ARIUS Announces Third Quarter Fiscal 2007 Financial Results



    TORONTO, Oct. 12 /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 third quarter,
ended August 31, 2007.
    "Our third quarter of fiscal 2007 was one of preparation as we worked
towards moving our lead drug candidate AR001 into human clinical trials in
2008, while also building value in our business and our pipeline through the
progression of our other antibody anti-cancer candidates," said Dr. David
Young, President and CEO. "Our most important development this quarter and a
milestone step for ARIUS, was the initiation of a pre-clinical dose-finding
toxicology study for AR001, our CD44 targeting anti-cancer antibody."

    Program Updates:

    CD44 Cancer Stem Cell Program
    ARIUS initiated a pre-clinical dose-finding study, commencing its
IND-enabling toxicology program for its lead anti-CD44 antibody. The Company
expects to file a Phase I IND application and begin human clinical trials in
2008. The Company engaged a manufacturer for process development and
manufacturing of its lead antibody under Current Good Manufacturing Practices
("cGMP").

    Trop-2 Signal Transduction Program
    ARIUS has successfully humanized its anti-Trop-2 antibody, which
continues to retain its binding characteristics and in vivo activity. The
Company also selected a manufacturer for the antibody. The Company expects to
perform pre-clinical toxicology studies in 2008 in preparation for filing a
Phase I IND application in 2008.

    CD59 Complement Inhibitor Program
    In collaboration with Antitope Limited, ARIUS has successfully humanized
its CD59 targeting antibody, retaining its binding characteristics and in vivo
activity. The Company expects to perform preclinical toxicology studies in
2008 in preparation for filing a Phase I IND application.

    CD63 Antibody Program
    The Genentech-partnered CD63 antibody program continues to produce
results from further preclinical studies in a variety of cancer indications in
its progress towards human clinical trials.

    Takeda Collaboration
    ARIUS successfully met its year one obligations and received all
scheduled research payments from Takeda.

    Additional Product Updates
    Additionally, ARIUS continues to progress several other antibody
candidates and has antibody programs targeting the MCSP antigen, AR005
antigen, and 37LRP in addition to several other undisclosed programs.

    Management Change:

    As part of its corporate governance review, ARIUS' Board of Directors has
decided to nominate Mr. Carl Gordon as non-executive Chair of the Board of
Directors. Dr. Young remains as President and Chief Executive Officer of the
Company.
    During the quarter, ARIUS' Executive Vice President and Chief Business
Officer, Helen Findlay, left the Company to pursue other opportunities. In Ms.
Findlay's role, she contributed to ARIUS' partnering and financing activities,
helping to establish ARIUS on the path to becoming a clinical company.

    Financial Results:

    All amounts are in Canadian dollars unless otherwise indicated.

