Xillix Technologies Corp.

Xillix Technologies Corp.

March 22, 2005 16:28 ET

Xillix Announces 2004 Year-End Results


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: XILLIX TECHNOLOGIES CORP.

TSX SYMBOL: XLX

MARCH 22, 2005 - 16:28 ET

Xillix Announces 2004 Year-End Results

RICHMOND, BRITISH COLUMBIA--(CCNMatthews - March 22, 2005) - Xillix
Technologies Corp. (TSX:XLX), a world leader in fluorescence endoscopy
for the early detection of cancer, today announced results for the year
ended December 31, 2004.

"During 2004, we focused primarly on the clinical and regulatory
activities required to commercialize the lung application of
Onco-LIFE™ in the United States, the world's largest medical device
market. We completed our lung cancer trial in July, and submitted our
Pre-Market Approval (PMA) Supplement to the US Food and Drug
Administration (FDA) in September. In January 2005, we successfully
passed the FDA's four-day on-site inspection and audit of our
manufacturing and quality processes, and in February, we responded fully
to questions requested by the FDA. We are not aware of any outstanding
issues and we eagerly await the FDA's response," said Cynthia Roney,
President and CEO. "Although approval was anticipated within the
original 180-day review guideline, the review process is ultimately
determined by the FDA. In the meantime, we are expanding our global
sales and marketing team and preparing manufacturing to build Onco-LIFE
devices to be ready for US market launch. We have also focused on
gastrointestinal (GI) clinical plans for Onco-LIFE. All this work will
come together for us in 2005, as we look forward to putting Onco-LIFE
into the skilled hands of physicians worldwide."

2004 Highlights

Highlights for the year included:

- Completion of the lung cancer trial involving clinical investigators
in the US, Canada and Europe, each experienced with Xillix's first
generation device, Xillix LIFE-Lung™. More than 200 patients known to
have, or suspected of having, lung cancer were enrolled in the trial and
evaluated using Onco-LIFE.

- Submission of the PMA Supplement to the FDA requesting US marketing
approval. The submission includes a detailed, technical description of
Onco-LIFE, a review of Xillix's manufacturing and quality processes, and
the results of the multi-centre lung cancer trial. In November, the FDA
completed its initial review of the PMA Supplement and determined that
the submission was sufficiently complete for filing and substantive
review.

- Completion of a validation study of the GI application of Onco-LIFE
with Dr. Norman Marcon, a world-renowned gastroenterologist at St.
Michael's Hospital in Toronto, Canada. Results from the validation study
will be presented to the FDA as part of Xillix's request for
Investigational Device Exemption (IDE) to initiate a multi-center
clinical trial in colon cancer in 2005.

- Appointment of David Marsh as Director, North American Sales. Prior to
joining Xillix, David was responsible for managing the U.S. endoscopy
sales force for C.R. Bard with a proven record of driving sales growth.

- Completion of a bought deal financing with a syndicate of underwriters
issuing 15 million common shares, including the exercise of the
underwriter's option, for gross proceeds of $15.75 million and the
raising of an additional $5 million through a convertible unsecured
debenture private placement by Canadian Medical Discoveries Fund Inc. in
Xillix Ltd., the Company's wholly-owned Ontario-based subsidiary.

- Appointment of three independent Directors to the Xillix Board: Dr.
Guy Jordan, Gene Starr and Rick Stewart, all seasoned US medical device
executives with more than 75 years combined healthcare and medical
device experience.

Subsequent to year-end Highlights:

- In January 2005, the Company successfully passed a four-day, on-site
FDA inspection of its manufacturing and quality processes, an important
milestone in the FDA review process

- Also in January, Patrick du Monceaux was appointed as Vice President,
Sales and Marketing responsible for global Onco-LIFE sales. Patrick
brings a wealth of U.S. and international medical device sales
experience having recently returned to the US as International General
Manager with Medtronic Physio-Control, after completing a four-year
assignment as European General Manager, based in Lausanne, Switzerland.

Outlook

2005 is expected to be an exciting year with the anticipated FDA
approval for lung cancer, a major catalyst for global sales, combined
with expanded GI clinical activity in the multi-centre colon cancer
trial. "We are well positioned as we move forward into 2005," said
Cynthia Roney.

Financial Review

Revenue for the year ended December 31, 2004 was $683,105 compared with
$39,334 in the year ended December 31, 2003. 2004 revenue primarily
consisted of intial sales of Onco-LIFE units to European and
international customers versus the sale of parts and services for Xillix
LIFE-Lung devices to third-party customers in 2003.

