ARIUS announces second quarter fiscal 2008 financial results



    TORONTO, July 11 /CNW/ - ARIUS Research Inc., (TSX: ARI), a biotechnology
company discovering and developing the next wave of antibody therapeutics,
today announced its financial and operational results for the second fiscal
quarter of 2008, ended May 31st, 2008.
    "Throughout the second quarter, we maintained our focus on moving ARIUS'
anti-cancer antibodies towards human clinical trial. Most notably, our lead
drug candidates received significant attention from the scientific community
this quarter as five abstracts were presented at the AACR Annual Meeting in
April, disclosing new findings about our CD44, Trop-2, CD59, and CD9 antibody
programs," said Dr. David Young, President and CEO of ARIUS. "Additionally,
abstracts on our CD44 program were selected for publication at the ASCO Annual
Meeting in May. The inclusion of ARIUS' findings at these important
conferences demonstrates the high quality of our research and reinforces the
value of our lead drug candidates."

    
    Program Updates:

    CD44 Cancer Stem Cell Program
    -   Presented two CD44-focused posters at AACR the American Association
        for Cancer Research (AACR) Annual Meeting held from April 12-16, 2008
        in San Diego, California.
    -   Published two CD44-focused abstracts at the American Association for
        Clinical Oncology (ASCO) Annual Meeting held from May 30-June 3, 2008
        in Chicago, Illinois.
    -   Held meeting with FDA to discuss plans for the upcoming IND
        submission in the first quarter of 2008.
    -   ARIUS plans to have clinical trials' materials prepared in the fourth
        quarter of 2008 and then a Phase I IND application is expected to be
        filed and human clinical trials commenced.

    Trop-2 Signal Transduction Program
    -   Completed two toxicology studies with no dose-limiting toxicity.
    -   Presented a Trop-2-focused poster at AACR Annual Meeting.
    -   Engaged Laureate Pharma Inc. for cGMP manufacturing of humanized
        antibody for Phase 1 clinical supply. A cell line producing the
        humanized anti-Trop-2 antibody was successfully transferred to
        Laureate.
    -   Preparing for a pre-IND meeting with the FDA.
    -   ARIUS intends to have clinical trials' materials prepared in the
        fourth quarter of 2008 and then a Phase I IND application is expected
        to be filed and human clinical trials commenced.

    CD59 Complement Inhibitor Program
    -   Presented a CD59-focused poster at AACR Annual Meeting.
    -   Generated a cell line producing humanized CD59 antibody that
        successfully retained binding characteristics and potent in vivo
        activity.
    -   Preparing to perform preclinical toxicology studies planned for 2008
        in preparation for a Pre-IND meeting with the FDA and filing a
        Phase I IND application.

    CD9 Cancer Stem Cell Program
    -   Presented a CD9-focused poster at AACR Annual Meeting.
    -   Presented positive findings demonstrating the ability of the lead
        anti-CD9 antibody to kill cancer stem cells in an in vivo model using
        cells from human leukemia patients at the American Association of
        Cancer Research Special Conference on Cancer Stem Cells in the first
        quarter of 2008.

    CD63 Antibody Program
    -   Licensed to Genentech, Inc. in March 2006, the CD63 program continues
        to advance in preclinical studies in a variety of cancer indications
        as part of a program to move the lead antibody towards the clinic.

    Takeda Collaboration
    -   Discovered and delivered novel antibodies to Takeda. Under the terms
        of the research collaboration agreement, ARIUS has successfully met
        its obligations to date and has received all scheduled research
        payments from Takeda.

    Additional Product Updates
    -   Currently, ARIUS has antibody programs targeting the MCSP antigen and
        37LRP, in addition to several other undisclosed programs.
    -   ARIUS now has 26 issued or allowed patents covering its antibody
        programs and discovery platform and over 273 patents pending
        worldwide.

    Corporate Updates
    -   Dr. Young was awarded "Most Innovative" award by the Association of
        Chinese Canadian Entrepreneurs for demonstration of exceptional
        innovation in his field and contribution to the marketplace.
    -   Secured a sponsored research agreement with the University of Toronto
        Health Network and cancer stem cell pioneer, Dr. John E. Dick. In
        collaboration with Dr. Dick, ARIUS is assessing the impact of certain
        antibodies on cancer stem cells.
    -   Continued to evaluate its strategic options with global
        pharmaceutical and biotechnology companies.
    

