WEX Pharmaceuticals Inc.
TSX : WXI

WEX Pharmaceuticals Inc.

August 15, 2005 21:22 ET

WEX Reports First Quarter Results

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Aug. 15, 2005) - WEX Pharmaceuticals Inc. (TSX:WXI) ("WEX" or the "Company") reported today highlights and financial results for the first quarter ended June 30, 2005. All amounts, unless specified otherwise, are in Canadian dollars.

For the three months ended June 30, 2005, the Company recorded a loss of $3.6 million ($0.10 per common share) compared to a loss of $3.3 million ($0.10 per common share) in the three months ended June 30, 2004. The increase in loss for the three months ended June 30, 2005, when compared to the preceding year, is mainly attributable to increased clinical trial expense recorded in the period. Management expects losses to continue during the coming quarters as it continues to focus resources on clinical trials in an effort to further the commercialization of Tectin™.

The Company had cash, cash equivalents and short term investments of $20.7 million as at June 30, 2005 as compared to $20.8 million as at March 31, 2005.

The Company's subsidiary in China, Nanning Maple Leaf Pharmaceuticals Co. Ltd. ("NMLP"), and Wex Medical Limited in Hong Kong, recorded product revenues of $130,986 for the three months ended June 30, 2005, as compared to $136,199 in the same period in the previous year, or a decrease of $5,213.

All results of operations were in line with management expectations.

There have been no material changes during the three months ended June 30, 2005 to the forward-looking information provided in the "Management's Discussion and Analysis of Financial Condition and Operations" for the prior fiscal year except as noted in our Contingencies section below.

CORPORATE DEVELOPMENTS

Financial

On April 7, 2005 the Company announced that it received a payment of EUR 2,000,000 (approximately $3,100,000) from its co-development partner Laboratorios del Dr. Esteve S.A. ("Esteve") for research and development work done for the recently completed Tectin™ Phase IIa trial in Canada. The Company ended the first quarter with cash resources of $20.7 million.

Team

On April 12, 2005 Dr. Kim Fisher joined the Company's Clinical Department as Sr. Research Scientist. Dr. Fisher is a Postdoctoral Fellow funded by the Canadian Institutes of Health Research (CIHR) and has 16 years of experience in neuroscience/neuropharmacology research.

On April 18, 2005 the Company announced the appointment Michael (Guang) Luan as Director and Chairman of the Board.

On May 5, 2005 WEX announced the departure of John Olthoff, General Manager, as a result of corporate restructuring of the Company. Mr. Olthoff will remain as a Director of WEX for the balance of the 2004/2005 term.

On May 26, 2005 WEX announced the hiring of Dr. Euan Taylor for the position of Director of Intellectual Property with the Company. Dr. Taylor has a B.A. in Natural Sciences from the University of Cambridge, a Ph.D. in Developmental Molecular Biology from the University of London and a law degree from the University of British Columbia. He is also a registered Canadian Patent Agent and a Registered Canadian Trademark Agent.

Clinical

In accordance to the Company's plan to develop and commercialize TTX (Tectin™) as a medication intended to provide relief for various persistent and chronic pain conditions, on June 2, 2005 WEX announced that it had received a No Objection Letter ("NOL") from Health Canada to amend the Phase IIb/III clinical trial protocol for Tectin™ in moderate to severe inadequately controlled cancer-related pain. The patients' recruitment rate was lower than anticipated with about 35% of the required patients enrolled and dosed; therefore, Dr. Jean Bourgouin, the Company's Chief Medical Officer, determined the amendments necessary in order to complete the study in a timely manner without compromising objectives and patient safety. The amended protocol will simplify the study, increase patient eligibility, lessen the burden on patients and as a result, reduce the workload required by the physicians and their clinical teams. This is expected to help accelerate patient recruitment. The data from the patients who have completed the study will still be evaluable and the total target enrollment will remain at up to 150 patients. With the amendments to the protocol, the enrollment and dosing of patients in this study is projected to be completed by the end of June 2006.