Research and development (R&D) expenditures were $4.4 million in fiscal
2004 compared with $6.2 million in fiscal 2003. R&D expenditures in 2004
resulted from clinical and regulatory costs associated with the
completion of the clinical trial and PMA Supplement submission for the
lung application of Onco-LIFE in addition to activities related to the
GI (colon cancer) application of Onco-LIFE. The year over year reduction
was the result of higher costs associated with preparation for and
execution of the Onco-LIFE lung cancer clinical trial in 2003. The
Company expects R&D expenditures to remain substantial in the near
future as it plans to commence a colon cancer clinical trial of
Onco-LIFE in mid-2005, followed by preparation of a US regulatory
submission for the colon cancer application of Onco-LIFE.

General and administrative expenses were $3.1 million for the year ended
December 31, 2004 compared with $2.8 million for the year ended December
31, 2003. General and administrative costs in 2004 increased by $0.3
million from 2003, reflecting an increase in stock-based compensation
expense from $0.1 million in 2003 to $0.4 million in 2004.

Marketing and Sales expenses were $1.6 million for the year ended
December 31, 2004 compared to $0.7 million for the year ended December
31, 2003. Marketing and sales expenses in 2004 reflect marketing in
Europe for Onco-LIFE, as well as participation in international medical
conferences during the year. The increase also reflects the hire of a
new Director of North American Sales in the early part of the year and a
Western Region US Sales Manager in the fourth quarter of 2004.

The loss for the year ended December 31, 2004 was $10.2 million or
($0.08) per share, based on a weighted average number of common shares
outstanding of 122,646,996, compared with a loss of $10.1 million
($0.11) loss per share, based on a weighted average number of common
shares outstanding of 92,520,184. The 2004 loss remained consistent with
the loss reported in 2003 reflecting the ongoing costs associated with
the clinical, regulatory, marketing and other activities related to
commercializing Onco-LIFE.

As at December 31, 2004, the Company had working capital of $18.8
million, which consisted primarily of cash and cash equivalents of $7.6
million and short term investments of $10.4 million from which to fund
operations.



2004 Annual General Meeting

The Company will hold its Annual General Meeting on
April 28, 2005 at 10am PST at The Fairmont Waterfront,
900 Canada Place Way, Vancouver, BC.


About Xillix

Xillix Technologies Corp. is a Canadian medical device company and a
world leader in fluorescence endoscopy for improved cancer detection.
The Company's first-generation product, Xillix LIFE-Lung™ received
U.S. FDA PMA approval in 1996. Xillix's latest device, Onco-LIFE™
incorporates fluorescence and white light endoscopy in a single device
that has been developed for the detection and localization of lung and
gastrointestinal (GI) cancers. Onco-LIFE is approved for sale in Europe
and Canada for both lung and GI applications. On September 30, 2004,
Xillix submitted a PMA Supplement to the FDA for the Onco-LIFE lung
cancer application, which is currently under review by the FDA.
Onco-LIFE is compact, user-friendly and affordable and is compatible
with a wide range of endoscopes and endoscopic accessories to help
maximize global market acceptance.

Note: Certain of the statements contained in this press release contain
forward-looking statements which involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of the Company, or industry results, to be
materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements.
The Company does not expect to update forward-looking statements
continually as conditions change. Investors are referred to the full
discussion of risk factors associated with the Company's business
contained in the Company's Annual Information Form filed with securities
regulatory authorities dated April 5, 2004.



CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT

As at December 31 (Expressed in Canadian dollars)

2004 2003
$ $
---------------------------------------------------------------------

REVENUE
Product sales and services 683,105 39,334
Cost of sales 1,110,423 12,388
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Gross margin (427,318) 26,946
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EXPENSES
Research and development 4,404,988 6,189,373
General and administrative 3,076,831 2,774,848
Marketing and sales 1,587,386 666,605
Amortization of capital assets and
intellectual property and patents 730,739 521,974
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Total expenses 9,799,944 10,152,800
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Operating loss (10,227,262) (10,125,854)
Foreign exchange loss (29,620) (47,327)
Interest income 260,899 155,031
Interest expense - long term (160,895) (124,147)
---------------------------------------------------------------------
Loss for the year (10,156,878) (10,142,297)

Deficit, beginning of year (61,251,624) (51,109,327)
---------------------------------------------------------------------
Deficit, end of year (71,408,502) (61,251,624)
---------------------------------------------------------------------
---------------------------------------------------------------------

Loss per common share - basic and diluted $(0.08) $(0.11)
---------------------------------------------------------------------
---------------------------------------------------------------------

