BELLUS Health reports results for first quarter of fiscal 2009



    LAVAL, QC, May 6 /CNW Telbec/ - BELLUS Health Inc. ("BELLUS Health" or
the "Company") (TSX: BLU) reported results for the first quarter ended March
31, 2009. The Company reported a net loss of $9,907,000 ($0.20 per share) for
the quarter, compared to $13,042,000 ($0.27 per share) for the same period the
previous year. The decrease in the net loss is mainly due to a reduction in
research and development (R&D) expenses, before research tax credits and
grants, which amounted to $3,610,000 for the current quarter, compared to
$8,780,000 for the same period the previous year. The decrease is mainly
attributable to a reduction in the research and development of tramiprosate
(ALZHEMED(TM); homotaurine) for the treatment of Alzheimer's disease following
the Company's decision in November 2007 to terminate the tramiprosate
(ALZHEMED(TM)) pharmaceutical drug development program. The Company is also
developing NC-503 (eprodisate) for the treatment of Type II diabetes and
certain features of metabolic syndrome.
    As at March 31, 2009, the Company had available cash, cash equivalents
and marketable securities of $3,187,000, compared to $10,595,000 at December
31, 2008. The decrease is primarily due to funds used in operating activities.
    On April 16, after the end of the first quarter of 2009, the Company
announced the completion of the first tranche of its previously announced
$20.5 million CAD convertible notes (see Liquidity and capital resources
section for further details). BELLUS Health received gross proceeds of $10
million CAD for the issuance of new convertible notes. A second tranche of
$10.5 million CAD is expected to be funded by June 2009. In March 2009, the
Company announced a reduction in the workforce and other related measures
which are expected to result in annual savings of approximately $3.5 million
CAD, and the restructuring of the lease of the Company's main premises and the
2006 and 2007 convertible notes, which are expected to result in annual cash
savings of approximately an additional US$4.1 million on an annual basis.
    BELLUS Health also announced today that, in a cost-saving measure, it is
taking steps to remove its common shares from registration under the U.S.
Securities Exchange Act of 1934, as amended, by filing a Form 15 with U.S.
Securities and Exchange Commission (the "SEC"). Consequently, BELLUS Health
will no longer be required to file reports with the SEC. BELLUS Health will
continue to be subject to public company reporting obligations in Canada, and
investors will continue to be able to access its reports on the sedar.com and
bellushealth.com websites. The Company expects the steps to be completed in
the coming days.
    The Company also announced that on May 5, 2009, Mr. Calin Rovinescu
tendered his resignation from the Board of Directors of BELLUS Health and all
of its committees, effective immediately.
    "I recognize the significant challenges that Calin has assumed as
President and Chief Executive Officer of Air Canada. We wish him every success
and thank him for his valuable contribution to our Board of Directors and its
committees," said Dr. Bellini, Chairman, President and Chief Executive
Officer.

    Highlights of the Consolidated Financial Results for the First Quarter of
    2009

    BELLUS Health Inc. (BELLUS Health or the Company) is a global health
company focused on the development and commercialization of products to
provide innovative health solutions to address critical unmet needs.
    This Management's Discussion and Analysis (MD&A) provides a review of the
Company's operations and financial performance for the three-month period
ended March 31, 2009, compared to the three-month period ended March 31, 2008.
It should be read in conjunction with the Company's unaudited consolidated
financial statements for the period ended March 31, 2009, as well as the
Company's audited consolidated financial statements for the year ended
December 31, 2008, which have been prepared in accordance with Canadian
Generally Accepted Accounting Principles (GAAP). For discussion regarding
related-party transactions, contractual obligations, disclosure controls and
procedures, internal control over financial reporting, critical accounting
policies and estimates, recent accounting pronouncements, and risks and
uncertainties, refer to the Annual Report and the Annual Information Form for
the year ended December 31, 2008, as well as registration statements and other
public filings, which are available on SEDAR at www.sedar.com or on EDGAR at
www.sec.gov. This document contains forward-looking statements, which are
qualified by reference to, and should be read together with the
"Forward-Looking Statements" cautionary notice, which can be found at the end
of this MD&A. All currency figures reported in this document, including
comparative figures, are reported in US dollars, unless otherwise specified.
This MD&A was prepared by Management with information available as at May 5,
2009.

    Results of Operations

    For the three-month period ended March 31, 2009, the net loss amounted to
$9,907,000 ($0.20 per share), compared to $13,042,000 ($0.27 per share) for
the corresponding period the previous year.