    Financial Results:

    All amounts are in Canadian dollars unless otherwise indicated.

    For the six-month period ended May 31, 2008, the Company recorded a net
loss of $6,401,018 ($0.14 per share) compared to a net loss of
$5,342,827 ($0.12 per share) for the six-month period ended May 31, 2007. For
the three-month period ended May 31, 2008, the Company recorded a net loss of
$3,816,937 ($0.08 per share) compared to a net loss of $3,036,132 ($0.07 per
share) for the three-month period ended May 31, 2007. This increase in net
loss for both periods is primarily the result of higher research and
development, and general administrative expenses, partially offset by higher
revenues and foreign exchange gains.
    For the six-month period ended May 31, 2008, the Company's revenue
increased to $1,471,447 compared to $129,846 for the same period in fiscal
2007. For the three-month period ended May 31, 2008, the Company's revenue
increased to $424,153 compared to $21,392 for the same period in fiscal 2007.
The increase for both periods was primarily the result of the recognition of
product and research contract revenue from the Takeda collaboration and the
recognition of licensing fee revenue for an extension fee payment under the
agreement with PDL Biopharma Inc.
    For the six-month period ended May 31, 2008, the Company's interest
income decreased to $176,512 compared to $381,407 for the same period in
fiscal 2007. For the three-month period ended May 31, 2008, the Company's
interest income decreased to $69,720 compared to $181,484 for the same period
in fiscal 2007. The decrease for both periods was primarily the result of
lower average cash and investment balances.
    For the six-month period ended May 31, 2008, the Company's research and
development costs increased to $5,933,367 compared to $4,059,931 for the same
period in fiscal 2007. For the three-month period ended May 31, 2008, the
Company's research and development costs increased to $3,337,461 compared to
$2,102,603 for the same period in fiscal 2007. The increases were primarily
the result of an increase in staffing levels related to an overall increase in
activity as the Company is preparing three products for the clinic,
accompanied by increased patent and licensing activity and an increase in
stock option remuneration expense.
    For the six-month period ended May 31, 2008, the Company's general and
administrative expenses increased to $2,170,683 compared to $1,437,009 for the
same period in fiscal 2007. For the three-month period ended May 31, 2008, the
Company's general and administrative expenses increased to $1,149,402 compared
to $762,673 for the same period in fiscal 2007. The increases were primarily
the result of an increase in staffing levels, consulting fees, legal expenses
and stock option remuneration expense.
    As at May 31, 2008, ARIUS' cash and cash equivalents, and net working
capital position were $8,543,124 and $5,807,638, respectively, compared with
November 30, 2007 cash and cash equivalents, short-term investments and net
working capital of $5,635,365, $6,825,190 and $9,088,712, respectively. The
Company currently believes that it has adequate financial resources to
continue into the fourth quarter of fiscal 2008 based on planned research and
development expenditures and operating costs.

    About ARIUS

    ARIUS is a biotechnology company discovering and developing the next wave
of antibody therapeutics. Established in 1999, ARIUS has built a proprietary
technology platform, FunctionFIRST(TM), that rapidly identifies and selects
antibodies based on their functional ability to affect disease. This antibody
generation engine has enabled ARIUS to assemble a portfolio of more than 500
antibody candidates. In addition to the antibodies it is developing in-house,
ARIUS has ongoing partnerships with key biotechnology and drug development
companies. ARIUS is listed on the TSX under the symbol "ARI". For further
information, visit www.ariusmabs.com

    Financial Information to Follow:

    
    ARIUS RESEARCH INC.
    (A DEVELOPMENT STAGE COMPANY)

    INTERIM BALANCE SHEETS

    (Unaudited)

    -------------------------------------------------------------------------
                                                        May 31,  November 30,
                                                          2008          2007
                                                             $             $
    -------------------------------------------------------------------------