Tetrodin™, for the management of pain symptoms associated with addiction and withdrawal from abused substances is currently in Phase IIa clinical trails for methadone maintenance patients in Canada. Results for Phase IIa are expected in the second quarter of the 2005/2006 fiscal year. In China, the Company has postponed development and testing of its opiate addiction withdrawal drug until ownership of a Chinese patent is resolved. In addition, due to limited resources and the Company's primary focus on the commercialization of Tectin™ for moderate to severe cancer-related pain, the Company will not pursue the development of the Tetrodin™ drug in Canada until further resources are available or a partnership or collaboration is entered into to proceed beyond the Phase IIa clinical trial stage.

Tocudin™, a local anaesthetic is currently in the pre-clinical stage and further development and commercialization plans are pending allocation of additional resources.

Intellectual Property

On June 28, 2005 the Company announced that it had been notified that based on a court ruling (the "Ruling") the Chinese Patent Office ("CPO") had changed registered ownership of the drug withdrawal Patent No. ZL95190556.2 "Use of Amino Quinazoline Hydride Compound and its Derivative for Abstaining from Drug Dependence" in China from the Company's subsidiary, Nanning Maple Leaf Pharmaceuticals ("NMLP") to one of the two inventors and a third party who alleges to have been an employer of the other inventor. WEX filed an appeal of the Ruling earlier this year and the Court subsequently dismissed the appeal. The Company disagrees with the Ruling and considers that the prior assignment of interest to NMLP in the invention was valid and therefore that WEX has at least part ownership rights to the patent. Even though the Company is currently investigating other legal and business options, until the ownership of the patent is resolved and as a result of financial and other considerations, the Company has decided to temporarily postpone development and testing of its opiate addiction withdrawal drug in Canada and China. The ultimate outcome of this matter is uncertain at this time. There can be no assurance that this matter will be resolved on a timely matter or that the outcome will be resolved on a favourable basis for the Company.

This does not affect any of the Tectin™ clinical trials conducted by the Company to date or the Company's ability to use the results of the trials for regulatory approval purposes. The two individuals noted as inventors on the patent in question are not associated with any of the Company's other patents filed or registered in China.

The Company's core business has not been affected and we will continue to focus our financial and operational resources on the development of Tectin™ for the treatment of moderate to severe cancer-related pain through clinical development in North America, China and Europe.

Change in Accounting Policies

Capitalization of patent costs

The Company's intangible assets include patents to protect the Company's intellectual property ("IP") that is generated through research programs. Previous, to the twelve month period ended March 31, 2005 the Company capitalized the costs of initially filing patents and amortized these costs on a straight-line basis over the estimated useful life of the IP, which was generally the period until the patent expired. On a quarterly basis the Company would then review the carrying value of the IP. If it was determined that successful development of products to which the IP costs relate was not reasonably certain, or that deferred IP costs exceed the recoverable value, the value of the patent was written off and the costs charged to operations to the extent that they no longer represented any future benefit for the Company. In the fourth quarter of 2005, the Company changed the accounting policy with regard to capitalizing patent costs. The Company now expenses the costs of initially filing and maintaining patents in the period in which the costs were incurred to research and development expense. This change was applied retroactively and accordingly, the prior periods have been restated. The impact of this change has been to increase the loss for the three months ended June 30, 2004 by $136,599 and has had a $nil effect on the loss per common share from the amounts previously reported.

Results of Operations



Revenue

--------------------------------------------------------------------
(in thousands of dollars) Three months ended June 30,
2005 2004
--------------------------------------------------------------------
Product sales $ 131 $ 136
License fees 47 79
--------------------------------------------------------------------
$ 178 $ 215
--------------------------------------------------------------------


The Company's main source of pre-commercialization revenue is in relation to the agreement signed with Esteve in the year ended March 31, 2002. License fees for the three months ended June 30, 2005 and 2004 were $46,945 and $79,135 respectively and are related to the upfront licensing payment of approximately $1.58 million received from Esteve during the year ended March 31, 2003. This has been recorded as deferred revenue and is being amortized on a straight-line basis. The amortization period was revised by management to seven years from five years in the fourth quarter of fiscal 2005.

