Calgary, Alberta, Canada
March 16, 2009
SemBioSys Genetics Inc. (TSX:SBS), specializing in the
manufacture of high-value proteins and oils in plant seeds,
today announced its 2008 year end financial and operational
results.
"2008 was a pivotal year for SemBioSys as the tremendous
progress that was made, particularly in the biopharmaceutical
programs, has positioned us to reach key value inflection points
in 2009," said James Szarko, Chief Executive Officer of
SemBioSys. "We now expect preliminary results during the first
quarter of 2009 from our first "in-man" clinical study of
SBS-1000, a recombinant human insulin manufactured using our
proprietary platform. Key preclinical studies for Apo AI(Milano)
were also initiated in the third quarter of 2008 and data are
anticipated in the first half of 2009. These results will be
influential to the partnership discussions that are now underway
for both programs."
"The economy and the capital markets obviously weakened
considerably during the second half of 2008 and these will
continue to be challenging in 2009. We responded to this
downturn by implementing a substantial cost reduction program
during the fourth quarter to extend our cash runway. This was
done in a targeted way to avoid losing momentum in our core
programs. We continue to pursue a variety of creative options
designed to further
strengthen our balance sheet."
Highlights
Insulin Program
- Demonstrated that plant-produced insulin
(SBS-1000) showed no
distinguishable differences from the reference
drug, Humulin(R) R
over a 28-day, repeat dose toxicology animal
trial.
- Submitted an Investigational New Drug (IND)
application to the United
States Food and Drug Administration (FDA) and a
Clinical Trial
Application (CTA) to the Medicines and
Healthcare products Regulatory
Agency (MHRA).
- Successfully completed the manufacture of
clinical-grade insulin from
field-grown safflower seeds necessary to conduct
the phase I/II
insulin trial, including a cGMP audit of the
Company's pilot-scale
manufacturing facility as required by European
authorities.
- Initiated a single-dose three-arm phase I/II
clinical trial of SBS-
1000 in the United Kingdom wherein
safflower-produced insulin was
compared to both U.S. and European-sourced
reference insulin
(Humulin(R) R and Humulin(R) S respectively).
- Announced in December an option agreement
(expires March 31, 2009)
with MannKind Corporation (MannKind) for the use
of SemBioSys'
plant-produced insulin for AFRESA(TM),
MannKind's ultra-rapid acting
insulin product which recently completed phase
III studies. A
US$500,000 option payment from MannKind was
received in January 2009
together with a US$2,000,000 investment in
return for 2,400,000 units
of SemBioSys comprising one common share of
SemBioSys and one-tenth
of one common share purchase warrant of
SemBioSys.
Apo AI(Milano) Program
- Demonstrated, in collaboration with the Montreal
Heart Institute,
that safflower-produced Apo AI(Milano) is
functional by measuring
increased cholesterol mobilization in a widely
accepted animal model.
- Initiated a formal partnering process for Apo
AI(Milano).
- Initiated in vivo plaque remodeling and
regression studies at Cedars
Sinai Hospital at UCLA with safflower-produced
Apo AI(Milano).
- Completed the process development for
safflower-produced Apo
AI(Milano) at a bench scale, and continued
scale-up of safflower-
produced Apo AI(Milano) seed from a successful
outdoor field harvest.
Botaneco
- Launched its second generation oleosome product,
Hydresia(TM) G2,
which offers formulators the ability to develop
products over a
broader pH range and uses a new globally
accepted preservative system
that will expand the use of oleosomes in Europe
and other markets.
- Entered into an agreement for a $4.0 million
convertible debenture
financing with Avrio Ventures Limited
Partnership (Avrio) to
accelerate Botaneco's commercialization of
Hydresia(TM) products for
the personal care and topical ingredients
markets.
- Accelerated the commercialization of its
Hydresia(TM) products,
including receipt of notification from ECOCERT
that its Hydresia(TM)
G2 product has been authorized as an approved
raw material, complying
with the standards for ecological and organic
cosmetics.
Corporate
- Implemented a cost reduction program in the
fourth quarter to extend
the cash runway of the Company. SemBioSys
reduced headcount by
40 per cent and curtailed expenditures on
activities not critical to
the achievement of milestones for our core
programs and partnering
initiatives.
- Announced senior management changes immediately
following year end,
in which Andrew Baum transitioned from CEO of
SemBioSys to CEO of
SemBioSys' subsidiary, Botaneco, and James
Szarko became CEO of
SemBioSys from his former role of CFO.
- Received a total of $1,794,000 in milestone
payments during the year
as part of the Company's agreements with AVAC
for non-dilutive
funding of the insulin program ($621,000) and
Botaneco's
commercialization ($1,173,000). Botaneco
received an additional
$500,000 from AVAC subsequent to the end of the
year.