    Assets

    Current assets:
      Cash and cash equivalents                      8,543,124     5,635,365
      Short-term investments                                 -     6,825,190
      Receivables                                      185,672       230,126
      Refundable tax credits                           600,000       400,000
      Prepaid expenses                                 473,080       387,674
      -----------------------------------------------------------------------
                                                     9,801,876    13,478,355

    Facilities and equipment, net                    1,763,960     1,889,921

    -------------------------------------------------------------------------
                                                    11,565,836    15,368,276
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity

    Current liabilities:
      Accounts payable and accrued liabilities       2,060,753     2,034,972
      Accrued loss on embedded foreign exchange
       derivative                                      129,930       296,064
      Current portion of leasehold inducements          41,484        41,484
      Current portion of capital lease obligation       15,304        25,710
      Current portion of deferred revenue            1,746,767     1,991,413
      -----------------------------------------------------------------------
                                                     3,994,238     4,389,643

    Leasehold inducements                              214,548       235,291
    Capital lease obligation                                 -         2,224
    Deferred revenue                                 1,752,104     1,758,898

    Shareholders' equity:
      Share capital:
        Common shares                               31,084,346    28,644,454
        Warrants                                    10,325,740     9,603,644
        Compensation warrants                                -       912,377
      Contributed surplus                            3,129,511     2,355,378
      Deficit                                      (38,934,651)  (32,533,633)
      -----------------------------------------------------------------------
                                                     5,604,946     8,982,220

    Nature of operations and going concern
     uncertainty
    Commitments
    Subsequent events

    -------------------------------------------------------------------------
                                                    11,565,836    15,368,276
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    ARIUS RESEARCH INC.
    (A DEVELOPMENT STAGE COMPANY)

    INTERIM STATEMENTS OF OPERATIONS, COMPREHENSIVE LOSS AND DEFICIT

    (Unaudited)

    -----------------------------------------------------------
                                       Six-month     Six-month
                                    period ended  period ended
                                          May 31,       May 31,
                                            2008          2007
                                               $             $
    -----------------------------------------------------------

    Revenue:
      Research contract                1,249,340             -
      Product                            121,107        56,486
      Licensing fees                     101,000             -
      Research grant payments                  -        73,360
      ---------------------------------------------------------
                                       1,471,447       129,846
    Expenses:
      Research and development,
       net of tax credits              5,933,367     4,059,931
      General and administrative       2,170,683     1,437,009
      Foreign exchange loss (gain)      (202,635)      235,234
      Interest expense                     2,371         1,646
      ---------------------------------------------------------
                                       7,903,786     5,733,820
      ---------------------------------------------------------

    Loss before the undernoted        (6,432,339)   (5,603,974)

    Interest income                      176,512       381,407
    Loss on extinguishment of debt             -             -
    -----------------------------------------------------------

    Loss before income taxes          (6,255,827)   (5,222,567)

    Income taxes:
      Current                           (145,191)     (120,260)
    -----------------------------------------------------------

    Loss and comprehensive loss
     for the period                   (6,401,018)   (5,342,827)

    Deficit, beginning of period     (32,533,633)  (21,476,594)
    -----------------------------------------------------------

    Deficit, end of period           (38,934,651)  (26,819,421)
    -----------------------------------------------------------
    -----------------------------------------------------------

    Loss per share - basic and
     diluted                               (0.14)        (0.12)

    -----------------------------------------------------------
    -----------------------------------------------------------

    Weighted average common shares
     outstanding                      46,239,912    44,750,964

    -----------------------------------------------------------
    -----------------------------------------------------------


    -------------------------------------------------------------------------
                                                                  Cumulative
                                     Three-month   Three-month         since
                                    period ended  period ended  inception on
                                          May 31,       May 31,    August 11,
                                            2008          2007          1999
                                               $             $             $
    -------------------------------------------------------------------------

    Revenue:
      Research contract                  262,478             -     1,996,120
      Product                             60,675        21,392       280,049
      Licensing fees                     101,000             -     3,385,703
      Research grant payments                  -             -       273,663
      -----------------------------------------------------------------------
                                         424,153        21,392     5,935,535
    Expenses:
      Research and development,
       net of tax credits              3,337,461     2,102,603    31,331,946
      General and administrative       1,149,402       762,673    13,168,494
      Foreign exchange loss (gain)      (236,020)      319,481       508,201
      Interest expense                       551           771       906,768
      -----------------------------------------------------------------------
                                       4,251,394     3,185,528    45,915,409
      -----------------------------------------------------------------------

