GeneNews announces first quarter results

TORONTO, May 14 /CNW/ - GeneNews Limited (TSX: GEN), a company focused on developing blood-based biomarker tests for the early detection of diseases and personalized health management, today reported operational and financial results for the first quarter-ended March 31, 2009.

"We continue to focus on expanding access to ColonSentry(TM), the world's first blood test for colorectal cancer, into additional Canadian markets. In parallel, we are preparing for the commercial launch of ColonSentry(TM) in other global regions including the United States, Europe and Asia," said Dr. Heiner Dreismann, Lead Director and Interim CEO of GeneNews. "In support of these efforts, subsequent to the end of the quarter, we presented the results of a study on cost-effectiveness of ColonSentry(TM), which demonstrated that our test detected more early stage colorectal cancer, saved lives and lowered the costs associated with late stage colorectal cancer. This economic validation of ColonSentry(TM) shows that our product provides a meaningful return on investment for many organizations and their employees."

GeneNews has sufficient funds to continue its operations into the second half of 2009. Discussions with potential strategic partners and other entities are underway to secure access to additional capital resources and to expand its commercial capabilities however there is no assurance that these initiatives will be successful.

    
    Recent highlights:

    -   Granted U.S. patent in January for Chagas' disease based on Sentinel
        Principle(TM) platform. Chagas' disease is a serious and potentially
        fatal disease resulting from parasitic infection and affects more
        than 11 million people worldwide each year.
    -   Expanded ColonSentry(TM) access into Southwestern Ontario. Gamma-
        Dynacare Medical Laboratories will provide blood specimen collection
        services for ColonSentry(TM) from three of its Patient Service
        Centres in London, Ontario.

    Subsequent to quarter-end:

    -   Expanded access to ColonSentry(TM) to Burlington and the Niagara
        Region.
    -   Presented results of study on cost-effectiveness of ColonSentry(TM)
        for colorectal cancer screening. The report demonstrated that
        ColonSentry(TM) detected more early stage colorectal cancer, saved
        lives and lowered the costs associated with late stage colorectal
        cancer.
    -   Appointed Dr. David Sable to the GeneNews Board of Directors. Dr.
        Sable directs all life sciences investing for the Special Situations
        Funds based in New York.
    -   Granted MYR 5 million from the Malaysian Ministry of Health for the
        development of diagnostic tests for liver cancer, hepatitis and
        nasopharyngeal cancer based on the Company's proprietary platform
        Sentinel Principle technology.
    -   Entered into an agreement with DundeeWealth Inc., a leading Canadian
        wealth management firm, to offer ColonSentry(TM) to its employees.
    -   Retired all debt obligations owed to the Royal Bank of Canada.

    Financial results (CDN dollars) for the first quarter-ended
    March 31, 2009:
    

For the three-month period ended March 31, 2009, the Company recorded revenue of $0.3 million compared with $0.3 million for the three month period ended March 31, 2008. Revenue in the first quarter of 2009 was attributable to ColonSentry(TM) sales and a non-refundable technology access fee earned from a leading research and development company. Revenue in the first quarter of 2008 was attributable to a research collaboration agreement entered into with an Asian biomedical consortium to identify and validate a set of biomarkers for in the field of prostate disease.

For the three-month period ended March 31, 2009, total operating expenditures were $2.2 million compared to $3.0 million for the same period last year. Research and development expenses for the quarter were $1.0 million compared to $2.2 million for the same period last year. This decrease is largely the result of the Company's strategic restructuring of operations announced in November 2008, which lead to the transfer of pipeline research and development activities to the Company's Malaysian and Chinese operations, where they can be conducted in a more cost-effective manner. Sales and marketing expense for the quarter were $0.1 million compared to nil for the same quarter last year. General and administrative expenses for the quarter were $0.8 million compared to $0.5 million for the corresponding quarter in 2008. This increase was largely the result of legal costs associated with the debenture offering, additional public entity costs, and a reduction in the allocation of general and administration costs to other departments. Debenture interest expenses were $0.1 million compared to nil for the same quarter last year.

Net loss for the quarter-ended March 31, 2009, totalled $2.0 million or ($0.04) per common share compared to a net loss of $2.6 million or ($0.05) per common share for the quarter-ended March 31, 2008.

As at March 31, 2009, the Company's unrestricted cash and cash equivalents amounted to $1.4 million compared to $1.4 million as at December 31, 2008. In December 2008, the Company gained approval from the Toronto Stock Exchange to offer up to $3.45 million of five-year convertible secured debentures bearing simple interest at 15% per annum with warrants exercisable for four common shares of the Company for every $1 of debentures acquired. The first of three closings under this offering occurred on December 31, 2008 whereby $1,058,350 of debentures were sold. On January 16, 2009 a further $718,782 of debentures were sold. On February 11, 2009, $1,475,210 of debentures were sold for total gross proceeds raised under the offering of $3,252,342.

As at March 31, 2009, the Company had 55,883,437 common shares and 7,803,688 stock options outstanding.

The Company's annual financial statements and management's discussion and analysis will be available on www.sedar.com.

    
    About GeneNews
    --------------
    

GeneNews is focused on the application of functional genomics to enable early diagnosis and personalized therapeutic intervention based on disease-specific biomarkers. The Company has developed a novel approach, the Sentinel Principle(TM), to detect and stage virtually any disease or medical condition from a simple blood sample. GeneNews is currently applying the Sentinel Principle(TM) in major areas with unmet clinical needs such as cancer, arthritis, cardiovascular disease and neurological disorders. GeneNews' first product in development, ColonSentry(TM), is a convenient and patient-friendly blood-based test that can assess an individual's current risk for colorectal cancer. For more information on GeneNews and ColonSentry(TM), visit www.genenews.com and www.colonsentry.com.