    Net sales amounted to $84,000 for the current quarter and represent the
sales of VIVIMIND(TM) (also known as tramiprosate and homotaurine), the
Company's first natural health brand launched on September 2, 2008 in Canada
and also globally on the Internet. VIVIMIND(TM), to protect memory function,
is based on homotaurine, a naturally occurring ingredient found in certain
seaweed. Targeted at healthy baby boomers, this patented natural health brand
is expected to address a largely underserved self-care market by providing a
scientific, evidence-based health solution. VIVIMIND(TM) is the direct result
of over 15 years of significant scientific research, including clinical
testing in over 2,000 individuals. Post-hoc analysis of the North American
Phase III clinical trial of tramiprosate (homotaurine) involving 1,052
Alzheimer's disease (AD) patients showed a positive impact on cognitive
function and that, anatomically, it helped to reduce the volume loss of the
hippocampus, an important area of the brain responsible for memory.
VIVIMIND(TM) is commercialized by OVOS Natural Health Inc., a wholly owned
subsidiary of BELLUS Health. The Company's strategy includes revenue
generation in the short- to medium-term through the sale of natural health
products and in the medium- to long-term through development of a pipeline of
pharmaceutical products.

    Research and development expenses, before research tax credits and
grants, amounted to $3,610,000 for the current quarter, compared to $8,780,000
for the same period the previous year. The decrease is mainly attributable to
a reduction in the research and development of tramiprosate (ALZHEMED(TM);
homotaurine) for the treatment of AD, following the Company's decision in
November 2007 to terminate the tramiprosate (ALZHEMED(TM)) pharmaceutical drug
development program. The Company is also developing NC-503 (eprodisate) for
the treatment of Type II diabetes and certain features of metabolic syndrome.
During the second quarter of 2008, a Phase II clinical trial in diabetic
patients was initiated in Canada and patient recruitment and randomization
commenced. The study is a randomized 26-week, double-blind, placebo-controlled
study. Interim results are anticipated late in the second quarter or early in
the third quarter of 2009, at which time a decision may be made as to the
future of this program. Results from a validated rat model of diabetes and
metabolic syndrome have demonstrated that NC-503 decreases glycemic levels in
obese diabetic Zucker rats, when compared to the control group, while
preserving 40% more pancreatic islet cells (insulin secreting cells) as
compared to the control group, and have shown some protective effect on renal
function.

    Research tax credits and grants amounted to $303,000 for the current
quarter, compared to $397,000 for the corresponding period the previous year.
Research tax credits represent refundable tax credits earned under the Quebec
Scientific Research and Experimental Development Program for expenditures
incurred in Quebec. The decrease is attributable to lower research and
development expenses incurred in Quebec during the current period that are
eligible for refundable tax credits.

    General and administrative expenses totaled $3,148,000 for the current
quarter, compared to $3,576,000 for the same quarter the previous year. The
decrease is mainly due to the reduction in the workforce and additional
measures implemented by the Company to reduce its burn rate.

    Marketing and selling expenses amounted to $1,878,000 for the current
quarter compared to nil for the same quarter the previous year and represent
expenses incurred in relation to the commercialization of the Company's
natural health brand, VIVIMIND(TM).

    Stock-based compensation amounted to $452,000 for the current quarter,
compared to $1,035,000 for the corresponding quarter the previous year. This
expense relates to stock options and stock-based incentives, whereby
compensation cost in relation to stock options is measured at fair value at
the date of grant and is expensed over the award's vesting period. The
decrease is mainly due to adjustments in relation to forfeitures of stock
options, which occurred as a result of reductions in the workforce.

    Interest income amounted to $13,000 for the current quarter compared to
$498,000 for the same quarter the previous year. The decrease is mainly
attributable to lower average cash balances and lower interest rates during
the current period, compared to the same period the previous year.

    Accretion expense amounted to $1,282,000 for the current quarter,
compared to $1,207,000 for the same quarter the previous year. Accretion
expense represents the imputed interest under GAAP on the $42,085,000
aggregate principal amount of 6% convertible senior notes issued in November
2006 (2006 Notes), as well as on the remaining $4,500,000 principal amount of
6% senior convertible notes (2007 Senior Notes) issued in May 2007. The
Company accretes the carrying values of the 2006 Notes and the 2007 Senior
Notes to their face value through a charge to earnings over their expected
life of 60 months and 54 months, respectively. As of March 31, 2009,
$42,085,000 of the 2006 Notes and $4,500,000 of the 2007 Senior Notes remained
outstanding.

    The fair value of third party Asset-Backed Commercial Paper (ABCP)
decreased by $341,000 for the current quarter compared to a decrease of
$375,000 for the same quarter the previous year. This represents adjustments
recorded on the valuation of ABCP held by the Company. See Liquidity and
Capital Resources section for more details.