    Loss before the undernoted        (3,827,241)   (3,164,136)  (39,979,874)

    Interest income                       69,720       181,484     2,221,804
    Loss on extinguishment of debt             -             -      (782,143)
    -------------------------------------------------------------------------

    Loss before income taxes          (3,757,521)   (2,982,652)  (38,540,213)

    Income taxes:
      Current                            (59,416)      (53,480)     (394,438)
    -------------------------------------------------------------------------

    Loss and comprehensive loss
     for the period                   (3,816,937)   (3,036,132)  (38,934,651)

    Deficit, beginning of period     (35,117,714)  (23,783,289)            -
    -------------------------------------------------------------------------

    Deficit, end of period           (38,934,651)  (26,819,421)  (38,934,651)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Loss per share - basic and
     diluted                               (0.08)        (0.07)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average common shares
     outstanding                      47,062,644    44,750,964

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    ARIUS RESEARCH INC.
    (A DEVELOPMENT STAGE COMPANY)

    INTERIM STATEMENTS OF CASH FLOWS

    (Unaudited)

    -----------------------------------------------------------
                                       Six-month     Six-month
                                    period ended  period ended
                                          May 31,       May 31,
                                            2008          2007
                                               $             $
    -----------------------------------------------------------
    Cash provided by (used in):
    Operating activities:
      Loss for the period             (6,401,018)   (5,342,827)
      Items not involving cash:
        Amortization of:
          Facilities and equipment       187,307       166,479
          Deferred costs                       -             -
          Leasehold inducements          (20,743)      (20,743)
        Loss on disposal of equipment          -             -
        Write-off of leasehold
         improvements                          -             -
        Write-off of receivable           42,109             -
        Leasehold inducement                   -             -
        Non-cash stock-based
         compensation                    866,895       434,620
        Accretion of convertible
         debentures                            -             -
        Loss on extinguishment of
         debt                                  -             -
        Services received for common
         shares                                -             -
        Write-off of investment                -             -
        Interest expense paid in
         common shares                         -             -
      Change in non-cash operating
        working capital items           (674,854)    1,221,090
      ---------------------------------------------------------
                                      (6,000,304)   (3,541,381)
    Financing activities:
      Issue of shares, warrants and
       units, net of issuance costs      305,486             -
      Issuance of convertible bridge
       loan, net                               -             -
      Repayment of convertible bridge
       loan, including costs                   -             -
      Exercise of compensation
       warrants                        1,697,446             -
      Exercise of stock options          153,917             -
      Draw of bank line of credit              -             -
      Repayment of bank line of
       credit                                  -             -
      Bridge loan                              -             -
      Repayment of bridge loan                 -             -
      Repayment of capital lease
       and equipment financing
       obligations                       (12,630)      (17,433)
      ---------------------------------------------------------
                                       2,144,219       (17,433)
    Investing activities:
      Purchase of short-term
       investments                    (1,299,844)  (10,240,605)
      Maturity of short-term
       investments                     8,125,034    17,661,017
      Leasehold inducements                    -             -
      Long-term investment                     -             -
      Acquisition of facilities
       and equipment                     (61,346)     (517,554)
      Disposal of equipment                    -             -
      ---------------------------------------------------------
                                       6,763,844     6,902,858

    Increase in cash & cash
     equivalents                       2,907,759     3,344,044

    Cash & cash equivalents,
     beginning of period               5,635,365     4,077,065

    -----------------------------------------------------------
    Cash & cash equivalents,
     end of period                     8,543,124     7,421,109
    -----------------------------------------------------------
    -----------------------------------------------------------