This press release contains forward-looking statements, which reflect the Company's current expectations regarding future events. The forward-looking statements involve risks and uncertainties. Actual events could differ materially from those projected herein. Investors should consult the Company's ongoing quarterly filings and annual reports for additional information on risks and uncertainties relating to these forward-looking statements. The reader is cautioned not to rely on these forward-looking statements. The Company disclaims any obligation to update these forward-looking statements.

    
                         CONSOLIDATED BALANCE SHEETS
                                 (Unaudited)
                       (Expressed in Canadian dollars)

    As at
                                                    March 31     December 31
                                                      2009           2008
                                                       $              $
    -------------------------------------------------------------------------

    ASSETS

    Current
    Cash and cash equivalents                       1,453,947      1,414,395
    Restricted cash                                 1,239,605      1,239,605
    Accounts receivable                               329,323        549,134
    Investment tax credits recoverable                400,000        400,000
    Prepaid expenses and deposits                     313,535        284,423
    -------------------------------------------------------------------------
    Total current assets                            3,736,410      3,887,557
    -------------------------------------------------------------------------
    Property, plant and equipment, net              3,212,375      3,400,298

    -------------------------------------------------------------------------
                                                    6,948,785      7,287,855
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Accounts payable and accrued liabilities        2,365,085      3,156,397
    Deferred revenue                                   27,678         15,871
    Current portion of long-term debt                 928,858      1,061,368
    -------------------------------------------------------------------------
    Total current liabilities                       3,321,621      4,233,636
    -------------------------------------------------------------------------
    Long-term debt                                    199,479        219,548
    Convertible debentures                          2,323,771        729,646
    -------------------------------------------------------------------------
    Total liabilities                               5,844,871      5,182,830
    -------------------------------------------------------------------------

    Shareholders' equity
    Capital stock                                  45,562,516     44,870,734
    Contributed surplus                             4,030,312      3,753,924
    Deficit                                       (48,488,914)   (46,519,633)
    -------------------------------------------------------------------------
    Total shareholders' equity                      1,103,914      2,105,025
    -------------------------------------------------------------------------
                                                    6,948,785      7,287,855
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



          CONSOLIDATED STATEMENTS OF OPERATIONS, COMPREHENSIVE LOSS
                                 AND DEFICIT
                                 (Unaudited)
                       (Expressed in Canadian dollars)

    Three month period ended March 31
                                                      2009           2008
                                                       $              $
    -------------------------------------------------------------------------

    REVENUE
    Milestone revenue                                       -        294,286
    Non-refundable license revenue                    254,460              -
    Sales                                               4,750              -
    -------------------------------------------------------------------------
                                                      259,210        294,286
    EXPENSES
    Research and development                          959,260      2,185,756
    Sales and marketing                               119,059              -
    General and administrative                        767,118        512,560
    Stock-based compensation                          276,387        142,274
    Amortization of intellectual property                   -        110,537
    Interest on debentures                             91,915              -
    Interest on long-term debt                         18,472         30,528
    -------------------------------------------------------------------------
                                                    2,232,211      2,981,655
    -------------------------------------------------------------------------
    Interest income                                     3,720        101,060
    -------------------------------------------------------------------------
    Net loss and comprehensive loss for the period (1,969,281)    (2,586,310)

    Deficit, beginning of period                  (46,519,633)   (33,348,130)
    -------------------------------------------------------------------------
    Deficit, end of period                        (48,488,914)   (35,934,440)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net loss and comprehensive loss per common share
    Basic and fully diluted                            $(0.04)        $(0.05)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average number of common
      shares outstanding
    Basic and fully diluted                        55,883,437     55,518,769
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (Unaudited)
                       (Expressed in Canadian dollars)

    Three month period ended March 31
                                                      2009           2008
                                                       $              $
    -------------------------------------------------------------------------

    OPERATING ACTIVITIES
    Net loss and comprehensive loss for the period (1,969,281)    (2,586,310)
    Add items not involving cash
      Debenture interest                               91,915              -
      Stock-based compensation                        276,387        142,274
      Amortization of property, plant and equipment   191,851        145,182
      Amortization of intellectual property                 -        110,537
    -------------------------------------------------------------------------
                                                   (1,409,128)    (2,188,316)
    Changes in non-cash operating working capital
      Accounts receivable                             219,811        464,274
      Investment tax credits recoverable                    -        464,581
      Prepaid expenses and deposits                   (29,112)       (45,869)
      Accounts payable and accrued liabilities       (791,312)      (237,571)
      Deferred revenue                                 11,807       (294,286)
    -------------------------------------------------------------------------
    Cash used in operating activities              (1,997,934)    (1,837,370)
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Net proceeds from issuance of convertible
     debentures                                     2,193,993              -
    Proceeds from exercise of employee stock options        -         30,750
    Repayments of long-term debt                     (152,579)      (142,900)
    -------------------------------------------------------------------------
    Cash provided by (used in) financing
     activities                                     2,041,414       (112,150)
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Additions to property, plant and equipment         (3,928)      (213,104)
    -------------------------------------------------------------------------
    Cash used in investing activities                  (3,928)      (213,104)
    -------------------------------------------------------------------------

    Net increase (decrease) in cash and cash
     equivalents during the period                     39,552     (2,162,624)
    Cash and cash equivalents, beginning of period  1,414,395     11,279,030
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period        1,453,947      9,116,406
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental cash flow information:
    Interest received                                   3,720         95,958
    Interest paid                                      18,472         30,528
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

SOURCE GeneNews Limited

For further information: For further information: Casey Gurfinkel, (416) 815-0700 x 283, cgurfinkel@equicomgroup.com


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