    For the nine-month period ended August 31, 2007, the Company recorded a
net loss of $8,104,701 ($0.18 per share) compared to a net loss of $2,820,462
($0.09 per share) for the same period in fiscal 2006. The increase in net loss
was the result of lower revenue, higher research and development expenses and
higher general and administrative costs offset partially by lower interest
expense and higher interest income. For the three-month period ended
August 31, 2007, the Company recorded a net loss of $2,761,874 ($0.06 per
share) compared to a net loss of $1,469,728 ($0.03 per share) for the
three-month period ended August 31, 2006. This increase in net loss for the
three-month period is primarily the result of higher research and development
expenses, higher general and administrative expenses, and lower interest
income, offset partially by lower interest expense and higher revenues.
    Revenue decreased to $845,974 for the nine-month period ended August 31,
2007, compared to $2,668,010 for the nine-month period ended August 31, 2006.
The decrease during the nine-month period ended August 31, 2007, was primarily
the result of the recognition of licensing fee revenue from Genentech in the
fiscal 2006 period, partially offset by the recognition of revenue from the
Takeda collaboration and the recognition of unearned revenue from PDL
BioPharma Inc. ("PDL"). For the three-month period ended August 31, 2007, the
Company's revenue increased to $716,128 compared to $226,710 for the
three-month period ended August 31, 2006. The increase in the three month
period relates to the recognition of revenue from the Takeda collaboration and
the recognition of unearned revenue from PDL in the fiscal 2007 period.
    Interest income increased to $537,128 for the nine-month period ended
August 31, 2007, compared to $396,966 for the same period in fiscal 2006. For
the three-month period ended August 31, 2007, the Company's interest income
decreased to $155,721 compared to $275,529 for the same period in fiscal 2006.
The increase for the nine-month period was primarily the result of higher
average cash balances due to the completion of a private placement in February
and March 2006, payments from the Genentech licensing agreement and the Takeda
research collaboration and higher interest rates. The decrease for the
three-month period was primarily the result of lower average cash and
investment balances.
    Research and development costs amounted to $6,461,991 for the nine-month
period ended August 31, 2007, compared to $3,175,663 for the same period in
fiscal 2006. For the three-month period ended August 31, 2007, the Company's
research and development costs amounted to $2,402,060 compared to $1,303,088
for the same period in fiscal 2006. The increases were primarily the result of
increased product development activity, including process development and
scale-up, as the Company prepares several of its programs for the clinic as
well as an increase in staffing levels and stock option remuneration expense.
    General and administrative expenses increased to $2,833,070 for the
nine-month period ended August 31, 2007, compared to $2,162,020 for the same
period in fiscal 2006. For the three-month period ended August 31, 2007, the
Company's general and administrative expenses increased to $1,160,827 compared
to $470,619 for the same period in fiscal 2006. The increases were primarily
the result of increased head count, stock option remuneration, and severance
costs, partially offset by decreased consulting and legal costs.
    As at August 31, 2007, the Company's cash and cash equivalents,
short-term investments and working capital position were $6,201,996,
$7,962,663 and $12,035,539 respectively, compared with November 30, 2006
balances of $4,077,065, $16,135,490 and $20,263,807, respectively. The Company
believes that it has adequate financial resources for anticipated expenditures
until the fourth quarter of fiscal 2008.
    As at October 10, 2007, the Company had: 44,750,964 Common Shares
outstanding; 34,953,526 Warrants; 2,121,808 Compensation Warrants; and
4,019,705 Stock Options.

    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 400
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.ariusresearch.com.

    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.



    
    ARIUS RESEARCH INC.
    (a Development Stage Company)

    INTERIM BALANCE SHEETS

    (Unaudited)
    -------------------------------------------------------------------------
                                                      August 31, November 30,
                                                           2007         2006
                                                              $            $
    -------------------------------------------------------------------------

    Assets

    Current assets:
      Cash and cash equivalents                       6,201,996    4,077,065
      Short-term investments                          7,962,663   16,135,490
      Receivables                                       246,191      716,727
      Refundable tax credits                            600,000      400,000
      Prepaid expenses                                  493,864      340,695
      -----------------------------------------------------------------------
                                                     15,504,714   21,669,977

    Property and equipment, net                       1,988,053    1,539,536
    -------------------------------------------------------------------------
                                                     17,492,767   23,209,513
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity

    Current liabilities:
      Accounts payable and accrued liabilities        1,917,930    1,211,528
      Current portion of capital lease obligation        25,265       29,630
      Current portion of unearned revenue and
       contract advances                              1,525,980      165,012
      -----------------------------------------------------------------------
                                                      3,469,175    1,406,170

    Leasehold inducements                               287,147      318,261
    Capital lease obligation                              8,821       27,934
    Unearned revenue and contract advances            1,937,451    2,263,091

    Shareholders' equity:
      Share capital:
        Common shares                                28,644,454   28,644,454
        Warrants                                      9,603,644    9,603,644
        Compensation warrants                           912,377      912,377
      Contributed surplus                             2,210,993    1,510,176
      Deficit                                       (29,581,295) (21,476,594)
      -----------------------------------------------------------------------
                                                     11,790,173   19,194,057
    Guarantees
    Commitments
    -------------------------------------------------------------------------
                                                     17,492,767   23,209,513
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    ARIUS RESEARCH INC.
    (a Development Stage Company)

    INTERIM STATEMENTS OF OPERATIONS, COMPREHENSIVE LOSS AND DEFICIT

    (Unaudited)
    ------------------------------------------------------------
                                        Nine-month   Nine-month
                                      period ended period ended
                                         August 31,   August 31,
                                              2007         2006
                                                 $            $
    ------------------------------------------------------------