    Foreign exchange gain amounted to $123,000 for the current quarter,
compared to a gain of $754,000 for the same quarter the previous year. Foreign
exchange gains or losses arise on the movement in foreign exchange rates in
relation to the Company's net monetary assets denominated in currencies other
than US dollars, which is its functional and reporting currency, and consists
primarily of monetary assets and liabilities denominated in Canadian dollars.
Foreign exchange gains for the comparative quarter include $924,000 of gain
recognized on the reclassification of the refundable amount ($6,000,000) due
to Centocor, Inc., from deferred revenue (non-monetary liability) to accrued
liability (monetary liability) following the recovery by the Company of
ownership rights in and control of eprodisate (KIACTA(TM)).

    Other income amounted to $529,000 for the current quarter, compared to
$278,000 for the same quarter the previous year. Other income consists of
non-operating revenue, primarily sub-lease revenue. The increase is
attributable to a gain recognized and realized during the current quarter on
the settlement of a dispute.

    Liquidity and capital resources

    As at March 31, 2009, the Company had available cash, cash equivalents
and marketable securities of $3,187,000, compared to $10,595,000 at December
31, 2008. The decrease is primarily due to funds used in operating activities.
    On April 16, 2009, the Company announced the completion of the first
tranche of a CDN$20.5 million convertible notes (2009 Notes) financing with
Vitus Investments III Private Limited (Vitus), a corporation whose shares are
beneficially owned by Mr. Carlo Bellini, and Victoria Square Ventures Inc.
(VSVI), a subsidiary of Power Corporation of Canada (the Investors). On that
date, BELLUS Health received gross proceeds of CDN$10 million for the issuance
of 2009 Notes (CDN$5 million from each Vitus and VSVI) and a second tranche of
CDN$10.5 million (CDN$5 million from Vitus and CDN$5.5 million from VSVI) is
expected to be funded in June 2009. Prior to this financing and as a condition
thereof, BELLUS Health and all of the existing noteholders had agreed to amend
the terms of the outstanding 2006 Notes and 2007 Senior Notes to either make
them convertible into a new series of preferred shares of BELLUS Health and to
have these notes converted into such preferred shares immediately, or to
otherwise amend the existing notes which shall remain outstanding. In
addition, the landlord of the premises of BELLUS Health, in Laval, Quebec, has
agreed, as a condition precedent to the financing, to defer certain rental
payments and to accept payment of the deferred rent in cash or common shares
of BELLUS Health (at the then applicable market price) at the option of BELLUS
Health at a later date. The features of the 2009 Notes issued to the
Investors, the terms of the preferred shares, the amended terms of the 2006
Notes and 2007 Senior Notes, as well as the amended terms of the lease for the
Laval premises are set forth below.
    The 2009 Notes are secured, subject to certain permitted encumbrances, by
a first charge on all of the assets of BELLUS Health and certain of its
subsidiaries and are convertible into common shares of BELLUS Health at
CDN$0.20 per share (the Financing Conversion Price). Interest will be
capitalized on the 2009 Notes at the rate of 15% per year and the notes will
mature 5 years and one day from the date of issuance. The 2009 Notes include
customary anti-dilution provisions in respect of issuances of securities or
distributions to shareholders and, in the event BELLUS Health issues
additional equity or equity-linked securities at a price per common share that
is less than the Financing Conversion Price then in effect, "full ratchet"
anti-dilution protection (which will have the effect of lowering the Financing
Conversion Price to the new issue price of equity or equity-linked securities)
will apply, subject to certain exceptions. In addition, the 2009 Notes contain
adjustment provisions in the event of a change of control, and negative
covenants, as well as a pre-emptive right in respect of future financings of
BELLUS Health. The 2009 Notes issued to VSVI contains certain piggyback rights
in favor of VSVI. The exercise of pre-emptive and piggyback rights will be
subject to regulatory approval. The aggregate amount of the 2009 Notes issued
to the Investors was increased by CDN$615,000 to cover a set up fee in
connection with the financing. Assuming that each of the 2009 Notes remain
outstanding until maturity, are converted in full at the Financing Conversion
Price and that all interest thereon is paid by the issuance of common shares
of BELLUS Health at the Financing Conversion Price, the maximum number of
common shares issuable under the 2009 Notes is 212,349,035, representing a
potential dilution factor of 424%, based on the number of common shares issued
and outstanding as at March 31, 2009.
    Each of Vitus and VSVI have the right to nominate two (2) members to the
Board of Directors of BELLUS Health and BELLUS Health has agreed to seek the
reduction of the size of its Board of Directors from twelve (12) to seven (7)
directors at its next annual general meeting.
    Prior to the 2009 Notes financing, BELLUS Health and all of the existing
noteholders had agreed to amend the terms of the outstanding 2006 Notes and
2007 Senior Notes. Holders of $33,085,000 principal amount of existing 2006
Notes and 2007 Senior Notes have agreed to amend the terms of their notes to