    -------------------------------------------------------------------------
                                                                  Cumulative
                                     Three-month   Three-month         since
                                    period ended  period ended  inception on
                                          May 31,       May 31,    August 11,
                                            2008          2007          1999
                                               $             $             $
    -------------------------------------------------------------------------
    Cash provided by (used in):
    Operating activities:
      Loss for the period             (3,816,937)   (3,036,132)  (38,934,651)
      Items not involving cash:
        Amortization of:
          Facilities and equipment        94,993        85,064     1,466,178
          Deferred costs                       -             -        55,055
          Leasehold inducements          (10,372)      (10,371)      (76,896)
        Loss on disposal of equipment          -             -        23,532
        Write-off of leasehold
         improvements                          -             -        86,349
        Write-off of receivable           42,109             -        42,109
        Leasehold inducement                   -             -        89,148
        Non-cash stock-based
         compensation                    696,818       224,036     2,497,496
        Accretion of convertible
         debentures                            -             -       429,905
        Loss on extinguishment of
         debt                                  -             -       782,143
        Services received for common
         shares                                -             -       400,024
        Write-off of investment                -             -        20,000
        Interest expense paid in
         common shares                         -             -       140,032
      Change in non-cash operating
        working capital items            109,584       549,700     4,388,693
      -----------------------------------------------------------------------
                                      (2,883,805)   (2,187,703)  (28,590,883)
    Financing activities:
      Issue of shares, warrants and
       units, net of issuance costs      305,486             -    38,587,264
      Issuance of convertible bridge
       loan, net                               -             -     2,196,619
      Repayment of convertible bridge
       loan, including costs                   -             -    (2,408,886)
      Exercise of compensation
       warrants                                -             -     1,706,027
      Exercise of stock options          118,825                     153,917
      Draw of bank line of credit              -             -       655,000
      Repayment of bank line of
       credit                                  -             -      (655,000)
      Bridge loan                              -             -       300,000
      Repayment of bridge loan                 -             -      (300,000)
      Repayment of capital lease
       and equipment financing
       obligations                        (6,370)       (5,941)     (303,061)
      -----------------------------------------------------------------------
                                         417,941        (5,941)   39,931,880
    Investing activities:
      Purchase of short-term
       investments                             -    (2,577,726)  (44,450,921)
      Maturity of short-term
       investments                     1,299,844     7,662,879    44,450,921
      Leasehold inducements                    -             -       243,780
      Long-term investment                     -             -       (20,000)
      Acquisition of facilities
       and equipment                     (51,129)     (295,296)   (3,030,639)
      Disposal of equipment                    -             -         8,986
      -----------------------------------------------------------------------
      -----------------------------------------------------------------------
                                       1,248,715     4,789,857    (2,797,873)

    Increase in cash & cash
     equivalents                      (1,217,149)    2,596,213     8,543,124

    Cash & cash equivalents,
     beginning of period               9,760,273     4,824,896             -

    -------------------------------------------------------------------------
    Cash & cash equivalents,
     end of period                     8,543,124     7,421,109     8,543,124
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Forward-Looking Statements

    Certain statements in this news release constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, which involve known and unknown risks, uncertainties and other
factors that may cause our actual results to be materially different from any
future results, performance or achievements expressed or implied by such
statements. Forward-looking statements in this release include, but are not
limited to, ARIUS successfully advancing its new product programs as well as
licensing opportunities. These statements are only predictions and actual
events or results may differ materially. Factors that could cause such actual
events or results expressed or implied by such forward-looking statements to
differ materially from any future results expressed or implied by such
statements include, but are not limited to: early stage of development;
technology and product development; dependence on and management of current
and future corporate collaborations; future capital needs; uncertainty of
additional funding; no assurance of market acceptance; dependence on
proprietary technology and uncertainty of patent protection; intense
competition; manufacturing and market uncertainties; and government
regulation. These and other factors are described in detail in ARIUS' Annual
Report, forthcoming news releases and other filings with Canadian securities
regulatory authorities available at www.sedar.com. Forward-looking statements
are based on our current expectations and ARIUS is not obligated to update
such information to reflect later events or developments.

    %SEDAR: 00013708E




For further information:

For further information: Warren Whitehead, C.M.A., Chief Financial
Officer, ARIUS Research Inc., (416) 862-2323 ext. 214,
wwhitehead@ariusmabs.com, contact@ariusmabs.com; James Smith, Investor
Relations, (416) 815-0700 ext. 229, jsmith@equicomgroup.com

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ARIUS RESEARCH INC.

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