For the three months ended June 30, 2005 the total generic and other sales were $130,986 or a decrease of $5,213 when compared to $136,199 in revenues for the three months ended June 30, 2004. The Company will continue to support the generic sales programs, but its focus remains on the commercialization of Tectin™.



Expenditures

--------------------------------------------------------------------
(in thousands of dollars) Three months ended June 30,
2005 2004
--------------------------------------------------------------------
Cost of Goods Sold $ 96 $ 85
Research and Development 2,233 1,566
General and Administrative 1,100 1,390
Amortization $ 233 $ 183
--------------------------------------------------------------------


Cost of Goods Sold

Gross margins on product sales for the three months ended June 30, 2005 and 2004 were 27% and 38% respectively. The decrease in gross margin is due to the higher cost of goods resulting from the Company's antibiotic, which is produced under a manufacturing contract rather than in our manufacturing facility, and the impact of competition which has placed a downward pressure on sales prices.

Research and Development

Three months ended June 30, 2005 compared to the three months ended June 30, 2004

Research and development expenses consist primarily of salaries and related employee benefits, costs associated with our clinical trials such as payments to clinical research organizations and research related overhead expenses. The Company has not historically tracked R&D costs by project but rather by type of cost incurred. R&D expenses totalled $2.2 million for the three months ended June 30, 2005 as compared to $1.6 million for the three months ended June 30, 2004. Included in research and development expenses for the three months ended June 30, 2004 is a non-cash stock-based compensation expense of $611,676 as compared to $nil for three months ended June 30, 2005.

Not including the non-cash stock-based compensation expense, R&D expenditures increased by $1.3 million or approximately 134% over the previous period. Most notably, clinical testing and trial costs were $1.6 million for the three months ended June 30, 2005 as compared to $308,297 over the same period in the previous year or an increase of $1.3 million. Additional expenses, as they relate to salaries, were also recorded in the amount of $274,877 for the three months ended June 30, 2005 as compared to $132,792 for the same period in the previous year. This increase of $142,085 relates to increased salary expenses associated to the expanded clinical and development teams as the Company continues to focus on the progression of its clinical trials and TTX development programs. For the three months ended June 30, 2005 patent cost were $45,782 as compared to $149,424 to the same period in 2004 or a reduction of $103,642.

Three months ended June 30, 2005 compared to the three months ended March 31, 2005

R&D expenses totalled $2.2 million for the three months ended June 30, 2005 as compared to $3.2 million the three months ended March 31, 2005 or a decrease of approximately $961,000 or 30%. A major area that contributed to the decrease in expenses for the three months ended June 30, 2005 as compared to the three months ended March 31, 2005 related to the clinical trials activities and pre-clinical work performed on TTX and Tectin™. For the three months ended March 31, 2005 total expenses, for the clinical trial activities, were $2.9 million as compared to $1.6 for the three months ended June 30, 2005 or a difference of $1.3 million. Management expects that increased costs will be incurred relating to our clinical trials over the coming quarters Included in the research and development expenses for the three months ended June 30, 2005 is a related party amount of $94,350. This amount relates to the compensation paid to the Company's Chief Scientific Officer. Currently, the compensation arrangements with this individual are based on a contract which provides for a minimum monthly fee of $5,000 and then allows for hourly billings over this base amount.

General and Administrative

Three months ended June 30, 2005 compared to the three months ended June 30, 2004

General and administrative expenditures for the three months ended June 30, 2005 were $1.1 million as compared with $1.4 million for the three months ended June 30, 2004 or a decrease of $289,730. The decrease primarily consisted of a reduction in stock based compensation expense for the period of $715,179. For the three months ended June 30, 2005 salaries increased by $206,935 to total $524,275 over the same period in 2004, rent increased slightly by $22,590 to total $102,488 and directors fees were $57,448 compared to $nil. The increase in salaries were due to the Company's increased development of its management team and the accrual of $130,000 in severance to one of the Company's former senior management, rent increases were related to the new premises which the Company began leasing in June 2004 and directors fees increased as a result of no fees being paid to the directors for the three months ended June 30, 2004.

Three months ended June 30, 2005 compared to the three months ended March 31, 2005

For the three months ended June 30, 2005 G&A expenses, when compared to the three months ended March 31, 2005 decreased to $1.1 million from $1.3 million respectively. Legal and corporate services related to corporate development were lower for the current period as well as accounting services and employee salaries.

