SEMBIOSYS ANNOUNCES 2010 FINANCIAL AND OPERATIONAL RESULTS

TSX symbol: SBS

CALGARY, March 31 /CNW/ - SemBioSys Genetics Inc. (TSX:SBS) a development stage biotechnology company that utilizes its patented plant seed oilbody expression technology platform to develop biosimilar drug candidates and high value proteins, today announced its 2010 year-end financial and operational results.

2010 Operational Highlights

• Recapitalized the business with $4 million financing, subsequent to year-end, extending the Company's operational runway to more effectively negotiate partnerships for it's core products and platform
• Recruited and promoted a new management team with a focus on commercialization, including the appointment of Ms. Enman Ma as its Chief Financial Officer subsequent to the end of the period
• Advanced partnering discussions for its biosimilar insulin and Apo AI_Milano programs with a very focused emphasis on China and companies with synergies for it's technology platform and products
• Generated successful reverse cholesterol transport data in a preclinical study of our Apo AI_Milano, at a well recognized North American cardiac institute and also presented and published preclinical data at The American College of Cardiology's Annual Scientific Session
• Harvested additional field grow outs in North America and Chile of key safflower lines expressing both Apo AI_Milano and insulin which ensure adequate active material to further prepare both products for critical upcoming development activity
• Commercialization partner successfully completed FDA registration of GLA (Omega-6) produced using SemBioSys' plant based technology and initiated commercial launch of the product
• Raised $2.3 million, including a non-dilutive investment of $500,000 from AVAC Ltd.

"The last two years have been a challenging period for the Company from a financial perspective. It demanded both creativity and tenacity to ensure that the Company survived and realized the potential of our transformative technology platform. We were faced with, and made, tough decisions in 2010 and early 2011 including the further downsizing of the organization. With these changes in place we have built a leaner and more commercially focused management team and with the recent completion of our $4 million financing, we can now clearly focus on the business development opportunities for our biosilmilar human insulin and Apo AI_Milano programs and our technology platform," said James Szarko, President and CEO of SemBioSys.

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.  On November 20, 2009 the Company disposed of its remaining investment in Botaneco.

Net loss for the year ended December 31, 2010, compared to the same period last year:

• $8,260,239 or $0.17 per share from continuing operations compared to $6,492,390 or $0.19 per share;
• $nil from discontinued operations compared to $96,492 or $nil per share; and
• $8,260,239 or $0.17 per share in total net loss compared to $6,588,882 or $0.19 per share.

Our net loss in 2009 was offset by a one time gain on the exchange of shares as part of the corporate reorganization and a gain on the disposal of our remaining shares of Botaneco.  Consequently our net loss increased in 2010 as there was no gain on exchange of shares or on the disposal of Botaneco to offset a portion of the net loss.  Furthermore, a one time non-cash expense of $735,000 was recorded in intellectual property as a result of the renegotiation of certain terms in an existing technology license agreement.

Revenue for the year ended December 31, 2010, compared to the same period last year:

• $479,516 in revenue from continuing operations compared to $1,571,114;
• $nil in revenue from discontinued operations compared to $378,970; and
• $479,516 in total revenue compared to $1,950,084.

The decrease in revenue in 2010 for continuing operations is due mainly to the recognition of licensing option fees in 2009 from a one time option agreement entered related to the Company's Biosimilar Insulin 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 year ended December 31, 2010, compared to the same period last year:

• $8,309,214 in expenditures from continuing operations compared to $11,270,330;
• $nil in expenditures from discontinued operations compared to $2,774,345; and
• $8,309,214 in total expenditures compared to $14,044,675.

The overall decrease in expenditures is primarily due to the cost reductions implemented in the third quarters of both 2009 and 2010, 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 December 31, 2010, the Company had cash and cash equivalents of $267,436 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.

The current portion of long-term debt and convertible debentures were $2,665,176 at December 31, 2010 compared to $1,534,535 at December 31, 2009. The increase in debt relates mainly to the $730,000 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 license agreement and the accrued interest recorded on the AVAC funding.

