Xillix Technologies Corp.
TSX : XLX

Xillix Technologies Corp.

July 28, 2005 13:48 ET

Xillix Announces Second Quarter Financial Results

RICHMOND, BRITISH COLUMBIA--(CCNMatthews - July 28, 2005) - Xillix Technologies Corp. (TSX:XLX), the world leader in fluorescence endoscopy for the early detection of cancer, today announced results for the second quarter ended June 30, 2005. "The second quarter ended with FDA approval of Onco-LIFE™, a monumental achievement for Xillix. Now we can focus on sales," said Cynthia Roney, President and CEO. "Together with announcement of our distribution agreement with ConMed, we are well positioned to market and sell Onco-LIFE in the U.S. and globally."

Recent Highlights

- On June 30th, Xillix received FDA approval to market Onco-LIFE in the United States. Onco-LIFE is indicated for use with fluorescence imaging during bronchoscopy as an adjunct to white light imaging, to detect and localize tissue suspicious for moderate or severe dysplasia, carcinoma in situ, or invasive cancer in patients with suspected or previously treated lung cancer. Results from the Onco-LIFE international lung cancer trial demonstrated a 325% per-lesion improvement in the detection of early lung cancer (moderate-severe dysplasia and carcinoma in situ) and a 250% per-patient improvement compared to white-light alone.

- On May 19th, Xillix entered into a distribution agreement for Onco-LIFE sales in the U.S. and Canada with ConMed Endoscopic Technologies, Inc., a division of ConMed Corporation (NASDAQ:CNMD). ConMed Endoscopic Technologies is a recognized technological leader in the pulmonary and gastrointestinal (GI) endoscopy market.

- Quarterly sales of Onco-LIFE for Q2 exceeded half a million dollars, limited by FDA approval, which was received at the end of the quarter. FDA approval is also expected to be a catalyst for sales growth beyond the U.S., including Europe.

- Onco-LIFE was showcased at five international conferences: International Respiratory Endoscopy Meeting (Spain), American Thoracic Society (ATS) in San Francisco, World Congress on Lung Cancer (Spain), and for GI application at the Digestive Diseases Week (DDW) in Chicago and European Gastroenterology Congress, in Brussels.

- Appointed Brett Gannon, Chief Operating Officer to prepare for increased Onco-LIFE operational activity, particularly manufacturing and supply chain management.

Subsequent to quarter-end Xillix:

- Announced the Company's Onco-LIFE global sales management team with more than 100 years combined international medical device sales expertise. The U.S. team will be working closely with ConMed, the Company's distributor, and European managers will drive sales through Xillix's independent dealer network.

- Appointed Rob Ngungu VP Quality, Clinical & Regulatory Affairs to focus on Xillix's next clinical trial of Onco-LIFE for colon cancer.

- Was awarded U.S. Patent entitled "Fluorescence Endoscopy Video Systems with No Moving Parts in the Camera." The patent covers the implementation details of a new camera for fluorescence endoscopy, one of several next-generation technologies being investigated as follow-up to the current Onco-LIFE product.

Financial Review

For the three and six month periods ended June 30, 2005 revenue was $0.6 million, resulting from the initial sales of Onco-LIFE devices to the U.S. as well as sales to customers in Canada and other international markets. Revenues for the three and six months ended June 30, 2004 were $0.5 million and $0.6 million respectively, the result of sales of Onco-LIFE devices to customers in Europe.

R&D expenditures for the quarter ended June 30, 2005 were $1.1 million compared with $1.2 million for the same quarter in 2004. R&D expenditures for the six months ended June 30, 2005 and 2004 were $2.2 million. R&D expenditures in the first half of 2005 focused on preparation for the planned clinical trials for the GI (colon cancer) application of Onco-LIFE, as well as on continued R&D activities for new applications of Onco-LIFE. R&D expenditures for the first half of 2004 related to finalizing the international lung clinical trials, and preparing international regulatory submissions. The Company expects R&D expenditures to remain substantial in the near future as it plans to commence clinical trials for the GI application of Onco-LIFE in late 2005, as well as continue to research future applications and products for its technology.

G&A expenses were $0.8 million for the three months ended June 30, 2005 compared with $0.9 million for the same period in 2004. G&A expenses were $1.5 million for the six months ended June 30, 2005 and 2004 and were comprised mainly of salaries and benefits, investor relations, legal and travel costs.