Included in administrative expenses for the three months ended June 30, 2005 is a related party amount of $82,580 in legal fees incurred from Fasken Martineau DuMoulin ("Fasken"). Peter Stafford is a director of the Company and a partner with this law firm, which acts as corporate counsel to the Company. Mr. Stafford is based in Fasken's offices in South Africa and the Company's relationship with Fasken is managed through a partner in the firm's Vancouver office. Mr. Stafford does not provide legal advice nor is he involved in any of the Company's files with Fasken.

The Company expects its expenses, as they relate to corporate development and infrastructure building, to increase over the next year as it works to meet the increasingly complex listing requirements in the US and Canada as well as the planned implementation of a new reporting system.

Amortization

Amortization expense relates to the amortization of property and equipment and the amortization of identifiable intangible assets. Depreciation and amortization expense for the three months ended June 30, 2005 of $233,336 is higher than the amortization expense of $183,180 for the three months ended June 30, 2004 as a result of capital asset purchases in the late half of fiscal 2005. There were no write downs of capital assets or any impairments recorded against the net book value of the intangible assets during the three month periods ended June 30, 2005 and 2004.

Management expects amortization expense to remain fairly consistent throughout the year as limited capital asset purchases are expected.



Investment and Other Income

--------------------------------------------------------------------
(in thousands of dollars) Three months ended June 30,
2005 2004
--------------------------------------------------------------------
Convertible debentures -
interest expense $ (167,837) $ (31,376)
Interest and sundry income 115,647 63,285
Foreign exchange loss (34,193) (322,488)
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$ (86,383) $ (290,579)
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Convertible Debentures Interest

In June 2004 the Company's wholly owned subsidiary, Wex Medical Limited, issued convertible debentures in the gross amount of $6,818,744 (US$5.1 million). The debentures have a term of five years and carry an annual coupon of 5.5% payable semi-annually (see contingency).

Included in interest expense for the debentures is interest calculated on the face value of the convertible debentures of $87,046 plus a notional interest amount of $79,578 representing the accretion of the carrying value of the notes.

Interest and Sundry Income

Investment and other income for the three months ended June 30, 2005 increased to $115,647 from $63,285 for the three months ended June 30, 2004 due to a higher cash and investment balance as a result of the issuances of shares and the debentures over the fiscal year.

Foreign Exchange Loss

The net foreign exchange loss of ($34,193) for the three months ended June 30, 2005 was $288,295 lower as compared to the net foreign exchange loss of ($322,488) for the three months ended June 30, 2004. This net difference was mainly due to the returning stability of the Hong Kong Dollar and Chinese Renminbis in the current period as compared to the previous period.

The Company operates in Canadian currency but holds US dollar denominated cash accounts, to meet the Company's anticipated US operating and capital expenditures in future periods. Further to this, the Company's foreign subsidiaries operate in Hong Kong dollars and Chinese Renminbis. The Company maintains cash resources in both currencies in order to meet its obligations in those areas. The Company does not use derivatives to hedge against exposures to foreign currency arising from the Company's balance sheet liabilities and therefore, the Company is exposed to future fluctuations in the U.S./Canadian dollar and Hong Kong dollar and Chinese Renminbis exchange rates.