    Revenue:
      Research Contract                    508,660            -
      Product                               98,942            -
      Licensing fees                       165,012    2,592,041
      Research grant payments               73,360       75,969
      ----------------------------------------------------------
                                           845,974    2,668,010
    Expenses:
      Research and development,
       net of tax credits                6,461,991    3,175,663
      General and administrative         2,833,070    2,162,020
      Interest expense                       2,313      547,755
      ----------------------------------------------------------
                                         9,297,374    5,885,438
      ----------------------------------------------------------

    Loss before the undernoted          (8,451,400)  (3,217,428)

    Interest income                        537,128      396,966

    Loss on extinguishment of debt               -            -
    ------------------------------------------------------------

    Loss before income taxes            (7,914,272)  (2,820,462)

    Income taxes:

      Current                             (190,429)           -
    ------------------------------------------------------------

    Loss and comprehensive loss
     for the period                     (8,104,701)  (2,820,462)

    Deficit, beginning of period       (21,476,594) (15,032,405)
    ------------------------------------------------------------

    Deficit, end of period             (29,581,295) (17,852,867)
    ------------------------------------------------------------
    ------------------------------------------------------------

    Loss per share - basic and diluted       (0.18)       (0.09)
    ------------------------------------------------------------
    ------------------------------------------------------------

    Weighted average common shares
     outstanding                        44,750,964   32,828,905
    ------------------------------------------------------------
    ------------------------------------------------------------


    -------------------------------------------------------------------------
                                                                  Cumulative
                                       Three-month  Three-month        since
                                      period ended period ended inception on
                                         August 31,   August 31,   August 11,
                                              2007         2006         1999
                                                 $            $            $
    -------------------------------------------------------------------------

    Revenue:
      Research Contract                    508,660            -      508,660
      Product                               42,456            -       98,942
      Licensing fees                       165,012      208,564    3,284,703
      Research grant payments                    -       18,146      273,663
      -----------------------------------------------------------------------
                                           716,128      226,710    4,165,968
    Expenses:
      Research and development,
       net of tax credits                2,402,060    1,303,088   23,254,226
      General and administrative         1,160,827      470,619   10,519,592
      Interest expense                         667      198,260      903,836
      -----------------------------------------------------------------------
                                         3,563,554    1,971,967   34,677,654
      -----------------------------------------------------------------------

    Loss before the undernoted          (2,847,426)  (1,745,257) (30,511,686)

    Interest income                        155,721      275,529    1,902,963

    Loss on extinguishment of debt               -            -     (782,143)
    -------------------------------------------------------------------------

    Loss before income taxes            (2,691,705)  (1,469,728) (29,390,866)

    Income taxes:

      Current                              (70,169)           -     (190,429)
    -------------------------------------------------------------------------

    Loss and comprehensive loss
     for the period                     (2,761,874)  (1,469,728) (29,581,295)

    Deficit, beginning of period       (26,819,421) (16,383,139)           -
    -------------------------------------------------------------------------

    Deficit, end of period             (29,581,295) (17,852,867) (29,581,295)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Loss per share - basic and diluted       (0.06)       (0.03)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average common shares
     outstanding                        44,750,964   44,076,383
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    ARIUS RESEARCH INC.
    (a Development Stage Company)