make them convertible into the preferred shares in the authorized capital of
BELLUS Health and received 3,096 preferred shares per $1,000 aggregate
principal amount of existing convertible notes, representing a conversion
price equal to 200% of the Financing Conversion Price (resulting in a
conversion price of CDN$0.40 per share) (the Preferred Share Conversion
Price). A total of 102,431,160 preferred shares were issued to note holders
who elected to receive preferred shares. Such preferred shares are convertible
into common shares of BELLUS Health on a one-to-one basis, subject to
adjustment, entitle the holder to 6% cumulative dividends payable in cash or
common shares of the Company at the option of the Company and shall be
automatically converted into common shares of the Company five years from the
date of issuance. The conversion of the 2006 Notes and 2007 Senior Notes to
preferred shares is expected to trigger a gain or loss on conversion during
the second quarter of fiscal 2009. The remaining note holders have agreed to
amend their existing convertible notes as set out below. Assuming that each of
the preferred shares remain outstanding until maturity, is converted in full
at the Preferred Share Conversion Price and that all dividends payable in
respect of the preferred shares are paid by the issuance of common shares of
BELLUS Health at an assumed market price of CDN$0.35, the maximum number of
common shares issuable on conversion of the preferred shares would be
137,595,789, representing a potential dilution factor of 275%, based on the
number of common shares issued and outstanding as at March 31, 2009.
    Holders of $13,000,000 principal amount of the 2006 Notes and one holder
of $500,000 principal amount of 2007 Senior Notes have also agreed to amend
the terms of their notes, without immediate conversion into preferred shares.
The amendments include providing for a 6% annual interest rate payable in cash
or common shares of BELLUS Health at the option of BELLUS Health at the then
market price of the common shares, replacing the existing conversion rate
adjustment period of October 2009 - November 2009 with a period from October
2012 - November 2012 for conversion of the notes at the then applicable market
price of the common shares of BELLUS Health based on a twenty (20) day volume
weighted average price at that time and replacing the right to have BELLUS
Health redeem the notes in November 2011 with a right to redeem the notes in
November 2014 at the then face value of the notes. Amendments to the notes
also include the removal of certain negative covenants. Assuming that the
remaining 2006 Notes and 2007 Senior Notes are converted in full at an assumed
market price of CDN$0.35 in 2012, when the price of such instruments gets
adjusted based on the then market price of the common shares of BELLUS Health,
and that all interest thereon is paid by way of issuance of common shares of
BELLUS Health at an assumed market price of CDN$0.35, the maximum number of
common shares issuable under the remaining 2006 Notes and the 2007 Senior
Notes, as amended, would be 56,437,714, representing a potential dilution
factor of 113%, based on the number of common shares issued and outstanding as
at March 31, 2009.
    BELLUS Health has agreed that the right to redeem the remaining 2006
Notes and 2007 Senior Notes, as amended, shall be exercisable 90 days prior to
the maturity date of the 2009 Notes to be issued to the Investors. Any
additional unsecured debt, other than operating facilities or debt that is
pari passu or junior in ranking to the existing convertible notes, as amended,
shall not mature or be redeemable for cash prior to the date on which the
redemption right of the remaining 2006 Notes and 2007 Senior Notes comes into
effect. In addition, BELLUS Health has agreed to certain restrictions on its
ability to declare or pay dividends in cash while the 2009 Notes are
outstanding.
    The terms of the 2009 Notes, the amended 2006 Notes and 2007 Senior Notes
require the continued listing of the Company's shares on the TSX; failure to
meet this requirement may be an event of default which may result in the
convertible notes being immediately due and payable.
    The Company has not yet assessed the impact the amendment of the 2006
Notes and the 2007 Senior Notes will have on its financial statements at the
date of this filing. Such impact will be reflected in the second quarter
results of the Company.
    The landlord of the premises of BELLUS Health, in Laval, Quebec, has
agreed, effective April 1, 2009 and continuing through and including the
period to April 7, 2011 (on which date BELLUS Health shall have the right to
terminate the lease (the First Termination Option)), to defer BELLUS Health'
base rent by CDN$166,667 per month (the Deferred Rent). In the event BELLUS
Health does not exercise its First Termination Option, the monthly deferral of
the Deferred Rent will continue for an additional twelve-month period until
March 31, 2012 (on which date BELLUS Health shall have the right to terminate
the lease (the Second Termination Option)). The Deferred Rent shall bear
interest at the rate of ten percent (10%) annually, calculated from the first
date of the month when any such component of Deferred Rent becomes due and
payable. Deferred Rent and the accrued interest thereon shall be evidenced by
promissory notes issued by BELLUS Health to its landlord on the first day of
each month when such Deferred Rent becomes due. The notes shall be payable in