Summary of Quarterly Results

--------------------------------------------------------------------
Quarter Quarter Quarter Quarter
ended ended ended ended
Jun 30, Mar 31, Dec 31, Sept 30,
(in thousand of dollars, 2005 2005 2004 2004
except per share amounts) (Q-1) (Q-4) (Q-3)(1) (Q-2)(1)
(restated) (restated)
--------------------------------------------------------------------
Total Revenues $ 178 $ 3,327 $ 205 $ 243
Loss (3,570) (1,434) (4,502) (2,430)
Basic and diluted loss per
common share (0.10) (0.04) (0.13) (0.08)
Total assets $ 28,836 $ 32,381 $ 31,826 $ 31,621
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--------------------------------------------------------------------
Quarter Quarter Quarter Quarter
ended ended ended ended
Jun 30, Mar 31, Dec 31, Sept 30,
(in thousand of dollars, 2004 2004 2003 2003
except per share amounts) (Q-1)(1) (Q-4)(1) (Q-3)(1) (Q-2)(1)
(restated) (restated) (restated) (restated)
--------------------------------------------------------------------
Total Revenues $ 215 $ 204 $ 190 $ 185
Loss (3,299) (3,792) (1,998) (1,161)
Basic and diluted loss per
common share (0.10) ( 0.15) (0.07) (0.05)
Total assets $ 32,045 $ 25,858 $ 19,698 $ 7,876
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(1) Restated to reflect the change in accounting policy on patents.
See note 3 to the consolidated financial statements.
(2) The significant decrease in the loss for the three months ended
March 31, 2005 when compared to the previous three months ended
December 31, 2004 was mainly due to the $3.1 million revenue from
the research and collaboration fees related to the Esteve
contract.
(3) The significant increase in the loss for the three months ended
December 31, 2004 as compared to the three months ended September
30, 2004 was due to the completion of one of the Company's
clinical trials and the subsequent final billings as related to
the trials.
(4) The significant increase in the loss for the three months ended
March 31, 2004 when compared to the previous three months ended
December 31, 2004 was mainly due to increased stock based
compensation expense recorded for the period.


Liquidity and Capital Resources

Since its incorporation, the Company has financed administration, research and development activities and capital expenditures through the private sales of its common shares, the exercise of warrants or options and the use of licensing revenue from its corporate partner and the collection of government tax credits. During the three months ended June 30, 2005 cash used by operations decreased to $442,151 from $2.1 million in the comparable quarter. This was due mainly to the reduction in clinical trial activity for the first quarter. With the recently amended protocol for WEX-014 Clinical Trial, management expects that increased cash resources will be used in the coming quarters related to this and other corporate development initiatives. In June 2004, the Company received net proceeds of $6.8 million (US$5.1 million) upon the issuance of convertible debentures.

At June 30, 2005 the Company had working capital of approximately $14.6 million including cash resources, comprising cash and cash equivalents and short-term investments in the amount of $20.7 million. As at June 30, 2005 cash resources included $1,760,043 denominated in Euros (March 31, 2005 - $Nil), $6,072,560 denominated in U.S. dollars (March 31, 2005 - $6,203,659), $3,009,944 denominated in Chinese Renminbis ("RMB") (March 31, 2005 - $2,704,551), $155,915 denominated in Hong Kong dollars (March 31, 2005 - $652,145) and $9,714,367 denominated in Canadian dollars (March 31, 2005 - $11,254,109).

In aggregate, the Company's cash resources decreased by $101,635 from $20.8 million as at March 31, 2005. Managements' expectations are that cash resources will decrease at a higher rate over the coming quarters as clinical trial activity increases.

The Renminbi is not fully convertible into foreign currencies and is subject to local governmental restrictions. All foreign currency exchange transactions involving Renminbi must take place either through the People's Bank of China or other institutions authorized to buy and sell foreign exchange or at a swap centre.

Management believes that with the existing cash resources there are sufficient resources for the Company's current programs to fund operations until early Q1 in fiscal 2007 (however, see contingency). At June 30, 2005, the Company had incurred significant losses and had an accumulated deficit of $49 million. The Company's ability to continue as a going concern is uncertain and dependent upon its ability to achieve profitable operations, obtain additional capital and dependent on the continued support of its shareholders. Management is planning to raise additional capital to finance expected growth. The outcome of these matters cannot be predicted at this time. If the Company is unable to obtain adequate additional financing, management will be required to curtail the Company's operations.