    INTERIM STATEMENTS OF CASH FLOWS

    (Unaudited)
    ------------------------------------------------------------
                                        Nine-month   Nine-month
                                      period ended period ended
                                         August 31,   August 31,
                                              2007         2006
                                                 $            $
    ------------------------------------------------------------
    Cash provided by (used in):
    Operating activities:
      Loss for the period               (8,104,701)  (2,820,462)
      Items not involving cash:
        Amortization of:
          Property and equipment           274,630      171,636
          Deferred costs                         -       40,693
          Leasehold inducements            (31,114)           -
        Loss on disposal of equipment            -            -
        Write-off of leasehold
         improvements                            -            -
        Leasehold inducement                     -            -
        Non-cash stock-based
         compensation                      700,817      102,460
        Accretion of convertible
         debentures                              -      224,077
        Loss on extinguishment of debt           -            -
        Services received for common
         shares                                  -            -
        Write-off of investment                  -            -
        Interest expense paid in
         common shares                           -            -
      ----------------------------------------------------------
                                        (7,160,368)  (2,281,596)
      Change in non-cash operating
       working capital items             1,859,097      369,343
      ----------------------------------------------------------
                                        (5,301,271)  (1,912,253)
    Financing activities:
      Issue of shares, warrants and
       units, net of issuance costs              -   24,861,718
      Issuance of convertible bridge
       loan, net                                 -    2,126,619
      Restricted cash                            -   (2,247,623)
      Repayment of convertible bridge
       loan, including costs                     -            -
      Exercise of compensation warrants          -            -
      Draw of bank line of credit                -            -
      Repayment of bank line of credit           -      (85,000)
      Bridge loan                                -            -
      Repayment of bridge loan                   -     (300,000)
      Repayment of capital lease and
       equipment financing obligations     (23,478)     (68,263)
      ----------------------------------------------------------
                                           (23,478)  24,287,451
    Investing activities:
      Purchase of short-term
       investments                     (25,405,198) (14,998,021)
      Maturity of short-term
       investments                      33,578,025            -
      Leasehold inducements                      -            -
      Long-term investment                       -            -
      Acquisition of property
       and equipment                      (723,147)    (674,279)
      Disposal of equipment                      -            -
      ----------------------------------------------------------
                                         7,449,680  (15,672,300)
    Increase in cash & cash
     equivalents                         2,124,931    6,702,898
    Cash & cash equivalents,
     beginning of period                 4,077,065      152,967
    ------------------------------------------------------------
    Cash & cash equivalents,
     end of period                       6,201,996    6,855,865
    ------------------------------------------------------------
    ------------------------------------------------------------



    -------------------------------------------------------------------------
                                                                  Cumulative
                                       Three-month  Three-month        since
                                      period ended period ended inception on
                                         August 31,   August 31,   August 11,
                                              2007         2006         1999
                                                 $            $            $
    -------------------------------------------------------------------------
    Cash provided by (used in):
    Operating activities:
      Loss for the period               (2,761,874)  (1,469,728) (29,581,295)
      Items not involving cash:
        Amortization of:
          Property and equipment           108,151       85,426    1,163,788
          Deferred costs                         -       14,364       55,055
          Leasehold inducements            (10,371)           -      (45,781)
        Loss on disposal of equipment            -            -       23,532
        Write-off of leasehold
         improvements                            -            -       86,349
        Leasehold inducement                     -            -       89,148
        Non-cash stock-based
         compensation                      266,197       31,456    1,486,216
        Accretion of convertible
         debentures                              -      120,903      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
      -----------------------------------------------------------------------
                                        (2,397,897)  (1,217,579) (24,950,884)
      Change in non-cash operating
       working capital items               638,007     (110,711)   4,041,306
      -----------------------------------------------------------------------
                                        (1,759,890)  (1,328,290) (20,909,578)
    Financing activities:
      Issue of shares, warrants and
       units, net of issuance costs              -            -   38,281,778
      Issuance of convertible bridge
       loan, net                                 -            -    2,196,619
      Restricted cash                            -      (38,540)           -
      Repayment of convertible bridge
       loan, including costs                     -            -   (2,408,886)
      Exercise of compensation warrants          -            -        8,581
      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      (6,045)     (21,316)    (284,279)
      -----------------------------------------------------------------------
                                            (6,045)     (59,856)  37,793,813
    Investing activities:
      Purchase of short-term
       investments                     (15,164,593) (14,998,021) (41,540,688)
      Maturity of short-term
       investments                      15,917,008            -   33,578,025
      Leasehold inducements                      -            -      243,780
      Long-term investment                       -            -      (20,000)
      Acquisition of property
       and equipment                      (205,593)    (523,558)  (2,952,342)
      Disposal of equipment                      -            -        8,986
      -----------------------------------------------------------------------
                                           546,822  (15,521,579) (10,682,239)
    Increase in cash & cash
     equivalents                        (1,219,113) (16,909,725)   6,201,996
    Cash & cash equivalents,
     beginning of period                 7,421,109   23,765,590            -
    -------------------------------------------------------------------------
    Cash & cash equivalents,
     end of period                       6,201,996    6,855,865    6,201,996
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    

    %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@ariusresearch.com, contact@ariusresearch.com; James Smith, Investor
Relations, (416) 815-0700 ext. 229, jsmith@equicomgroup.com

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ARIUS RESEARCH INC.

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