cash or, at the option of BELLUS Health, through the issuance of common shares
at the market price on the day that the notes become payable. Deferred Rent
and all notes evidencing Deferred Rent shall be payable on April 7, 2011, in
the event that the First Termination Option is exercised or, alternatively, on
March 31, 2012. In the event that the lease is terminated under the First
Termination Option or the Second Termination Option, BELLUS Health will pay
the landlord a consideration of CDN$6.0 million or CDN$5.45 million,
respectively, payable in common shares of BELLUS Health at the then market
price of the common shares. The precise amount of rent and number of common
shares to be issued upon conversion of notes issued to the landlord will
depend, among other things, on the extent to which portions of the premises
are sublet or assigned to other tenants during the relevant period. Assuming
that the notes issuable to the landlord in respect of deferred rent and
interest thereon remain outstanding until March 31, 2012, are paid by way of
issuance of common shares of BELLUS Health at an assumed market price of
CDN$0.35, and that the lease is terminated pursuant to the Second Termination
Option, the maximum number of common shares issuable under the notes would be
35,633,335, representing a potential dilution factor of 71%, based on the
number of common shares issued and outstanding as at March 31, 2009. The
Company has not yet assessed the impact the termination options payment will
have on its financial statements, which will be reflected in the financial
statements of the quarter ending June 30, 2009.
    The cash savings to BELLUS Health of the restructuring of debt and rental
obligations is expected to be approximately US$4,100,000 on an annual basis,
going forward.
    On January 8, 2009, the Company's common stock was delisted from NASDAQ
Capital Market following the Company's formal notice of its intention to
voluntarily delist its common stock provided to the NASDAQ Stock Market,
notice to the public by press release and the formal notice provided to the
SEC, in December 2008. The decision was taken in light of the continuing,
extreme short-term volatility in the financial markets and, accordingly, in
the Company's market value. Originally, the Company received a NASDAQ Staff
Deficiency Letter dated October 10, 2008, stating that, for 10 consecutive
trading days, the market value of the Company's listed securities has been
below the minimum $50,000,000 requirement for continued inclusion on the
NASDAQ Global Market. The Company filed an application to transfer the listing
of its common stock from the NASDAQ Global Market to the NASDAQ Capital Market
and the transfer was effective as of November 14, 2008. The Company then
received a Deficiency Letter dated December 1, 2008, from the NASDAQ Staff
stating that, for 10 consecutive trading days, the market value of the
Company's listed securities had been below the minimum $35,000,000 requirement
for continued inclusion on the NASDAQ Capital Market. The Company then
formally initiated the steps to voluntarily delist by notifying the NASDAQ
Stock Market and issuing a press release regarding its intention to
voluntarily delist its common stock from the NASDAQ Capital Market. The
Company received the consent of the holders of over a majority in value of the
Company's $42,085,000 aggregate principal amount of 2006 Notes and amended the
trust indenture governing these notes, so as to permit delisting from NASDAQ.
The Company's listing on the Toronto Stock Exchange was not affected by the
delisting from NASDAQ. The Company currently expects to continue to be subject
to the filing and other obligations of the US securities laws applicable to
non-US reporting companies during 2009.
    As at December 31, 2008, the Company held approximately $12,250,000 (of
which $6,250,000 is denominated in Canadian dollars) in principal value of
third party ABCP, including $5,719,000 of third party ABCP acquired as part of
the Innodia acquisition. These investments were due to mature as early as
August 2007, but, as a result of a disruption in the credit markets,
particularly in the ABCP market, they did not settle on maturity. On April 25,
2008, the restructuring plan announced by the Pan-Canadian Investors Committee
(the Committee) in December 2007 was approved by the ABCP holders. On January
21, 2009, the Committee announced that the restructuring plan had been
implemented. Pursuant to the terms of the restructuring plan, the Company
received the following new floating rate interest-bearing notes (New notes) in
exchange for its ABCP: CDN$2,306,000 of MAV2 Class A-1 Notes, CDN$2,773,000 of
MAV2 Class A-2 Notes, CDN$503,000 of MAV2 Class B Notes, CDN$173,000 of MAV2
Class C Notes, CDN$850,000 of MAV2 IA Tracking Notes, $5,000,000 of MAV3 IA
Tracking Notes as well as $977,000  and CDN$985,000 of MAV3 TA Tracking Notes.
The legal maturity of the notes is July 15, 2056, but the actual expected
repayment of the notes, if held to maturity, is January 22, 2017. The New
notes issued following the restructuring plan are designated as held for
trading financial assets. Previously, the ABCP were also classified in that
category. During the current quarter, the Company also received partial
payments for accrued interest, totaling $391,000, for its investment in ABCP
held since the market disruption. The Company has not recorded any interest
income since the initial maturity of the ABCP it held however the expected