At December 31, 2010, the Company had a net working capital balance of ($2,180,556) as compared to $1,595,217 at December 31, 2009. The decrease in working capital is primarily due to the increase in the current of long-term debt resulting from the accrued interest on the $1,350,000 of funding SemBioSys received from AVAC in 2009.  Also contributing to the decrease is the reduction in cash balance and sale of our investment.

Prior to year-end negotiations were initiated with AVAC regarding the repayment of the outstanding investment and accrued royalties of $1,848,329. An amending agreement comprising repayment of the outstanding investment through royalties earned from the commercialization of certain non-pharma product revenue streams is being concluded between the Company and AVAC. In addition, the Company estimates as of December 31, 2010, it has accumulated an additional $231,000 of refundable credits SR&ED which would further enhance its working capital had the Company accrued for these.

Subsequent to year-end the Company received the final tranche of $250,000 from AVAC under the $500,000 in non-dilutive funding previously announced in the fourth quarter of 2010.  Furthermore, the Company closed a $4 million financing.  The financing consists of bonds with an aggregate face value of $4 million (the "Bonds") and detachable warrants (the "Warrants") to purchase common shares of the Company. These activities further enhanced our working capital and extended our cash runway.

As at March 30, 2010, the Company had 51,374,536 common shares outstanding, 79,524,024 warrants, 4,560,481 options, 1,423,840 broker warrants, 1,065,467 deferred share units,  and debentures which are convertible into 8,993,611 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, the current financial position of the Company, the Company's ability to continue as a going concern and its ability to raise the funds necessary to continue its operations, the status of the TSX's de-listing review, the continued listing of the common shares on the TSX and the continued ability of the Company to maintain its listing on the TSX, the dilution of the proposed financing to existing shareholders, the identification and negotiation of partnerships with respect to the Company's next generation cardiovascular candidate, Apo AI_Milano and/or additional products, the development of additional products, 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 AI_Milano 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
As at December 31,	2010			2009
(expressed in Canadian dollars)	$			$
ASSETS
Current assets
Cash and cash equivalents	267,436			3,687,548
Investment (Note 4)	-			380,601
Accounts receivable	184,016			124,083
GST receivable	59,620			52,649
Prepaid expenses, deposits and other	229,590			175,894
	740,662			4,420,775
Property and equipment	2,294,026			3,683,462
	3,034,688			8,104,237
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities	1,014,857			1,291,023
Current portion of long-term debt	1,906,361			1,534,535
	2,921,218			2,825,558
Long-term portion of convertible debenture	758,815			-
	3,680,033			2,825,558
SHAREHOLDERS' (DEFICIENCY) EQUITY
Capital stock	75,459,690			73,726,414
Warrants	3,527,425			3,527,425
Contributed surplus	14,312,965			13,764,398
Accumulated other comprehensive loss	-			(54,372)
Deficit	(93,945,425)			(85,685,186)
	(645,345)			5,278,679
	3,034,688			8,104,237

 

SemBioSys Genetics Inc.
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
For the years ended December 31,	2010				2009
(expressed in Canadian dollars, except shares)	$				$
REVENUE
Licensing fees	315,789				307,048
Contract research	151,715				102,571
Royalty revenue	12,012				-
Licensing option fees	-				1,161,495
	479,516				1,571,114
EXPENSES
Research and development (net of scientific research &
experimental tax credits $318,994 (2009 - $nil)).	3,512,564				6,093,515
General and administration	1,202,898				1,619,930
Intellectual property costs (Note 7)	1,643,015				941,583
Business development	443,423				518,955
Stock-based compensation	466,071				682,791
Amortization	1,366,501				1,471,361
Cost recoveries (Note 9c)	(325,258)				(57,805)
	8,309,214				11,270,330
Loss before the undernoted	(7,829,698)				(9,699,216)
Interest expense	(370,545)				(210,648)
Interest income	3,821				9,427
Foreign exchange gain	4,282				50,621
Gain on sale of property and equipment	179,723
Gain on exchange of shares	-				2,941,981
Gain on sale of shares	-				415,445
Realized loss on disposal of investment	(247,822)				-
	(430,541)				3,206,826
Net loss from continuing operations	(8,260,239)				(6,492,390)
Discontinued operations	-				(96,492)
Net loss	(8,260,239)				(6,588,882)
Deficit - Beginning of the year	(85,685,186)				(79,096,304)
Deficit - End of the period of the year	(93,945,425)				(85,685,186)
Loss per share
Basic and diluted from continuing operations	(0.17)				(0.19)
Basic and diluted from discontinued operations	-				(0.00)
Basic and diluted	(0.17)				(0.19)
Weighted average shares outstanding	49,505,621				33,869,094

