Xillix Technologies Corp.
TSX : XLX

Xillix Technologies Corp.

October 27, 2005 13:09 ET

Xillix Announces Third Quarter Financial Results

RICHMOND, BRITISH COLUMBIA--(CCNMatthews - Oct. 27, 2005) -

Also Submits Colon Cancer Study Plan to FDA

Xillix Technologies Corp. (TSX:XLX), the world leader in fluorescence endoscopy for the early detection of cancer, today announced results for the third quarter ended September 30, 2005. The Company also outlined plans for a multi-center clinical trial in colon cancer with its latest device, Onco-LIFE™, which was recently approved by the U.S. Food and Drug Administration (FDA) for use in the detection of lung cancer, the leading cause of cancer death in both men and women.

"FDA approval at the end of June for the lung cancer indication of Onco-LIFE enabled us to focus on sales for the third quarter, particularly in the U.S.," said Cynthia Roney, President and CEO. "We are pleased to report that during this 90 day period, 23 Onco-LIFE devices were sold and shipped to leading hospitals and cancer centers and most are now in active clinical use." Revenue for the three months ended September 30 was $1.4 million compared with $3,324 during the same period a year ago, and more than double second quarter revenue of $0.6 million. Revenue for the nine-month period increased more than three-fold to $2.0 million compared with $0.6 million in 2004. Increased revenue was the result of Onco-LIFE sales in the U.S. and other international markets.

"FDA approval cleared the way for us to get Onco-LIFE into the skilled hands of physicians in the U.S. where interest in the fight against lung cancer is growing," said Cynthia Roney. "Initial sales came from healthcare centers who were part of the international Onco-LIFE clinical trial (which demonstrated that Onco-LIFE improved the detection of lung cancer by 325% compared to conventional white-light endscopy alone), centers using our earlier device Xillix LIFE-Lung™, and hospitals and cancer centers eager to adopt Xillix LIFE™ technology following FDA approval. As we look ahead, we expect Onco-LIFE sales to continue to grow in the U.S., and international sales to be positively influenced by FDA approval."

Highlights

- Announced the Company's international sales management team with more than 100 years combined medical device expertise, including the U.S. team who will work closely with ConMed, the Company's North American distributor for Onco-LIFE, and the European team who are working through Xillix's independent dealer network. Subsequent announcements include two additional international sales managers: Mike Harrison, Asia Pacific Manager; and Ivan Bolzani, Latin America Manager.

- 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.

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

- Appointed Dr. Richard Cline to Xillix Scientific Advisory Board. Dr. Cline joined Xillix in 1994 to lead GI development, ultimately taking on responsibility as Vice President, R&D. Last year, Dr. Cline decided to take a sabbatical and is now joining the Company's Scientific Advisory Board.

Subsequent News- Colon Cancer Study Submitted to FDA

On September 30th, following discussions with the U.S. Food and Drug Administration (FDA) gastrointestinal (GI) review group, the Company submitted its Investigational Device Exemption (IDE) application to begin a multi-center clinical trial for the Onco-LIFE device for use in colon cancer. Onco-LIFE is the same device approved by the U.S. FDA on June 30, 2005 for use in lung cancer (PMA P950042/s003). The Company plans to market this new indication of Onco-LIFE for use in colon cancer, the second leading cause of cancer death globally.

The IDE requests permission from the FDA for the Company to conduct a multi-center pivotal study in the U.S. to establish the clinical safety and efficacy of using Onco-LIFE during colonoscopy in patients with suspected or previously treated colon cancer as well as patients undergoing screening or surveillance colonoscopy. Clinical results are expected to support a Pre-Market Approval (PMA) submission to the U.S. FDA.

This IDE submission follows clinical studies performed with Onco-LIFE in Canada by Dr. Norman Marcon, a world-renowned gastroenterologist at St. Michael's Hospital and Director of the Therapeutic Endoscopy Programme at the University of Toronto, Canada. During the Digestive Disease Week (DDW) in Chicago, May 2005, Dr. Marcon presented results from his study of 74 patients which demonstrated that the addition of fluorescence increased the accuracy of diagnosis of adenomas or worse (abnormal tumor or growth) to 83% compared to 57% with white-light colonoscopy alone, and the accuracy for detection of hyperplastic lesions was 70% with the addition of fluorescence compared to 59% with white-light colonoscopy alone. In addition, 19 adenomas were identified by fluorescence that were missed with white-light colonoscopy alone. In presenting the results, Dr. Marcon also demonstrated the improvement in visual discrimination of hyperplastic and adenomatous lesions provided by fluorescence.

Similar to the Onco-LIFE lung cancer study completed last year, the IDE proposes a clinical study of approximately 120 patients with investigators at six of the top colorectal cancer centers in the US and Canada, including Dr. Marcon in Toronto. Patients will undergo white-light colonoscopy followed by fluorescence colonoscopy with Onco-LIFE. The study objective is to confirm that Onco-LIFE is safe and clinically effective in the colon indication. The Onco-LIFE colon study will quantify the improved relative sensitivity of the addition of fluorescence, calculated on a per-lesion and per-patient basis, and also will quantify the improved accuracy in discriminating between hyperplastic and adenomatous lesions with the addition of fluorescence. Detection rates and specificity will also be reported.