proceeds from the interest were considered in the determination of the fair
value of the ABCP at December 31, 2008 and March 31, 2009. As of May 5, 2009,
there are currently no market quotations available for these New notes.
    During the second quarter of 2008, the Company entered into a temporary
credit facility with the chartered bank that sold the ABCP to the Company.
This credit facility was put in place to finance the repayment to Centocor,
since this obligation was secured by ABCP. With respect to the implementation
of the ABCP restructuring plan announced in January 2009, the Company received
an offer by the chartered bank to refinance its temporary credit facility by
revolving credit facilities, with a minimum 2-year term and with options to
renew on an annual basis for up to a maximum total potential term of seven
years. In addition, the Company also received an offer to refinance the
temporary credit facility obtained as part of the Innodia transaction. In
total, the offers for the revolving credit facilities amount to approximately
$11,830,000, bear interest at prime rate minus 1% and require security in the
Company's investments in the New notes as well as a lien on the universality
of the assets of the corporation in the amount of approximately $2 million,
among other requirements. The offers for the revolving credit facilities also
include a put option feature in two to three years which may limit the
Company's losses to between 25% and 55% of the New notes, subject to certain
conditions.
    As at March 31, 2009, the Company estimated the fair value of these ABCP
at approximately $7,909,000, of which $274,000 is presented as part of
Restricted Cash, as it is pledged to a bank as collateral for letter of credit
issued in connection with a lease agreement. In connection with its fair value
determinations, the Company recorded a decrease in fair value of $1,184,000
for the year ended December 31, 2007, an increase in fair value of $309,000
for the year ended December 31, 2008 and a decrease in fair value of $341,000
for the three-month period ended March 31, 2009. The increase in fair value
recorded in 2008 is due to increased valuation of certain assets recognized as
part of the Innodia transaction. The exchange of third party ABCP for New
notes during the first quarter of 2009 resulted in a loss on settlement, which
is presented as part of the decrease in fair value recorded during the current
quarter. The Company estimated the fair value of the ABCP using a probability
weighted discounted cash flow approach, based on its best estimates of the
period over which the assets will generate cash flows, the coupon interest
rate, the discount rate to apply to the net cash flows anticipated to be
received commensurate with the return on comparably rated notes in accordance
with the risk factors of the different investments and other qualitative
factors. The Company estimated that the long-term financial instruments
arising from the conversion of its ABCP would generate interest returns
ranging from 0.15% to 1.19% (weighted average rate of 0.69%), depending on the
type of series. These future cash flows were discounted, according to the type
of series, over an 8-year period and using discount rates ranging from 4.4% to
9.4% (weighted average rate of 6.1%). The Company also took into account the
put option feature described above in determining the change in fair value of
ABCP recognized in earnings for the year ended December 31, 2008 and the
three-month period ended March 31, 2009. Estimates of the fair value of the
ABCP and related put option are not supported by observable market prices or
rates, and therefore are subject to uncertainty, including, but not limited
to, the estimated amounts to be recovered, the yield of the substitute
financial instruments and the timing of future cash flows, and the market for
these types of instruments. The resolution of these uncertainties could be
such that the ultimate fair value of these investments may vary significantly
from the Company's current estimate. Changes in the near term could require
significant changes in the recognized amount of these assets. As the Company
records the New notes at current fair value each period, such adjustments will
directly impact earnings.
    As at March 31, 2009, the Company's workforce comprised 61 employees
compared to 104 employees as at December 31, 2008. During the first quarter of
fiscal 2009, the Company reduced further its research activities and
associated workforce to focus on its key projects. On March 12, 2009, the
Company announced the reduction of its workforce by approximately 45%,
effective as of such date. In addition, three members of senior management
stepped down from their positions but will remain consultants to BELLUS
Health. The current programs related to the Company's existing product and
product candidates are not expected to be affected by the cuts, which were
made primarily in basic research and research-related functions, as well as
support and administrative functions.
    As at April 30, 2009, the Company had 50,043,892 common shares
outstanding, 220,000 common shares issuable to the Chief Executive Officer
upon the achievement of specified performance targets, 4,593,102 options
granted under the stock option plan, 102,431,160 preferred shares outstanding
which are convertible into common shares on a one for one basis, 2,250,645
warrants outstanding as well as notes outstanding in the amount of $13,500,000
and CDN$10,000,000, which are convertible into common shares.