Marketing and sales expenses were $0.7 million and $1.1 million for the three and six months ended June 30, 2005 respectively. This compares with $0.4 million and $0.6 million for the same periods in 2004. The increase reflects additional sales staff hired during the first two quarters of 2005. The Company expects this trend to continue during the remainder of 2005 as the Company focuses on marketing the Onco-LIFE lung and GI devices in Canada and internationally and the Onco-LIFE lung device in the U.S.

The loss for the three months ended June 30, 2005 was $3.1 million, or ($0.02) per share based on a weighted average number of common shares outstanding of 128,763,261. This compares with a loss of $2.8 million, or ($0.02) per share based on a weighted average number of common shares outstanding of 125,739,714 for the same period in 2004. The loss for the six months ended June 30, 2005 was $5.6 million, or ($0.04) per share based on a weighted average number of common shares outstanding of 128,122,653. This compares to a loss of $4.7 million, or ($0.04) per share based on a weighted average number of common shares outstanding of 113,075,281) for the six month period ended June 30, 2004. The losses are the result of ongoing spending on clinical, regulatory, marketing and other costs related to commercializing Onco-LIFE, as well as on continued R&D activities.

As at June 30, 2005, the Company had working capital of $13.6 million, which primarily consisted of cash and cash equivalents of $1.8 million and short-term investments of $9.4 million. This compares with working capital of $18.8 million at December 31, 2004, which primarily consisted of cash and cash equivalents of $7.6 million and short term investments of $10.4 million.



CONSOLIDATED BALANCE SHEETS

(Expressed in Canadian dollars)

June 30 December 31
2005 2004
(Unaudited) $ $
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ASSETS
Current
Cash and cash equivalents 1,805,180 7,564,523
Short term investments 9,430,972 10,392,861
Accounts receivable 462,401 112,233
Interest and other receivables 265,441 245,515
Inventories 2,144,229 1,450,577
Prepaid expenses and deposits 331,835 318,954
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Total current assets 14,440,058 20,084,663
Capital assets 1,741,379 1,344,449
Intellectual property and patents 668,983 876,284
Deferred financing costs 53,304 62,415
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Total assets 16,903,724 22,367,811
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LIABILITIES AND SHAREHOLDERS'
EQUITY
Current
Accounts payable and accrued liabilities 762,451 1,259,969
Current portion of capital lease
obligation 4,475 4,244
Current portion of deferred lease
inducement 41,176 -
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Total current liabilities 808,102 1,264,213
Capital lease obligation 13,133 15,419
Deferred lease inducement 101,461 21,395
Deferred revenue 1,366,680 1,067,280
Convertible debt 4,136,613 4,057,767
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Total liabilities 6,425,989 6,426,074
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Shareholders' equity
Common share capital 85,856,353 85,772,138
Contributed surplus 1,666,298 1,578,101
Deficit (77,044,916) (71,408,502)
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Total shareholders' equity 10,477,735 15,941,737
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Total liabilities and shareholder's
equity 16,903,724 22,367,811
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CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT

(Expressed in Canadian dollars)

Three Months Ended Six Months Ended
June 30 June 30
2005 2004 2005 2004
(Unaudited) $ $ $ $
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REVENUE
Product sales and
services 598,920 510,508 598,920 624,879
Cost of sales and
services 681,259 495,101 793,823 676,124
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Gross margin (82,339) 15,407 (194,903) (51,245)
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EXPENSES
Research and
development 1,116,591 1,230,196 2,192,447 2,194,153
General and
administrative 835,547 943,136 1,513,222 1,546,325
Marketing and sales 652,267 443,283 1,082,780 617,039
Amortization 301,856 168,231 495,123 322,845
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Total Expenses 2,906,261 2,784,846 5,283,572 4,680,362
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Operating loss (2,988,600) (2,769,439) (5,478,475) (4,731,607)
Foreign exchange (loss) (11,213) (15,629) (11,704) (12,381)
Interest income 79,074 103,419 188,908 159,576
Interest expense - long
term (167,555) (109,647) (335,143) (141,624)
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Loss for the period (3,088,294) (2,791,296) (5,636,414) (4,726,036)

Deficit, beginning
of period (73,956,622)(63,186,364)(71,408,502)(61,251,624)
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Deficit, end
of period (77,044,916)(65,977,660)(77,044,916)(65,977,660)
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Loss per common
share - basic
and diluted (0.02) (0.02) (0.04) (0.04)
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Weighted average
number of
common shares
outstanding 128,763,261 125,739,714 128,122,653 113,075,281
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CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in Canadian dollars)