"The IDE for the Onco-LIFE colon cancer trial is currently under review by the FDA," said Rob Ngungu, Xillix Vice President Quality, Clinical and Regulatory Affairs. "We have also had extensive discussions with potential clinical investigators and reference pathologists. There is significant interest from the medical community in the Onco-LIFE colon cancer study and we are eager to move forward."

Cancers of the gastrointestinal (GI) tract (colorectal, stomach and esophageal) are the second leading causes of cancer death globally, second only to lung cancer. According to American Cancer Society estimates, more than 253,000 new cases of GI cancer will be diagnosed in the United States in 2005, resulting in approximately 136,000 deaths.

Financial Review

Revenue for the three months ended September 30 was $1.4 million compared with $3,324 during the same period a year ago. Revenue for the nine-month period was $2.0 million compared with $0.6 million in 2004. Increased revenue was the result of sales of Onco-LIFE™ in the U.S., following the receipt of FDA approval, Canada and other international markets. Revenue recorded in 2004 was primarily the result of sales of the Onco-LIFE device in Europe.

Cost of sales was $1.1 million and $1.9 million for the three and nine months ended September 30, 2005, respectively, compared with $0.2 million and $0.8 million for the three and nine months ended September 30, 2004, respectively. Cost of sales includes the cost of manufacturing overheads as well as the direct cost of Onco-LIFE devices sold during the periods. The improvement in the gross margin during 2005 compared with the prior year reflects increased unit sales, which serve to absorb a greater amount of fixed manufacturing costs. During the remainder of 2005 the Company will focus on marketing the Onco-LIFE lung product in the U.S., and the Onco-LIFE lung and GI product in Canada and abroad. Gross margins are expected to continue to improve as a result of increased pricing for units in the market place combined with increased manufacturing activity.

R&D expenditures for the quarter ended September 30, 2005 were $1.0 million compared with $1.1 million for the same quarter in 2004. R&D expenditures for the nine months ended September 30, 2005 were $3.2 million compared with $3.3 million in 2004. R&D expenditures in 2005 focused on preparations for the planned clinical trials for the GI (colon cancer) indication of Onco-LIFE, as well as on continued R&D activities for new applications of Onco-LIFE. R&D expenditures in the third quarter of 2004 focused on preparing the PMA submission, final modifications to Onco-LIFE, and initial R&D activities related to the GI (colon cancer) application of Onco-LIFE. The Company expects R&D expenditures to remain substantial in the near future as it commences clinical trials for the GI (colon cancer) indication of Onco-LIFE in late 2005.

G&A expenses were $0.7 million for the three months ended September 30, 2005 and 2004. G&A expenses were $2.2 million for the nine months ended September 30, 2005 compared with $2.3 million in 2004 and were comprised mainly of salaries and benefits, investor relations, legal and travel costs.

Marketing and sales expenses were $0.8 million and $1.9 million for the three and nine months ended September 30, 2005 respectively. This compares with $0.4 million and $1.0 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 September 30, 2005 was $2.6 million, ($0.02 loss per share based on a weighted average number of common shares outstanding of 129,232,515). This compares to a loss of $2.5 million ($0.02 loss per share based on a weighted average number of common shares outstanding of 125,991,658) for the same period in 2004. The loss for the nine months ended September 30, 2005 was $8.2 million ($0.06 loss per share based on a weighted average number of common shares outstanding of 128,492,607). This compares to a loss of $7.2 million ($0.06 loss per share based on a weighted average number of common shares outstanding of 117,606,071) for the nine-month period ended September 30, 2004. As significant funds will continue to be spent on clinical, regulatory, marketing and other costs related to the commercialization of Onco-LIFE, the Company does not anticipate earning a profit in 2005.

As at September 30, 2005, the Company had working capital of $11.2 million, which primarily consisted of cash and cash equivalents of $2.1 million and short-term investments of $5.9 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)

September 30 December 31
2005 2004
(Unaudited) $ $
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ASSETS
Current
Cash and cash equivalents 2,110,517 7,564,523
Short term investments 5,887,270 10,392,861
Accounts receivable 1,133,867 112,233
Interest and other receivables 169,467 245,515
Inventories 2,433,890 1,450,577
Prepaid expenses and deposits 378,368 318,954
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Total current assets 12,113,379 20,084,663
Capital assets 1,788,743 1,344,449
Intellectual property and patents 640,813 876,284
Deferred financing costs 50,871 62,415
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Total assets 14,593,806 22,367,811
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued
liabilities 872,997 1,259,969
Current portion of capital
lease obligation 4,620 4,244
Current portion of deferred
lease inducement 73,297 -
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Total current liabilities 950,914 1,264,213
Capital lease obligation 11,911 15,419
Deferred lease inducement 114,278 21,395
Deferred revenue 1,397,283 1,067,280
Convertible debt 4,176,036 4,057,767
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Total liabilities 6,650,422 6,426,074
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Shareholders' equity
Common share capital 85,856,353 85,772,138
Contributed surplus 1,732,896 1,578,101
Deficit (79,645,865) (71,408,502)
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Total shareholders' equity 7,943,384 15,941,737
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Total liabilities and
shareholder's equity 14,593,806 22,367,811
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CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT

(Expressed in Canadian dollars)

Three Months Ended Nine Months Ended
September 30 September 30
2005 2004 2005 2004
(Unaudited) $ $ $ $
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REVENUE
Product sales
and services 1,351,617 3,324 1,950,537 628,203
Cost of sales
and services 1,062,175 172,344 1,855,997 848,468
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Gross margin 289,442 (169,020) 94,540 (220,265)
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EXPENSES
Research and
development 1,022,508 1,084,798 3,214,955 3,278,951
General and
administrative 671,824 739,614 2,185,047 2,285,939
Marketing and sales 841,067 373,269 1,923,846 990,308
Amortization 223,066 185,593 718,189 508,438
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Total expenses 2,758,465 2,383,274 8,042,037 7,063,636
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Operating loss (2,469,023) (2,552,294) (7,947,497) (7,283,901)
Foreign exchange
(loss) (39,622) (11,091) (51,326) (23,472)
Interest income 75,501 90,837 264,409 250,413
Interest expense -
long term (167,805) (2,030) (502,949) (143,654)
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Loss for the period (2,600,949) (2,474,578) (8,237,363) (7,200,614)

Deficit, beginning
of period (77,044,916) (65,977,660) (71,408,502) (61,251,624)
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Deficit, end
of period (79,645,865) (68,452,238) (79,645,865) (68,452,238)
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Loss per common
share - basic
and diluted (0.02) (0.02) (0.06) (0.06)
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Weighted average
number of
common shares
outstanding 129,232,515 125,991,658 128,492,607 117,606,071
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CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in Canadian dollars)

Three Months Ended Nine Months Ended
September 30 September 30
2005 2004 2005 2004
(Unaudited) $ $ $ $
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OPERATING ACTIVITIES

Loss for
the period (2,600,949) (2,474,578) (8,237,363) (7,200,614)
Add items not
affecting cash:
Amortization of
capital assets
and intellectual
property and
patents 223,066 185,593 718,189 508,438
Amortization of
deferred financing
costs 2,433 - 7,298 122,216
Amortization of
deferred lease
inducement 44,938 (10,572) 166,180 (31,716)
Accretion of
liability component
of convertible debt 39,423 - 118,269 -
Stock-based
compensation expense 66,598 65,138 167,139 291,635
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(2,224,491) (2,234,419) (7,060,288) (6,310,041)

Changes in non-cash
operating working
capital items relating
to operations:
Accounts receivable (671,465) 296,394 (1,021,633) (191,189)
Interest and other
receivables 95,974 61,138 76,048 (89,855)
Inventories (289,661) (65,722) (983,313) (685,056)
Prepaid expenses
and deposits (46,533) (214,399) (59,414) (337,536)
Accounts payable
and accrued
liabilities 79,551 (350,827) (328,724) (675,874)
Deferred revenue -
current - - - (20,213)
Deferred revenue -
long term 30,602 - 330,002 334,968
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Cash used in
operating
activities (3,026,023) (2,507,835) (9,047,322) (7,974,796)
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FINANCING ACTIVITIES
Issuance of share
capital, net - 188,775 70,879 15,494,082
Repayment of capital
lease obligations (1,077) (949) (3,132) (2,758)
Cost of issuance of
convertible debentures - - (66,262) -
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Cash (used in)
provided by
financing activities (1,077) 187,826 1,485 15,491,324
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INVESTING ACTIVITIES
Purchase of
capital assets (179,002) (282,930) (806,149) (533,356)
Purchase of
intellectual
property and
patents (32,263) - (107,611) -
Proceeds from
(purchase of)
short term
investments, net 3,543,702 2,593,447 4,505,591 (12,540,546)
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Cash provided by
(used in) investing
activities 3,332,437 2,310,517 3,591,831 (13,073,902)
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Increase (decrease)
in cash and cash
equivalents 305,337 (9,492) (5,454,006) (5,557,374)

Cash and cash
equivalents,
beginning of period 1,805,180 (2,734,635) 7,564,523 8,282,517
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Cash and cash
equivalents,
end of period 2,110,517 2,725,143 2,110,517 2,725,143
Supplemental cash
flow information:
Interest paid 125,666 803 389,427 19,172
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Conference Call

Xillix intends to host a conference call on Thursday October 27, 2005 at 4:30 p.m. E.T. (1:30 p.m. P.S.T.) to discuss its financial results for the third quarter ended September 30, 2005. To access the conference call by telephone, dial 1-866-250-4909 or 416-644-3414. 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 November 3, 2005 at midnight. To access the archived conference call, dial 416-640-1917 or 1-877-289-8525 and enter the reservation number 21159842 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
    (604) 278-5111 (FAX)
    ir@xillix.com
    www.xillix.com