SemBioSys Announces Third Quarter Results and receipt of a non-dilutive investment

TSX symbol: SBS

CALGARY, Nov. 15 /CNW/ - SemBioSys Genetics Inc. (TSX:SBS) a development stage biotechnology company that utilizes its patented plant seed oilbody expression technology platforms to develop biosimilar drug candidates and high value proteins, today announced its operational and financial results for the third quarter ended September 30, 2010.

"We continue to pursue a number of strategic alternatives, as set out in our release of September 24, 2010, and be resourceful in extending our cash runway to advance our Apo AI_Milano and biosimilar insulin programs to meaningful partnerships. We recently secured $500,000 in non-dilutive funding commitments from AVAC Ltd. that provides a cash runway into 2011. However, the financial condition of the Company continues to be very difficult and there is no assurance that any of the strategic alternatives in progress will be successful, or if successful, that they will provide a meaningful return to the existing shareholders," said James Szarko, President and CEO of SemBioSys. "Our Apo AI_Milano candidate continues to attract partnership interest and recently underwent scientific evaluation by a large global pharmaceutical company. Cardiovascular disease is a large and growing market and Apo AI remains a high profile target for pharma companies. Our ability to cost effectively manufacture Apo AI_Milano in high volume is an enabling technology for companies interested in establishing and/or expanding their cardiovascular franchise. We continue to pursue discussions with additional potential investors who are proposing alternative structures to advance our Apo AI_Milano and insulin programs. The recent $400 million transaction between Biocon and Pfizer, involving Biocon's human recombinant insulin, underscores that both our enabling technology for biosimilar protein expression and our product candidates are well positioned for strategic alliances in the rapidly advancing global market place of biosimilars."

Operational Highlights

• Received a non-dilutive investment of $500,000, extending our operational runway into 2011.
• Advanced partnering discussions for both our Apo AI_Milano program and our biosimilar insulin program.
• Engaged Deloitte on a broad strategic mandate, including assistance with an accelerated strategic partnering transaction for either its biolimilar insulin or Apo program or a sale or merger.
• Generated new preclinical data for our Apo AI_Milano program in partnership with a global pharmaceutical company, with the goal of forming an alliance.
• Continued to reduce overhead costs and monthly burn, including the reduction of our head count, while maintaining our core competencies.
• Harvested approximately 40 acres of Apo AI_Milano expressing seed in North America.
• Harvested our next generation seed lines expressing human insulin.

Financial Highlights
SemBioSys has historically operated in two reportable segments: (i) Biopharmaceuticals and Bioproducts and (ii) Specialty Ingredients.  Effective July 29, 2009, the Company divested its majority interest in Botaneco Specialty Ingredients Inc. and Botaneco Inc. (collectively referred to as "Botaneco"), and, therefore, it no longer has control nor significant influence over these entities.  As a result, the Specialty Ingredients segment is no longer being consolidated and its operating results are included in discontinued operations. 

Net income (loss) for the three months ended September 30, 2010 compared to the same period last year:

• ($1,715,947) or ($0.03) per share from continuing operations compared to ($2,472,008) or ($0.07) per share;
• $nil from discontinued operations compared to $2,544,986 or $0.07 per share; and
• ($1,715,947) or ($0.03) per share in total net income (loss) compared to $72,978 or $nil per share.

Net loss for the three months ended September 30, 2010 increased over the same period last year, due to a one-time gain recorded on the sale of Botaneco.

Net loss for the nine months ended September 30, 2010 compared to the same period last year:

• $6,671,697 or $0.14 per share from continuing operations compared to $7,545,095 or $0.24 per share;
• $nil from discontinued operations compared to $96,492 or $nil per share; and
• $6,671,697 or $0.14 per share in total net loss compared to $7,641,587 or $0.24 per share.

Net loss decreased in 2010 as a result of completing the insulin clinical trials in the first quarter of 2009, combined with the savings realized from the cost reduction program implemented in the third quarter of 2009.

Revenue for the three months ended September 30, 2010 compared to the same period last year:

• $5,974 in revenue from continuing operations compared to $24,540;
• $nil in revenue from discontinued operations compared to $41,670; and
• $5,974 in total revenue compared to $66,210.

Revenue for the nine months ended September 30, 2010 compared to the same period last year:

• $473,478 in revenue from continuing operations compared to $1,476,234
• $nil in revenue from discontinued operations compared to $378,970; and
• $473,478 in total revenue compared to $1,855,204.