Three Months Ended Six Months Ended
June 30 June 30
2005 2004 2005 2004
(Unaudited) $ $ $ $
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OPERATING ACTIVITIES
Loss for the period (3,088,294) (2,791,296) (5,636,414) (4,726,036)
Add items not
affecting cash:
Amortization of
capital assets and
intellectual
property
and patents 301,856 168,231 495,123 322,845
Amortization of
deferred financing
costs 2,432 105,548 4,865 122,216
Amortization of
deferred lease
inducement 39,065 (10,572) 121,242 (21,144)
Accretion of liability
component of
convertible debt 39,423 - 78,846 -
Stock-based
compensation expense 66,598 218,664 100,541 226,497
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(2,638,920) (2,309,425) (4,835,797) (4,075,622)
Changes in non-cash
operating working
capital items relating
to operations:
Accounts receivable (402,187) (393,894) (350,168) (487,583)
Interest and other
receivables 5,662 (165,654) (19,926) (150,993)
Inventories (238,404) (143,884) (693,652) (619,334)
Prepaid expenses
and deposits (3,247) (116,324) (12,881) (123,136)
Accounts payable and
accrued liabilities 86,920 174,224 (408,275) (325,049)
Deferred revenue
- current - (20,213) - (20,213)
Deferred revenue
- long term 299,400 334,968 299,400 334,968
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Cash used in operating
activities (2,890,776) (2,640,202) (6,021,299) (5,466,962)
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FINANCING ACTIVITIES
Issuance of share
capital, net 1,320 (24,278) 70,879 15,305,307
Repayment of capital
lease obligations (1,044) (919) (2,055) (1,809)
Cost of issuance of
convertible debentures - - (66,262) -
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Cash provided by (used
in) financing activities 276 (25,197) 2,562 15,303,498
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INVESTING ACTIVITIES
Purchase of capital
assets (300,805) (203,715) (627,147) (250,425)
Purchase of intellectual
property and patents (54,572) - (75,348) -
Proceeds from (purchase
of) short term
investments, net 2,543,391 (15,133,993) 961,889 (15,133,993)
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Cash provided by
(used in) investing
activities 2,188,014 (15,337,708) 259,394 (15,384,418)
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Decrease in cash and
cash equivalents (702,486)(18,003,107) (5,759,343) (5,547,882)

Cash and cash
equivalents, beginning
of period 2,507,666 20,737,742 7,564,523 8,282,517
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Cash and cash
equivalents, end
of period 1,805,180 2,734,635 1,805,180 2,734,635
Supplemental cash flow
information:
Interest paid 125,699 7,424 263,761 16,640
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Conference Call

Xillix intends to host a conference call on Thursday July 28, 2005 at 4:30 p.m. E.T. to discuss its financial results for the second quarter ended June 30, 2005. To access the conference call by telephone, dial 1-800-366-3908. Please connect approximately ten minutes prior to the beginning of the call to ensure participation. The conference call will be archived for replay until Thursday August 4, 2005 at midnight. To access the archived conference call, dial 416-640-1917 or 1-877-289-8525 and enter the reservation number 21132737 followed by the number sign.

A live audio webcast of the conference call will be available at www.xillix.com and www.newswire.ca. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived at the above web sites for 90 days.

About Xillix

Xillix Technologies Corp. is a Canadian medical device company and the world leader in fluorescence endoscopy for improved cancer detection. 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. An international multicenter lung cancer clinical trial of Onco-LIFE demonstrated a 325% per- lesion improvement in the detection of early lung cancer (moderate-severe dysplasia and carcinoma in situ) and a 250% per-patient improvement compared to white-light alone. Onco- LIFE is approved for sale in the United States for the lung application and in Europe and Canada for both lung and GI applications. Onco- LIFE is compact, user-friendly 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 March 31, 2005.

The Company is listed on the Toronto Stock Exchange under the trading symbol "XLX".

Contact Information

  • Xillix Technologies Corp.
    Sonja Rematore
    Investor Relations
    (604) 278-5000
    or
    Xillix Technologies Corp.
    Farran Grant
    Director of Finance
    (604) 278-5000
    ir@xillix.com
    www.xillix.com