The Company's contractual commitments are related to the lease of the Company's office space and operating leases for office equipment, plus clinical and non clinical research. Payments required under these agreements and leases are as follows:



--------------------------------------------------------------------
(in thousands
of dollars) Payments Due by Period
Contractual 2007- 2009- There-
Obligations Total 2006 2008 2010 after
--------------------------------------------------------------------
Capital Leases $ 43 $ 22 $ 21 $ - $ -
Operating Leases 3,813 433 800 819 1,761
Purchase Obligations 8,152 7,433 719 - -
Debenture
Obligations (1) 7,607 339 679 6,589 -
--------------------------------------------------------------------
$ 19,613 $ 8,227 $ 2,218 $ 7,408 $ 1,761
--------------------------------------------------------------------

(1) The $339,293 (US$280,500) represents the estimated interest
payments due each year on the debentures. If the debentures are
not converted prior to their maturity date of June 14, 2009 a
payment of $6,168,960 (US$5,100,000) is payable (see
contingency).


Pursuant to the license agreement referred to in note 12 to the consolidated financial statements, the Company is jointly responsible for development costs in excess of $40 million (EUR 25 million), if any.

Pursuant to certain People's Republic of China ("PRC") regulations, the Company's subsidiary is likely required to transfer certain percentages of its profit, as determined under the PRC accounting regulations, to certain statutory funds. To date, the subsidiary has not recognized any statutory reserves as it has not been profitable. Should the subsidiary become profitable in the future, it will be required to recognize these statutory accounts and accordingly, a portion of the subsidiary's future earnings will be restricted in use and not available for distribution.

Contingencies

The Company was notified in April 2005 that its appeal with the Chinese Patent Office concerning ownership of a patent relating to addiction withdrawal in the territory of China was not successful. The Company is currently considering legal options and other possible business arrangements. Please see our Annual Information Forum ("AIF") for the year ended March 31, 2005 for additional information.

The Company was issued, in August 2005, a request for early redemption of its unsecured convertible debentures in the aggregate principal amount of US$5.1 million that were issued in June 2004 by the Company's wholly owned subsidiary, Wex Medical Ltd., to 3 investment funds managed by a major Asian financial institution ("Institution"). The Company is currently in discussions regarding this matter as the Institution has indicated that it is prepared to consider other options to satisfy its request. The Institution alleges that the Company breached certain representations and warranties contained in the agreements in regards to the registered ownership of the drug withdrawal patent "Use of Amino Quinazoline Hydride Compound and its Derivative for Abstaining from Drug Dependence". As the debentures may now be due on demand, in accordance with Canadian generally accepted accounting principles, for financial statement purposes they have been reclassified as current liabilities as at June 30, 2005. Resolution of the above matters is pending the outcome of current discussions with the Institution.

Off-Balance Sheet Arrangements

The Company currently has no off-balance sheet financings.

Transactions with Related Parties

During the three months ended June 30, 2005, the Company paid $94,350 (2004 - $81,900) of research and development consulting fees to a senior officer and incurred $82,580 (2004 - $46,065) of legal fees charged by a law firm, a partner of which is a director of the Company. Amounts advanced from directors are without interest or stated terms of repayment. All related party transactions are recorded at the exchange amount established and agreed to between the related parties.

Financial Instruments and Other Instruments

Included in interest expense for the debentures is interest calculated on the face value of the convertible debentures of $87,046 plus a notional interest amount of $79,578 representing the accretion of the carrying value of the notes.

The fair value of capital lease obligations and the convertible debentures, calculated at the present value of future contractual payments of principal and interest, discounted at current applicable market rates of interest, approximates their carrying values.

The Company is exposed to market risks related to changes in interest rates and foreign currency exchange rates. The Company invests its cash resources in liquid investment grade commercial debt and government agency notes. The Company is subject to foreign exchange rate changes that could have a material effect on future operating results or cash flow as a portion of the Company's investments which finance operations are denominated in Canadian dollars and a portion of the Company's expenses are denominated in Hong Kong dollars and the Chinese RMB. The Company has not entered into any forward currency contracts or other financial derivatives to hedge foreign exchange risks.

Share Capital

As of June 30, 2005, there were 35,059,451 common shares issued and outstanding for a total of $62.8 million in share capital and there were 3,666,213 stock options outstanding in the Company's stock option plan (of which 3,616,213 were exercisable) at a weighted average exercise price of $3.20. As at June 30, 2005 there are also 3,838,788 warrants outstanding at and average price of $3.85. In addition, the Company has agent's warrants outstanding for the purchase of 109,392 (2004 - 190,392) common shares at an average exercise price of $2.27 (2004 - $2.27) per common share expiring between October 2005 and January 2006. As of August 12, 2005, there were 35,059,041 common shares issued and outstanding for a total of $62.8 million in share capital. As of August 12, 2005 there were 3,621,213 stock options outstanding in the Company's stock option plan (of which 3,604,547 were exercisable) at a weighted average exercise price of $3.21 and 109,392 agent warrants at an average exercise price of $2.27.