The decrease in revenue in 2010 for continuing operations is due mainly to the recognition of licensing option fees in 2009 from an option agreement entered into with MannKind related to the Company's BiosimilarInsulin program; offset by licensing fees recorded 2010 related to the Company's GLA program. 

Expenditures (net of cost recoveries and scientific research & experimental development tax credits in each case) for the three months ended September 30, 2010 compared to the same period last year:

• $1,615,822 in expenditures from continuing operations compared to $2,461,085;
• $nil in expenditures from discontinued operations compared to $376,645; and
• $1,615,822 in total expenses net of cost recoveries and SR&ED compared to $2,837,730.

Expenditures (net of cost recoveries and scientific research & experimental development tax credits in each case) for the nine months ended September 30, 2010 compared to the same period last year:

• $6,863,364 in expenditures from continuing operations compared to $8,955,871;
• $nil in expenditures from discontinued operations compared to $2,774,345; and
• $6,863,364 in total expenses net of cost recoveries and SR&ED compared to $11,730,216.

The overall decrease in expenditures is primarily due to the cost reductions implemented in the third quarter of 2009, in addition to decreased post-clinical costs as the majority of the post-clinical work for the insulin clinical trial was completed in early 2009.  Costs were further offset by the receipt of the SR&ED refundable tax credits in the third quarter of this year.

At September 30, 2010, the Company had cash and cash equivalents of $609,935 as compared to $3,687,548 at December 31, 2009. The decrease in cash during the period resulted primarily from net cash burn offset by the proceeds received relating to the private placement completed in March 2010 and the proceeds received from our SR&ED claim in August 2010. SemBioSys received funding commitments from AVAC Ltd. of $500,000 in a, non-dilutive investment, subsequent to the end of the period.  This brings AVAC's investment to $6,884,000 to date.

Total short-term debt and convertible debentures were $2,421,902 at September 30, 2010 compared to $1,534,535 at December 31, 2009. The increase in debt relates mainly to the $625,000 of convertible debentures issued in June 2010 to UTI Limited Partnerships as part of the consideration paid to renegotiate certain terms of our existing technology licence agreement.  

At September 30, 2010, the Company had a net working capital balance of ($1,515,073) as compared to $1,595,217 at December 31, 2009. The decrease in working capital is primarily due to the increase in the short-term portion of long-term debt resulting from the accrued interest on the $1,350,000 of funding SemBioSys received from AVAC in 2009 that is secured by certain SemBioSys assets.  Also contributing to the decrease is the short-term portion of the convertible debentures issued in June 2010. SemBioSys has initiated discussions with AVAC regarding repayment of the outstanding investment and accrued interest of $1,783,169. The discussions have contemplated pushing back the repayment of the investment and accrued interest from November 2010 to the end of 2011.  If the Company is successful in obtaining these terms the investment would be reclassified from short-term debt to long-term debt. Had the investment been reclassified on September 30, 2010 and December 31, 2009, SemBioSys would have had positive working capital of $268,096 and $3,129,752 respectively. The Company successfuly filed a Scientific Research and Experimental Development (SR&ED) claim under the Alberta government's newly created program and received $318,994 of refundable tax credits in August 2010. It estimates as of September 30, 2010 it has accumulated an additional $175,000 of refundable credits SR&ED which would further enhance its working capital had the Company accrued for these. 

As at November 15, 2010, the Company had 51,374,536 common shares outstanding, 12,655,341 warrants, 4,655,448 options, 1,423,840 broker warrants, 672,628 deferred share units and debentures which are convertible into 10,200,647 common shares.

 About SemBioSys
Calgary, Alberta-based SemBioSys is a development stage biotechnology Company that utilizes its patented plant seed oilbody expression technology platforms to develop biosimilar drug candidates and high value proteins. SemBioSys' seed-based protein expression system can enable exceptionally low cost of production with unprecedented scalability and reliability. SemBioSys is focusing the platform selectivity to develop biosimilar product candidates with tremendous commercial value. The Company's current pharmaceutical development programs include insulin (SBS-1000, regulated as a biosimilar in Europe) and Apo AI_Milano, a new chemical entity and next-generation cardiovascular therapy with blockbuster revenue potential if it reaches market for treatment of atherosclerosis. SemBioSys' Apo AI_Milano is a des-1,2- variant of Apo AI_Milano as previously described in scientific literature. SemBioSys is listed on the Toronto Stock Exchange under the ticker SBS. More information is available at www.sembiosys.com.