Weighted average number of common
shares outstanding 122,646,996 92,520,184
---------------------------------------------------------------------
---------------------------------------------------------------------



CONSOLIDATED BALANCE SHEETS

Years ended December 31 (Expressed in Canadian dollars)

2004 2003
$ $
---------------------------------------------------------------------

ASSETS
Current
Cash and cash equivalents 7,564,523 8,282,517
Short term investments 10,392,861 -
Accounts receivable 112,233 22,689
Interest and other receivables 245,515 182,156
Inventories 1,450,577 570,779
Prepaid expenses and deposits 318,954 250,352
---------------------------------------------------------------------
Total current assets 20,084,663 9,308,493
Capital assets 1,344,449 958,711
Intellectual property and patents 876,284 974,655
Deferred financing costs 62,415 122,216
---------------------------------------------------------------------
Total assets 22,367,811 11,364,075
---------------------------------------------------------------------
---------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 1,259,969 1,278,860
Current portion of capital lease obligation 4,244 3,698
Deferred revenue - 20,213
Deferred lease inducement - 38,764
---------------------------------------------------------------------
Total current liabilities 1,264,213 1,341,535
---------------------------------------------------------------------
Capital lease obligation 15,419 19,702
Deferred lease inducement 21,395 -
Deferred revenue 1,067,280 732,312
Convertible debt 4,057,767 790,000
---------------------------------------------------------------------
Total liabilities 6,426,074 2,883,549
---------------------------------------------------------------------

Shareholders' equity
Common share capital 85,772,138 66,808,752
Exchangeable shares - 2,617,330
Contributed surplus 1,578,101 306,068
Deficit (71,408,502) (61,251,624)
---------------------------------------------------------------------
Total shareholders' equity 15,941,737 8,480,526
---------------------------------------------------------------------
Total liabilities and shareholders'
equity 22,367,811 11,364,075
---------------------------------------------------------------------
---------------------------------------------------------------------



CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31 (Expressed in Canadian dollars)

2004 2003
$ $
---------------------------------------------------------------------

OPERATING ACTIVITIES
Loss for the year (10,156,878) (10,142,297)
Add items not affecting cash:
Amortization of capital assets and
intellectual property and patents 730,739 521,974
Amortization of deferred lease inducement (17,369) (42,288)
Amortization of deferred financing costs 122,474 66,672
Accretion of liability component of
convertible debt 3,888 -
Stock based compensation expense 372,163 106,068
---------------------------------------------------------------------
(8,944,983) (9,489,871)

Changes in non-cash operating working
capital items relating to operations:
Accounts receivable (89,544) (16,300)
Interest and other receivables (63,359) (60,274)
Inventories (879,798) (570,779)
Prepaid expenses and deposits (68,602) (183,024)
Accounts payable and accrued liabilities (108,134) 608,767
Deferred revenue - current (20,213) 20,213
Deferred revenue - long term 334,968 356,040
---------------------------------------------------------------------
Cash used in operating activities (9,839,665) (9,335,228)
---------------------------------------------------------------------

FINANCING ACTIVITIES
Issuance of share capital, net 15,524,432 9,248,063
Issuance of convertible debentures, net 4,994,200 -
Repayment of capital lease obligations (3,737) (2,513)
---------------------------------------------------------------------
Cash provided by financing activities 20,514,895 9,245,550
---------------------------------------------------------------------

INVESTING ACTIVITIES
Purchase of capital assets (807,702) (654,132)
Purchase of intellectual
property and patents (192,661) -
Purchase of short term investments, net (10,392,861) -
---------------------------------------------------------------------
Cash used in investing activities (11,410,967) (654,132)
---------------------------------------------------------------------

Decrease in cash and cash equivalents (717,994) (743,810)
Cash and cash equivalents,
beginning of year 8,282,517 9,026,327
---------------------------------------------------------------------
Cash and cash equivalents, end of year 7,564,523 8,282,517
---------------------------------------------------------------------
---------------------------------------------------------------------

Supplemental cash flow information:
Interest paid 22,204 66,693
Capital asset acquired under capital lease - 25,913
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The Company is listed on the Toronto Stock Exchange under the trading
symbol "XLX".

-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Xillix Technologies Corp.
    Sonja Rematore
    Investor Relations
    (604) 278-5000
    or
    Xillix Technologies Corp.
    Farran Grant
    Director of Finance
    (604) 278-5000
    (604) 278-5111 (FAX)
    ir@xillix.com
    www.xillix.com