Subsequent Events

On August 12, 2005, at the Company's Annual General and Special General Meeting (adjourned to September 9, 2005), the shareholders approved a Shareholder Rights Plan (the "Rights Plan"), which expires at the Company's annual general meeting in 2008. The Rights Plan was designed to encourage the fair treatment of its shareholders in the event of an unsolicited take-over bid for shares of the Company. The Rights Plan will provide the board of directors (the "Board) and shareholders of the Company with more time to fully consider any unsolicited take-over bid without undue pressure, allowing the Board to pursue, if appropriate, other alternatives to maximize shareholder value and allowing additional time for competing bids to emerge. Under the Rights Plan, holders of common shares are entitled to one share purchase right ("Right") for each common share held. If any person or group makes a take-over bid, other than a bid permitted under the plan or acquires 20% or more of the Company's outstanding common shares without complying with the Rights Plan, each Right will entitle its holder (other than the acquiring person and certain related persons) to acquire, for $100, common shares of the Company having a market price of $200.

The current version of the Company's Annual Information Forum (AIF) is available on the Company's web site www.wexpharma.com and on www.sedar.com.

About WEX Pharmaceuticals Inc.

WEX Pharmaceuticals Inc. is dedicated to the discovery, development, manufacture and commercialization of innovative drug products to treat moderate to severe acute and chronic pain, symptom pain relief associated with addiction withdrawal from opioid abuse and medicines designed for local anaesthesia. The Company's principal business strategy is to derive drugs from naturally occurring toxins and develop proprietary products for the Global market. The Company's Chinese subsidiary sells generic products manufactured at its facility in China.

Forward Looking Statements

This News Release contains forward-looking statements which may not be based on historical fact, including without limitation statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, events or developments to be materially different from any future results, events or developments expressed or implied by such forward-looking statements. These factors should be considered carefully and readers are cautioned not to place undue reliance on such forward-looking statements. The company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future results, events or developments.



WEX PHARMACEUTICALS INC.
Incorporated under the laws of Canada

CONSOLIDATED BALANCE SHEETS
(See Note 1 - Basis of Presentation)
(Unaudited)

(expressed in Canadian dollars)

As at June 30, 2005 March 31, 2005

ASSETS

Current
Cash and cash equivalents
(notes 4 (a) and (c)) $ 9,771,404 $ 10,233,288
Restricted cash 23,000 23,000
Short-term investments
(notes 4 (b) and (c)) 10,941,425 10,581,176
Accounts and other receivables 493,975 3,716,189
Investment tax credit receivable 393,000 293,000
Inventories 73,955 81,080
Prepaid expenses, deposits and other 349,811 447,193
Total current assets 22,046,570 25,374,926

Deposits 125,000 125,000
Property and equipment (note 5) 2,702,386 2,802,823
Intangible assets (note 6) 3,962,598 4,079,145

TOTAL ASSETS $ 28,836,554 $ 32,381,894

LIABILITIES AND SHAREHOLDERS' EQUITY

Current
Accounts payable and accrued
liabilities $ 2,745,483 $ 3,146,016
Deferred revenue 187,778 187,778
Capital lease obligations (note 7) 20,967 27,036
Convertible debentures
(notes 8 and 11 (vi)) 4,518,151 -
Total current liabilities 7,472,379 3,360,830

Deferred tenant inducements 261,620 214,610
Deferred revenue 641,575 688,520
Capital lease obligations (note 7) 19,711 19,386
Convertible debentures
(notes 8 and 11 (vi)) - 4,295,419

Total liabilities 8,395,285 8,578,765

Commitments and contingencies
(note 11)