This press release contains certain forward-looking statements, including, without limitation, statements containing the words "believe", "may", "plan", "will", "estimate", "continue", "anticipate", "intend", "expect" and other similar expressions which constitute "forward-looking information" within the meaning of applicable securities laws. Forward-looking statements reflect the Company's current expectation and assumptions, and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. These forward-looking statements involve risks and uncertainties including, but not limited to, changing market conditions and market size, the acceptance of an IND by the FDA in respect of clinical studies, the submission of a CTA to the appropriate European authorities, the successful initiation and timely and successful completion of clinical studies, the fact that Apo AIMilano is currently a development stage drug, the establishment of corporate alliances and partnerships, the impact of competitive products and pricing, new product development, uncertainties related to the regulatory approval process and other risks detailed from time-to-time in the Company's ongoing filings with the Canadian securities regulatory authorities which filings can be found at www.sedar.com. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements either as a result of new information, future events or otherwise, except as required by applicable Canadian securities laws.

 

SemBioSys Genetics Inc.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(expressed in Canadian dollars)
	September 30,		December 31,
	2010 $		2009 $
ASSETS
Current assets
Cash and cash equivalents	609,935		3,687,548
Investment	176,263		380,601
Accounts receivable	113,395		124,083
GST receivable	129,409		52,649
Prepaid expenses, deposits and other	206,887		175,894
	1,235,889		4,420,775
Property and equipment	2,643,459		3,683,462
	3,879,348		8,104,237
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities	860,486		1,291,023
Short-term debt	1,783,169		1,534,535
Short-term portion of convertible debenture	107,307		-
	2,750,962		2,825,558
Long-term portion of convertible debenture	531,426		-
	3,282,388		2,825,558
SHAREHOLDERS' EQUITY
Capital stock	75,459,690		73,726,414
Warrants	3,527,425		3,527,425
Contributed surplus	14,153,445		13,764,398
Accumulated other comprehensive loss	(186,717)		(54,372)
Deficit	(92,356,883)		(85,685,186)
	596,960		5,278,679
	3,879,348		8,104,237

SemBioSys Genetics Inc.
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
(unaudited)
(expressed in Canadian dollars, except shares)
	Three month period ended				Nine month period ended
	September 30,				September 30,
	2010		2009		2010		2009
	$		$		$		$
REVENUE
Licensing fees	-		-		315,789		252,048
Contract research	-		24,540		151,715		62,691
Royalty revenue	5,974		-		5,974		-
Licensing option fees	-		-		-		1,161,495
	5,974		24,540		473,478		1,476,234
EXPENSES
Research and development	963,126		1,361,957		3,166,010		5,051,023
General and administration	238,894		288,376		939,113		1,203,772
Intellectual property costs	215,869		216,359		1,350,738		763,097
Business development	94,387		95,516		408,765		374,708
Stock-based compensation	119,502		147,045		334,050		503,744
Amortization	341,443		364,332		1,040,004		1,104,832
Scientific research & experimental development tax credits	(318,994)		-		(318,994)		-
Cost recoveries	(38,405)		(12,500)		(56,322)		(45,305)
	1,615,822		2,461,085		6,863,364		8,955,871
Loss before the undernoted	(1,609,848)		(2,436,545)		(6,389,886)		(7,479,637)
Interest expense	(108,738)		(69,481)		(259,850)		(117,792)
Interest income	1,262		131		3,269		7,629
Foreign exchange gain (loss)	6,752		33,887		534		44,705
Realized loss on disposal of investment	(5,375)		-		(25,764)		-
	(106,099)		(35,463)		(281,811)		(65,458)
Net loss from continuing operations	(1,715,947)		(2,472,008)		(6,671,697)		(7,545,095)
Discontinued operations	-		2,544,986		-		(96,492)
Deficit - Beginning of the period	(90,640,936)		(86,810,869)		(85,685,186)		(79,096,304)
Deficit - End of the period	(92,356,883)		(86,737,891)		(92,356,883)		(86,737,891)
Loss per share
Basic and diluted from continuing operations	(0.03)		(0.07)		(0.14)		(0.24)
Basic and diluted from discontinued operations	-		0.07		-		(0.00)
Basic and diluted	(0.03)		0.00		(0.14)		(0.24)
Weighted average shares outstanding	51,297,448		37,558,286		48,875,804		31,582,743

