocytes (CTLs) play an important role in killing cancer cells in melanoma, renal cell carcinoma breast and pancreatic cancer. In in vitro experiments, PBI-1393 enhanced human CTL's activity to a biological level equivalent to Interleukin-2 (IL-2). IL-2 is approved for the treatment of renal cell carcinoma and metastatic melanoma but it is expensive and displays severe side effects.

ProMetic scientists have also confirmed the mechanism of action of PBI-1393.

Financial Results

The following information should be read in conjunction with the Company's audited consolidated financial statements and notes thereto as at and for the year ended December 31, 2005 included in the Company's annual report to shareholders. Information as at June 30, 2006 and for the periods ended June 30, 2006 and 2005 are unaudited.

Revenues for the second quarter of 2006 were $0.6 million compared with $1.1 million in the same period last year. Lower revenues are mainly related to the delay in signing product development agreements and delay in shipment of products to Hemosol, which is currently under insolvency proceedings.

For the first six months of 2006, revenues were $1.1 million compared with $6.3 in the same period last year.

Research and development expenses were $2.4 million for the second quarter, significantly below the R&D expenses of $3.7 million incurred in the same period in 2005. This significant variance is caused mainly by the reversal of accruals related to the PPPS project jointly developed with the American Red Cross (ARC).

For the first six months of 2006, research and development expenses amounted to $6.2 million compared to $7.7 million for the same period in 2005. Research and development expenses consisted primarily of bio-separation activities, advancement of PBI-1402 and PBI-1393 clinical and pre-clinical development, and plasma fractionation activities.

Administration, marketing and other expenses, excluding amortization, were $1.8 million for the second quarter of 2006, slightly below the expenses of $1.9 million for the same period in 2005. For the first six months of the year, these expenses were $3.3 million, slightly below last year's amount of $ 3.5 million for the same period. A significant portion of the administration expenses is attributable to legal fees related to Hemosol's insolvency.

Net interest expenses in 2006 were significantly higher at $3.5 million compared with $0.1 million in the same period of 2005. The increase is mainly attributed to the interest expenses related to the convertible term notes issued by the company at the end of 2005 and at the beginning of 2006. As at June 30, 2006, the company did not meet certain of the requirements contained in a limited number of covenants related to those convertible term notes. However, the company has been actively negotiating new, more lenient covenants with its note holders, and as of the date of the issuance of these quarterly financial statements, a substantial majority of the note holders had executed amendments to the notes agreement that confirm those new covenants.

As a result, interest expenses were conservatively capitalized to the outstanding debt for a total of $3.6 million to adjust the carrying value to the principal amount.

Net loss for the quarter was $7.1 million, or $0.05 per share, compared with $7.5 million, or $0.07 per share, for the same period in 2005. Year to date losses of $13.5 million are higher by $4.0 million compared to the same period in 2005.

Cash and cash equivalents were $11.1 million as at June 30, 2006.

(In thousands of Canadian dollars)
June 30 December 31
2006 2005

Current assets
Cash and cash equivalents $11,062 $10,525
Accounts receivable 3,678 2,914
Inventories 2,290 1,935
Prepaid expenses 533 518
17,563 15,892

Investments 2,562 2,876
Capital assets 4,867 5,324
Licenses and patents 6,056 5,098
Deferred financing expenses 149 563
Deferred development costs - 43
$31,197 $29,796

Current liabilities
Bank loan $1,029 $1,029
Accounts payable and accrued liabilities 3,639 5,319
Deferred revenues 130 -
Provision related to a lawsuit 2,999 -
Current portion of long-term debt 200 366
Current portion of liability component
of the convertible term notes 4,724 524
12,721 7,238

Liability component of the convertible term
notes 3,205 3,490
Long-term debt 19 46
Provision related to a lawsuit - 2,921
Preferred shares, retractable at the holder's
option 3,204 2,248
19,149 15,943

Share capital 161,646 150,697
Contributed surplus 6,807 5,929
Deficit (156,405) (142,773)
12,048 13,853

$31,197 $29,796

The accompanying notes are an integral part of the consolidated
financial statements.
The unaudited quarterly financial statements have not been reviewed
by external auditors.

(In thousands of Canadian dollars except for per share amounts)
Quarter ended Six month ended
June 30 June 30
2006 2005 2006 2005
Sales and contract $624 $1,127 $1,080 $2,349
Licensing 1 - 41 4,000
625 1,127 1,121 6,349

Research and
development expenses 2,410 3,745 6,219 7,722
marketing and other
expenses 1,774 1,886 3,257 3,462
Amortization of
capital assets 258 271 514 544
Amortization of
licenses and patents
and deferred
development 65 394 501 785
Amortization of
deferred financing
expenses 423 - 476 -
4,931 6,296 10,968 12,513

Loss before the
following items (4,306) (5,169) (9,847) (6,164)
Provision related to
a lawsuit (44) - (78) -
Write-down of short-term
investment - (2,254) - (3,242)
Net interest expenses (2,769) (33) (3,540) (65)
Net loss ($7,118) ($7,456) ($13,465) ($9,471)

Net loss per share
(basic and diluted) (0.05) (0.07) (0.10) (0.09)

Weighted average
number of outstanding
shares (in thousands) 137,708 103,813 131,568 101,677

The accompanying notes are an integral part of the consolidated
financial statements.
The unaudited quarterly financial statements have not been reviewed
by external auditors

About ProMetic Life Sciences

ProMetic Life Sciences Inc. is a biopharmaceutical company specialized in the research, development, manufacture and marketing of a variety of commercial applications derived from its proprietary Mimetic LigandTM enabling technology. This technology is used in large-scale purification of biologics and the elimination of pathogens. ProMetic is also active in therapeutic drug development with the mission to bring to market effective, innovative, lower cost, less toxic products for the treatment of inflammation and cancer. Its drug discovery platform is focused on replacing complex, expensive proteins with synthetic "drug-like" protein mimetics. Headquartered in Montreal (Canada), ProMetic has R&D and manufacturing facilities in the UK and business development activities in the US, Europe, Asia and MENA countries (Middle East and North Africa).

Forward Looking Statements

This press release contains forward-looking statements about ProMetic's objectives, strategies and businesses that involve risks and uncertainties. These statements are "forward-looking" because they are based on our current expectations about the markets we operate in and on various estimates and assumptions. Actual events or results may differ materially from those anticipated in these forward-looking statements if known or unknown risks affect our business, or if our estimates or assumptions turn out to be inaccurate. Such risks and assumptions include, but are not limited to, the Company's ability to develop, manufacture, and successfully commercialize value-added pharmaceutical products, the availability of funds and resources to pursue R&D projects, the successful and timely completion of clinical studies, the ability of the Company to take advantage of business opportunities in the pharmaceutical industry, uncertainties related to the regulatory process and general changes in economic conditions. You will find a more detailed assessment of the risks that could cause actual events or results to materially differ from our current expectations on page 17 of the Company's Annual Information Form for the year ended December 31, 2005, under the heading "Risk Factors". As a result, we cannot guarantee that any forward-looking statement will materialize. We assume no obligation to update any forward-looking statement even if new information becomes available, as a result of future events or for any other reason.

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