Shareholders' equity
Share capital (note 9) 62,766,019 62,583,019
Equity component of convertible
debentures (notes 8 and 11 (vi)) 2,332,443 2,332,443
Contributed surplus (note 9 (e)) 4,558,680 4,533,117
Deficit (49,215,873) (45,645,450)
Total shareholders' equity 20,441,269 23,803,129

TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 28,836,554 $ 32,381,894

See Sedar for accompanying notes

On behalf of the Board:

"Bruce Hay" "Pierre Lapalme"
Director Director


WEX PHARMACEUTICALS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(Unaudited)

For the three months ended
June 30, 2005 and 2004 (expressed in Canadian dollars)

2005 2004
(Restated-
see note 3)

Revenue
Product sales (note 12 (b)) $ 130,986 $ 136,199
License fees (note 12 (b)) 46,945 79,135
177,931 215,334

Cost of goods sold - product sales 95,599 84,728

82,332 130,606

Expenses
Research and development
(note 10 (a)) 2,232,579 1,565,793
General and administrative
(note 10 (b)) 1,100,457 1,390,187
Amortization 233,336 183,180
Total operating expenses 3,566,372 3,139,160

Operating loss (3,484,040) (3,008,554)

Other
Convertible debentures -
interest expense (167,837) (31,376)
Interest and sundry income 115,647 63,285
Foreign exchange loss (34,193) (322,488)
Total other (86,383) (290,579)

Loss for the period (3,570,423) (3,299,133)

Deficit, beginning of period (45,645,450) (33,980,789)

Deficit, end of period $ (49,215,873) $ (37,279,922)

Basic and diluted loss per common
share $ (0.10) $ (0.10)

Weighted average number of common
shares outstanding 35,049,847 32,257,778

See Sedar for Company notes


WEX PHARMACEUTICALS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

For the three months ended
June 30, 2005 and 2004 (expressed in Canadian dollars)

2005 2004
(Restated-
see note 3)

OPERATING ACTIVITIES
Loss for the period $ (3,570,423) $ (3,299,133)
Adjustment for items not involving
cash:
Amortization of capital assets
and intangibles 233,336 183,180
Amortization of deferred tenant
inducement allowance (7,601) -
Stock-based compensation 25,563 1,352,417
Accretion of liability component
of convertible debentures 167,837 31,376
Foreign exchange expense on
convertible debentures 56,108 -
Amortization of deferred revenue (46,945) (79,135)
(3,142,125) (1,811,295)

Changes in non-cash working capital
items:
Accounts and other receivables 3,222,214 (61,903)
Investment tax credit receivable (100,000) -
Inventories 7,125 (11,889)
Prepaid expenses, deposits and other (28,831) (45,065)
Accounts payable and accrued
liabilities (400,533) (212,601)
Cash used in operating activities (442,150) (2,142,753)

INVESTING ACTIVITIES
Purchase of short-term investments (5,273,075) -
Proceeds from short-term investments 4,912,826 -
Rental deposit 125,000 (250,000)
Tenant inducement allowance 54,611 -
Restricted cash - 209,336
Purchase of property and equipment (16,352) (390,913)
Cash used in investing activities (196,990) (431,577)

FINANCING ACTIVITIES
Convertible debentures issued,
net of issuance costs - 6,818,744
Proceeds from issuance of share
capital, net of issuance costs 183,000 1,675,124
Repayment of amounts due to directors - (95,071)
Repayment of capital lease obligations (5,744) (5,190)
Cash provided by financing activities 177,256 8,393,607

Increase (decrease) in cash and cash
equivalents (461,884) 5,819,277

Cash and cash equivalents,
beginning of period 10,233,288 8,301,863

Cash and cash equivalents,
end of period $ 9,771,404 $ 14,121,140

See Sedar for accompanying notes



Contact Information

  • WEX Pharmaceuticals Inc.
    Don Evans
    (604) 683-8880 or Toll Free: 1-800-722-7549
    or
    WEX Pharmaceuticals Inc.
    Gordon Stanley
    Corporate Communications
    (604) 683-8880 or Toll Free: 1-800-722-7549
    (604) 683-8868 (FAX)
    wex@wexpharma.com
    www.wexpharma.com