SemBioSys Genetics Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(unaudited)
(expressed in Canadian dollars)
		Three month period ended				Nine month period ended
		September 30,				September 30,
		2010		2009		2010		2009
		$		$		$		$
Net income (loss) for the period		(1,715,947)		72,978		(6,671,697)		(7,641,587)
Other comprehensive loss
	Foreign currency translation adjustment	-		(19,388)		-		(32,365)
	Foreign currency translation adjustment transferred to net income from discontinued operations during the year	-		19,388		-		32,365
	Unrealized loss on investment	(22,183)		-		(158,109)		-
	Realized loss on investment	5,375		-		25,764		-
Comprehensive loss		(1,732,755)		72,978		(6,804,042)		(7,641,587)
CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE LOSS
(unaudited)
(expressed in Canadian dollars)
		Three month period ended				Nine month period ended
		September 30,				September 30,
		2010		2009		2010		2009
		$		$		$		$
Accumulated other comprehensive loss
	- beginning of the period	(169,909)		-		(54,372)		-
Foreign currency translation adjustments
	Change in accounting policy	-		-		-		26,534
	Adjustments during the year	-		(19,388)		-		(32,365)
	Transferred to net income from discontinued operations during the year	-		19,388		-		5,831
		(169,909)		-		(54,372)		-
Unrealized loss on Investment		(22,183)		-		(158,109)		-
Realized loss on investment		5,375		-		25,764		-
Accumulated other comprehensive loss
	- end of the period	(186,717)		-		(186,717)		-

SemBioSys Genetics Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
		Three month period ended				Nine month period ended
		September 30,				September 30,
(unaudited)		2010		2009		2010		2009
(expressed in Canadian dollars)		$		$		$		$
Cash provided by (used in)
Operating activities
Net loss for the period from continuing operations		(1,715,947)		(2,472,008)		(6,671,697)		(7,545,095)
Add items not affecting cash:
	Amortization	341,443		364,332		1,040,004		1,104,832
	Stock-based compensation	119,502		147,045		334,050		503,744
	Shares issued for services	20,700		-		113,635		152,985
	Deferred stock units issued	-		-		54,997		-
	Unrealized foreign exchange loss	(5,507)		(21,123)		9,322		(35,801)
	Non-cash interest expense	97,306		56,720		245,388		72,193
	Loss on disposal of shares	5,375		-		25,764		-
	Non-cash interest on convertible debentures	10,937		-		13,733		-
	Non-cash license fees expensed	-		-		625,000		-
		(1,126,191)		(1,925,034)		(4,209,804)		(5,747,142)
Change in non-cash working capital and other balances related to operations		159,400		(347,544)		(245,524)		(385,059)
Cash used in operating activities		(966,791)		(2,272,578)		(4,455,328)		(6,132,201)
Financing activities
Issuance of capital stock		-		1,779,801		1,778,595		3,531,801
Share issue costs		(5,419)		(237,427)		(163,709)		(298,854)
Issuance of warrants		-		2,373,068		-		2,454,668
Warrant issue costs		-		(316,570)		(6,340)		(326,883)
Costs related to the corporate reorganization		(50,921)		-		(233,715)		-
Proceeds from long-term debt		-		81,118		-		1,031,118
Repayment of long-term debt		(12,388)		(162,501)		(43,345)		(432,154)
Cash provided by (used in) financing activities		(68,728)		3,517,489		1,331,486		5,959,696
Investing activities
Proceeds on disposition of shares		9,528		-		46,229		-
Acquisition of property and equipment		-		-		-		(17,311)
Cash provided by (used in) investing activities		9,528		-		46,229		(17,311)
Net change in cash from continuing operations		(1,025,991)		1,244,911		(3,077,613)		(189,816)
Cash flow from discontinued operations
Operating activities		-		(217,383)		-		(2,081,450)
Financing activities		-		506,232		-		951,576
Investing activities		-		(647,390)		-		(762,956)
Net change in cash from discontinued operations		-		(358,541)		-		(1,892,830)
Decrease in cash and cash equivalents		(1,025,991)		886,370		(3,077,613)		(2,082,646)
Cash and cash equivalents - Beginning of period		1,635,926		850,780		3,687,548		3,819,796
Cash and cash equivalents - End of period		609,935		1,737,150		609,935		1,737,150
	Cash and cash equivalents - discontinued operations	-		-		-		-
Cash and cash equivalents - from continuing operations		609,935		1,737,150		609,935		1,737,150
Supplemental Information (continuing operations)
Cash interest received		2,118		48		3,381		11,854
Cash interest paid		495.37		12,661		729		45,003

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