Outlook
The Company intends to build upon the considerable
progress that was made
in key business areas during 2008 and anticipates a number of
important
developments during 2009:
- Recombinant human insulin (SBS-1000):
preliminary phase I/II data in
the first quarter of 2009
- Apo AI(Milano): in vivo plaque remodeling and
regression data in the
first half of 2009
- Further progress with the partnering of both
insulin and Apo
AI(Milano)
- Botaneco: further expansion of customer/product
base (currently more
than 30 customers and approximately 40
Hydresia(TM) SKUs)
- Financing activities to extend cash runway
Financials
Prior to the third quarter of 2007, SemBioSys
operated under one segment. During the third quarter of 2007,
Botaneco completed construction of its manufacturing facility
and SemBioSys began to operate in two reportable segments: (i)
the Biopharmaceutical and Bioproducts segment focused on the
Company's lead pharmaceutical candidates, recombinant human
insulin and Apo AI(Milano) and (ii) the Specialty Ingredients
segment.
Total revenue for the year ended December 31, 2008 was $661,687,
compared with $1,222,823 for the same period in 2007. The
difference is due mainly to a license fee payment earned from
the Company's collaboration agreement with Martek BioSciences
Corporation in the first half of 2007 which is partially offset
by 2008 product sales revenue from Hydresia(TM) and an option
payment received from INDEAR S.A.
Total expenditures for the year ended December 31, 2008 were
$23,067,312 compared with $17,599,775 for the year ended
December 31, 2007.
Research and development expenses for the twelve-month period
ended December 31, 2008 were $11,771,072 compared with
$8,044,121 for the same period in 2007. The difference is
primarily related to the shift in the stage
of development of the Company from research to preclinical
development of two major drug candidates and, for insulin,
clinical development, with a resultant increase in the use of
external resources. These include increased contract research
organization (CRO) costs, independent third-party animal
studies, preparation of GMP and cGMP material and other
outsourcing costs as well as increased personnel and the
associated support costs and laboratory supplies related to
preclinical activity.
General and administrative expenses for the twelve-month period
ended December 31, 2008 were $5,594,991 compared with $4,528,184
for the corresponding period in 2007. The difference is mainly
due to the commercial
operations of Botaneco being fully established during 2008
resulting in increases in general and administrative costs and
legal fees incurred for Botaneco's debenture financing.
Intellectual property costs for the twelve-month period ended
December 31, 2008 were $1,613,816 compared with $1,569,095 for
the twelve-month period ended December 31, 2007. There was an
increase in legal costs for patent
applications for our insulin program, which was partially offset
by a decrease in royalty payments.
Business development costs for the twelve-month period ended
December 31, 2008 were $672,029, compared with $1,213,634 for
the corresponding period in 2007. The difference is primarily
due to the shift in Botaneco's activities
from entirely business development-related prior to the
commissioning of its commercial manufacturing operations which
occurred in September 2007, to now being fully operational.
Net loss for the twelve-month period ended December 31, 2008 was
$22,937,141 or $0.88 per share, compared to a net loss of
$15,418,677 or $0.71 per share for the twelve-month period ended
December 31, 2007.
As of December 31, 2008 the Company had cash and cash
equivalents totaling $3,819,796 and a net positive working
capital balance of $3,730,413 compared to $20,444,013 and
$19,518,408, respectively, at December 31, 2007. Subsequent to
the end of the year, the Company received an additional
US$2,500,000 from MannKind as noted above. Total long-term debt
and convertible debentures was $5,127,829 at December 31, 2008
compared to
$1,389,047 at December 31, 2007.
The decrease in cash and working capital during the period
resulted primarily from our net cash burn, which includes
significant capital outlays for expanded growth facilities,
equipment for preclinical and clinical work and the final
payments related to Botaneco's manufacturing facility. The
increase in long-term debt and convertible debentures is a
result of the $4,000,000 of funding Botaneco received from Avrio
in exchange for a convertible debenture, $1,173,244 of funding
received from AVAC in 2008 that is secured by certain Botaneco
assets, in addition to financing we obtained for the purchase of
some of our capital assets. The increase was offset by regular
repayments of long-term debt financing during the period.
As at March 16, 2009 the Company had 28,338,294 common shares
outstanding, 2,630,000 warrants and 3,138,086 options.
Calgary, Alberta-based SemBioSys is a world leader in
manufacturing high-value proteins and oils in plant seeds. With
its unique, proprietary platform, SemBioSys provides partners
with product enablement, exceptionally
low cost and unprecedented scalability. The Company applies this
platform with high selectivity to opportunities where it has a
unique competitive advantage. Since its inception, SemBioSys has
produced more than 50 non-native proteins and oils using its
patented seed technology, demonstrating applicability across a
broad range of industries such as pharmaceuticals, personal care
and industrial products. The Company's current pharmaceutical
development programs include insulin (SBS-1000, regulated as a
biosimilar in Europe) and Apo AI(Milano), a next-generation
cardiovascular therapy. SemBioSys is listed on the Toronto Stock
Exchange under the ticker SBS. More information is available at
www.sembiosys.com.
Financials results included below:
<<
SemBioSys Genetics Inc.