 

SemBioSys Genetics Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
For the years ended December 31,		2010		2009
(expressed in Canadian dollars)		$		$
Net loss for the year		(8,260,239)		(6,588,882)
Other comprehensive loss
	Foreign currency translation adjustment	-		-
	Foreign currency translation adjustment transferred to
	net income from discontinued operations during the year	-		-
	Unrealized loss on investment	(193,450)		(54,372)
	Realized loss on investment (Note 4)	247,822		-
Comprehensive loss for the year		(8,205,867)		(6,643,254)
CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE LOSS
As at December 31,		2010		2009
(expressed in Canadian dollars)		$		$
Accumulated other comprehensive loss
- beginning of the year		(54,372)		-
Foreign currency translation adjustments
	Change in accounting policy	-		26,534
	Adjustments during the year	-		(32,365)
	Transferred to net income from discontinued operations during the year	-		5,831
		(54,372)		-
Unrealized loss on Investment		(193,450)		(54,372)
Realized loss on investment		247,822		-
Accumulated other comprehensive loss
- end of the year		-		(54,372)

 

SemBioSys Genetics Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31,		2010		2009
(expressed in Canadian dollars)		$		$
Cash provided by (used in)
Operating activities
Net loss for the period from continuing operations		(8,260,239)		(6,492,390)
Add items not affecting cash:
	Amortization	1,366,501		1,471,361
	Stock-based compensation	466,071		682,791
	Shares issued for services	113,635		152,985
	Deferred share units issued	82,496		109,929
	Unrealized foreign exchange loss	2,891		(60,952)
	Non-cash interest expense	340,092		158,237
	Gain on disposal of property and equipment	(179,723)		-
	Loss on disposal of investment	247,822		-
	Gain on disposal of shares	-		(415,445)
	Gain on exchange of shares	-		(2,941,981)
	Non-cash interest on convertible debentures	28,815		-
	Non-cash license fees expensed	730,000		-
		(5,061,639)		(7,335,465)
Change in non-cash working capital and other        balances related to operations		64,902		(138,221)
Cash used in operating activities		(4,996,737)		(7,473,686)
Financing activities
Issuance of capital stock		1,778,595		3,531,801
Share issue costs		(163,709)		(303,609)
Issuance of warrants		-		2,454,668
Warrant issue costs		(6,340)		(333,223)
Proceeds related to the corporate reorganization		-		3,701,929
Costs related to the corporate reorganization		(255,572)		(443,933)
Proceeds from long-term debt		-		1,431,118
Repayment of long-term debt		(66,156)		(767,822)
Cash provided by  financing activities		1,286,818		9,270,929
Investing activities
Proceeds on disposition of investment		187,148		-
Purchase of Botaneco convertible debenture		-		(19,350)
Proceeds on disposition of property and equipment		102,659		-
Acquisition of property and equipment		-		(17,311)
Cash provided by (used in) investing activities		289,807		(36,661)
Net change in cash from continuing operations		(3,420,112)		1,760,582
Cash flow from discontinued operations
Operating activities		-		(2,081,450)
Financing activities		-		951,576
Investing activities		-		(762,956)
Net change in cash from discontinued operations		-		(1,892,830)
Decrease in cash and cash equivalents		(3,420,112)		(132,248)
Cash and cash equivalents - Beginning of the year		3,687,548		3,819,796
Cash and cash equivalents - End of the year		267,436		3,687,548
Supplemental Information (continuing operations)
Cash interest received		3,938		13,079
Cash interest paid		3,100		51,816
Non-cash transactions
	Capital items included in accounts receivable	100,000		-

 

 

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