    Financial position and going concern

    To date, the Company has financed its operations primarily through public
offerings of common shares, private placements, issuance of convertible notes,
as well as a sale-leaseback transaction, research tax credits, collaboration
and research contracts, interest and other income. The future profitability of
the Company is dependent upon such factors as the success of the clinical
trials, the approval by regulatory authorities of products developed by the
Company, the ability of the Company to successfully market, sell and
distribute products, including its natural health products, and the ability of
the Company to obtain the necessary financing to complete its projects. In
January 2009, the Company delisted its shares from NASDAQ. The Company's
shares trade on the Toronto Stock Exchange.
    The Company has incurred significant operating losses and negative cash
outflows from operations since inception and has an accumulated deficit of
$381,908,000 as at March 31, 2009. As at that date, the Company's committed
cash obligations and expected level of expenses for the upcoming twelve months
exceed the committed sources of funds, including the completed financing after
March 31, 2009, and the Company's cash and cash equivalents on hand. The
ability of the Company to continue as a going concern is dependent upon
raising additional financing through borrowings, share issuances, receiving
funds through collaborative research contracts, distribution agreements or
product licensing agreements, and ultimately, from obtaining regulatory
approval in various jurisdictions to market and sell its product candidates
and ultimately achieving future profitable operations. The outcome of these
matters is dependent on a number of factors outside of the Company's control.
These factors raise significant doubt about the Company's ability to continue
as a going concern. Management continues to actively pursue additional
financing. No definitive agreements have been reached yet and there can be no
assurance that such agreements will be reached. As a result, there is material
uncertainty as to whether the Company will have the ability to continue as a
going concern and thereby realize its assets and discharge its liabilities in
the normal course of business.
    The consolidated financial statements have been prepared on a going
concern basis, which assumes the Company will continue its operations in the
foreseeable future and will be able to realize its assets and discharge its
liabilities and commitments in the ordinary course of business. These
financial statements do not include any adjustments to the carrying value and
classification of assets and liabilities and reported revenues and expenses
that may be necessary should the Company not be successful in its efforts to
obtain additional financing, to receive significant funds on signing
collaborative research and development contracts, distribution agreements or
by out licensing its products or making significant product sales. Such
adjustments may include but would not be limited to: all debt would be
presented as current, accretion on convertible notes would be accelerated, and
the investment in ABCP would be reduced to its liquidation value.

    Forward-looking statements

    Certain statements included in this Management's Discussion and Analysis
may constitute "forward-looking statements" within the meaning of the US
Private Securities Litigation Reform Act of 1995 and Canadian securities
legislation and regulations, and are subject to important risks, uncertainties
and assumptions. This forward-looking information includes among other things,
information with respect to the Company's objectives and the strategies to
achieve those objectives, as well as information with respect to the Company's
beliefs, plans, expectations, anticipations, estimates and intentions.
Forward-looking statements generally can be identified by the use of
conditional or forward-looking terminology such as "may", "will", "expect",
"intend", "estimate", "anticipate", "plan", "foresee", "believe" or "continue"
or the negatives of these terms or variations of them or similar terminology.
Refer to the Company's filings with the Canadian securities regulatory
authorities and the US Securities and Exchange Commission for a discussion of
the various factors that may affect the Company's future results. Such risks
include, but are not limited to: the ability to obtain financing in the
current markets, the impact of general economic conditions, general conditions
in the pharmaceutical and/or natural health products industries, changes in
the regulatory environment in the jurisdictions in which the BELLUS Health
Group does business, stock market volatility, fluctuations in costs, and
changes to the competitive environment, and that actual results may vary once
the final and quality-controlled verification of data and analyses has been
completed. The results or events predicted in forward-looking information may
differ materially from actual results or events. The Company believes that
expectations represented by forward-looking statements are reasonable, yet
there can be no assurance that such expectations will prove to be correct.
Unless otherwise stated, the forward-looking statements contained in this
report are made as of the date of this report, and the Company does not
undertake any obligation to update publicly or to revise any of the included
forward-looking statements, whether as a result of new information, future
events or otherwise, unless required by applicable legislation or regulation.
The forward-looking statements contained in this report are expressly
qualified by this cautionary statement.