CONSOLIDATED BALANCE SHEETS
As at December 31, 2008 2007
(expressed in Canadian dollars) $ $
-------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents 3,819,796 20,444,013
Accounts receivable 912,702 613,912
Prepaid expenses and deposits 457,693 538,718
Inventory 1,929,289 426,641
-------------------------
7,119,480 22,023,284
Property and equipment 8,009,624 9,272,415
-------------------------
15,129,104 31,295,699
-------------------------
-------------------------
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities 2,237,225 1,875,397
Short-term portion of long-term debt 539,547 629,479
Deferred revenue 612,295 -
-------------------------
3,389,067 2,504,876
Deferred cost recoveries 39,557 286,596
Long-term debt 1,773,776 759,568
Convertible debenture 2,814,506 -
-------------------------
8,016,906 3,551,040
-------------------------
-------------------------
SHAREHOLDERS' EQUITY
Capital stock 70,428,431 70,396,170
Warrants 2,550,880 6,180,690
Contributed surplus 11,802,064 7,326,962
Equity component of convertible debenture 1,427,127 -
Deficit (79,096,304) (56,159,163)
-------------------------
-------------------------
7,112,198 27,744,659
-------------------------
15,129,104 31,295,699
-------------------------
-------------------------
SemBioSys Genetics Inc.
CONSOLIDATED STATEMENTS OF LOSS, COMPREHENSIVE LOSS AND DEFICIT
For the years ended December 31, 2008 2007
(expressed in Canadian dollars, except shares) $ $
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REVENUE
Licensing fees 50,110 874,024
Contract research 45,000 122,304
Product sales 566,577 226,495
-------------------------
661,687 1,222,823
EXPENSES
Research and development 11,771,072 8,044,121
General and administration 5,594,991 4,528,184
Intellectual property costs 1,613,816 1,569,095
Business development 672,029 1,213,634
Sales and marketing 587,435 201,094
Cost of products sold 802,032 198,019
Stock-based compensation 845,292 723,558
Amortization 2,221,158 1,390,065
Cost recoveries (1,040,513) (267,995)
-------------------------
23,067,312 17,599,775
-------------------------
Loss before the undernoted (22,405,625) (16,376,952)
-------------------------
-------------------------
Interest income 378,502 893,142
Interest expense (462,470) (195,753)
Loss on sale of property and equipment (16,268) (1,483)
Foreign exchange gain (loss) (431,280) 262,369
-------------------------
-------------------------
(531,516) 958,275
-------------------------
Net loss and comprehensive loss for the period (22,937,141) (15,418,677)
Deficit - Beginning of period (56,159,163) (40,740,486)
-------------------------
-------------------------
Deficit - End of period (79,096,304) (56,159,163)
-------------------------
-------------------------
Loss per share - basic and diluted (0.88) (0.71)
-------------------------
-------------------------
Weighted average shares outstanding 25,937,446 21,823,242
-------------------------
-------------------------
SemBioSys Genetics Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2008 2007
(expressed in Canadian dollars) $ $
-------------------------------------------------------------------------
Cash provided by (used in)
Operating activities
Net loss for the period (22,937,141) (15,418,677)
Add items not affecting cash:
Amortization 2,221,158 1,390,065
Loss on sale of property and equipment 16,268 1,483
Stock-based compensation 845,292 723,558
Unrealized foreign exchange loss (gain) 222,051 (220,554)
Non-cash interest expense 346,378 4,994
-------------------------
(19,285,994) (13,519,131)
-------------------------
-------------------------
Change in non-cash working capital and
other balances related to operations (767,180) 578,174
-------------------------
Cash used in operating activities (20,053,174) (12,940,957)
-------------------------
-------------------------
Financing activities
Issuance of capital stock - 24,331,688
Share issue costs (57,884) (2,256,728)
Issuance of warrants - 1,140,800
Warrant issue costs - (106,826)
Exercise of stock options 32,261 81,242
Proceeds from convertible debentures 4,000,000 -
Proceeds from long-term debt 1,380,828 250,000
Repayment of long-term debt (691,772) (704,990)
Repayment of repayable advances - (85,640)
-------------------------
Cash provided by financing activities 4,663,433 22,649,546
-------------------------
-------------------------
Investing activities
Proceeds on sale of property and equipment 5,000 6,000
Acquisition of property and equipment (1,239,476) (5,599,035)
-------------------------
Cash used in investing activities (1,234,476) (5,593,035)
-------------------------
-------------------------
Increase (decrease) in cash and cash
equivalents (16,624,217) 4,115,554
Cash and cash equivalents - Beginning
of period 20,444,013 16,328,459
-------------------------
-------------------------
Cash and cash equivalents - End of period 3,819,796 20,444,013
-------------------------
-------------------------
Supplemental Information
Cash interest received 402,346 1,367,372
Cash interest paid 101,735 175,343
Non-cash transactions
Capital items included in accounts payable 16,532 276,373
Share issue costs included in
accounts payable - 57,884
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