    
    BELLUS Health Inc.
    Consolidated Financial Information(1)
    (in thousands of US dollars, except per
     share data)
                                                   Three-month period ended
                                                               March 31
    -------------------------------------------------------------------------
    Consolidated Statements of Operations                 2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                    (unaudited)   (unaudited)
    Revenues:
      Gross sales                                 $        114  $          -
      Discounts, returns and cooperative
       promotional incentives                              (30)            -
    -------------------------------------------------------------------------
      Net sales                                             84             -
      Collaboration agreement                                -           205
      Reimbursable costs                                     -            22
    -------------------------------------------------------------------------
                                                            84           227
    -------------------------------------------------------------------------

    Expenses:
      Research and development                           3,610         8,780
      Research tax credits and grants                     (303)         (397)
    -------------------------------------------------------------------------
                                                         3,307         8,383
      General and administrative                         3,148         3,576
      Marketing and selling                              1,878             -
      Reimbursable costs                                     -            22
      Stock-based compensation                             452         1,035
      Depreciation of equipment                            169           214
    -------------------------------------------------------------------------
                                                         8,954        13,230
    -------------------------------------------------------------------------
      Loss before undernoted items                      (8,870)      (13,003)

      Interest income                                       13           498
      Interest and bank charges                            (79)          (29)
      Accretion expense                                 (1,282)       (1,207)
      Change in fair value of embedded derivatives           -            42
      Change in fair value of third party asset-backed
       commercial paper                                   (341)         (375)
      Foreign exchange gain                                123           754
      Other income                                         529           278
    -------------------------------------------------------------------------
      Net loss                                    $     (9,907) $    (13,042)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Net loss per share:
        Basic and diluted                         $      (0.20) $      (0.27)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Weighted average number of common shares
       outstanding                                  50,043,892    48,987,980
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                            At            At
                                                      March 31   December 31
    Consolidated Balance Sheets                           2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                    (unaudited)     (audited)

      Cash and cash equivalents                   $      3,187  $     10,595
      Other current assets                               3,711         3,667
    -------------------------------------------------------------------------
      Total current assets                               6,898        14,262
      Equipment                                          2,955         3,124
      Other long-term assets                             8,071         9,030
    -------------------------------------------------------------------------
      Total assets                                $     17,924  $     26,416
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

      Current liabilities                         $      9,800  $      9,257
      Long-term deferred gain and liabilities           63,626        63,211
      Shareholders' (deficiency) equity                (55,502)      (46,052)
    -------------------------------------------------------------------------
      Total liabilities and shareholders'
       (deficiency) equity                        $     17,924  $     26,416
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Condensed from the Company's unaudited consolidated financial
        statements.
    

    About BELLUS Health

    BELLUS Health is a global health company focused on the development and
commercialization of products to provide innovative health solutions to
address critical unmet needs.

    To Contact BELLUS Health

    For additional information on BELLUS Health and its drug development
programs, please call the Canada and United States toll-free number
1-877-680-4500 or visit the Web Site at BellusHealth.com.

    Certain statements contained in this news release, other than statements
of fact that are independently verifiable at the date hereof, may constitute
forward-looking statements. Such statements, based as they are on the current
expectations of management, inherently involve numerous risks and
uncertainties, known and unknown, many of which are beyond BELLUS Health
Inc.'s control. Such risks include but are not limited to: the ability to
obtain financing immediately in the current markets, the impact of general
economic conditions, general conditions in the pharmaceutical and/or
nutraceutical industry, changes in the regulatory environment in the
jurisdictions in which the BELLUS Health Group does business, stock market
volatility, the availability and terms of any financing, fluctuations in
costs, and changes to the competitive environment due to consolidation, that
actual results may vary once the final and quality-controlled verification of
data and analyses has been completed, as well as other risks disclosed in
public filings of BELLUS Health Inc.
    Consequently, actual future results may differ materially from the
anticipated results expressed in the forward-looking statements. The reader
should not place undue reliance, if any, on any forward-looking statements
included in this news release. These statements speak only as of the date made
and BELLUS Health Inc. is under no obligation and disavows any intention to
update or revise such statements as a result of any event, circumstances or
otherwise, unless required by applicable legislation or regulation. Please see
the Annual Information Form of BELLUS Health Inc. for further risk factors
that might affect the BELLUS Health Group and its business.




For further information:

For further information: Michelle Stein, Specialist, Corporate
Communications, (450) 680-4573, ir@bellushealth.com


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890