GeneNews announces second quarter results

TORONTO, Aug. 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 second quarter-ended June 30, 2009.

"Following the end of the second quarter, we completed a financing transaction that will allow us to continue to execute on our commercialization strategy for our lead product ColonSentry(TM), the world's first blood test for colorectal cancer," said Dr. Heiner Dreismann, Lead Director and Interim CEO of GeneNews. "In the second half of the year, we will focus the majority of our efforts on our ongoing discussions with potential marketing partners in the United States and selected countries in Europe and Asia to expand access to ColonSentry(TM) outside of Canada."

GeneNews has sufficient funds to continue its operations into the first quarter of 2010. Efforts to secure access to additional capital resources are continuing; however there is no assurance that these initiatives will be successful.

    
    Recent highlights:

    -   Raised $2,000,000 in a non-brokered private placement, subsequent to
        the end of the second quarter.
    -   Entered into an agreement with DundeeWealth Inc., a leading Canadian
        wealth management firm, to offer ColonSentry(TM) to its employees.
    -   Obtained a commitment of MYR 5 million (CDN$1.6 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.
    -   Appointed Dr. David Sable to the GeneNews Board of Directors. Dr.
        Sable is the portfolio manager for all Life Sciences investing for
        the Special Situations Funds based in New York.
    

Financial results (CDN dollars) for the first quarter-ended June 30, 2009:

For the three-month period ended June 30, 2009, the Company recorded revenue of $0.1 million compared with $0.3 million for the three-month period ended June 30, 2008. Revenues in the three-month period for 2009 were attributable to a research collaboration agreement with an Asian biomedical consortium and ColonSentry sales. For the same period 2008, revenues were from the Asian biomedical consortium. For the six-month period ended June 30, 2009, the Company recorded revenue of $0.4 million compared with $0.6 million for the six-month period ended June 30, 2008.

For the three-month period ended June 30, 2009, total operating expenditures were $1.9 million compared to $4.3 million for the same period last year. For the six-month period ended June 30, 2009, total operating expenditures were $4.1 million compared to $7.3 million for the same period last year. Research and development expenses for the quarter were $0.8 million compared to $3.0 million for the same period last year. Research and development expenses for the six-month period ended June 30, 2009 were $1.8 million compared to $5.2 million for the same period last year. These decreases are 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 expenses for the quarter were $0.1 million compared to nil for the same quarter last year. Sales and marketing expenses for the six-month period ended June 30, 2009, were $0.3 million compared to nil for the same period last year. General and administrative expenses for the quarter were $0.4 million compared to $0.8 million for the corresponding quarter in 2008. General and administrative expenses for the six-month period ended June 30, 2009, were $1.2 million compared with $1.3 million in the corresponding period last year.

Net loss for the three-month period ended June 30, 2009, totalled $1.8 million or ($0.03) per common share compared to a net loss of $4.0 million or ($0.07) per common share for the three-month period ended June 30, 2008. Net loss for the six-month period ended June 30, 2009, was $3.7 million or ($0.07) per common share compared to a net loss of $6.6 million or ($0.12) per common share the corresponding period last year.

As at June 30, 2009, the Company's unrestricted cash and cash equivalents amounted to $0.4 million compared to $1.4 million as at December 31, 2008, and the Company had 55,883,437 common shares and 8,305,857 stock options outstanding.

Subsequent to quarter-end, the Company raised gross proceeds of $2.0 million in a non-brokered private placement through the issuance of 8,000,000 common shares from treasury at a price of $0.25 per share.

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
                                                     June 30     December 31
                                                       2009          2008
                                                        $             $
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash and cash equivalents                          425,364     1,414,395
    Restricted cash                                    327,163     1,239,605
    Accounts receivable                                114,067       549,134
    Investment tax credits recoverable                 200,000       400,000
    Prepaid expenses and deposits                      105,216       284,423
    -------------------------------------------------------------------------
    Total current assets                             1,171,810     3,887,557
    -------------------------------------------------------------------------
    Property, plant and equipment, net               3,012,997     3,400,298

    -------------------------------------------------------------------------
                                                     4,184,807     7,287,855
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Accounts payable and accrued liabilities         1,792,490     3,156,397
    Deferred revenue                                    25,105        15,871
    Current portion of long-term debt                   79,511     1,061,368
    -------------------------------------------------------------------------
    Total current liabilities                        1,897,106     4,233,636
    -------------------------------------------------------------------------
    Long-term debt                                     179,012       219,548
    Convertible debentures                           2,446,183       729,646
    -------------------------------------------------------------------------
    Total liabilities                                4,522,301     5,182,830
    -------------------------------------------------------------------------

    Shareholders' equity(deficit)
    Capital stock                                   45,562,516    44,870,734
    Contributed surplus                              4,344,380     3,753,924
    Deficit                                        (50,244,390)  (46,519,633)
    -------------------------------------------------------------------------
    Total shareholders' equity(deficit)               (337,494)    2,105,025
    -------------------------------------------------------------------------
                                                     4,184,807     7,287,855
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

                      Three months  Three months    Six months    Six months
                          ended         ended         ended         ended
                         June 30       June 30       June 30       June 30
                           2009          2008          2009          2008
    -------------------------------------------------------------------------

    Revenue
      Milestone
       revenue        $     96,744  $    288,438  $     96,744  $    582,724
      Non-refundable
       license revenue           -             -       254,460             -
      Sales                 16,500             -        21,250             -
    -------------------------------------------------------------------------
                           113,244       288,438       372,454       582,724

    Expenses
      Research and
       development         830,296     3,044,225     1,789,556     5,229,981
      Sales and
       marketing           153,444             -       272,503             -
      General and
       administrative      441,063       806,675     1,208,181     1,319,236
      Stock-based
       compensation        314,068       352,264       590,455       494,538
      Amortization of
       intellectual
       property                  -       110,537             -       221,074
      Interest on
       debentures          122,412             -       214,327             -
      Interest on long
       term debt            16,609        28,172        35,081        58,700
      -----------------------------------------------------------------------
                         1,877,892     4,341,872     4,110,103     7,323,528

    Interest income          9,172        58,634        12,892       159,694
    -------------------------------------------------------------------------

    Net and
     comprehensive loss
     for the period     (1,755,476)   (3,994,800)   (3,724,757)   (6,581,110)

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

    -------------------------------------------------------------------------
    Deficit, end of
     period           $(50,244,390) $(39,929,240) $(50,244,390) $(39,929,240)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net and
     comprehensive
     loss per common
     share
      Basic and fully
       diluted        $      (0.03) $      (0.07) $      (0.07) $      (0.12)

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

    Weighted average
     number of common
     shares outstanding
      Basic and fully
       diluted          55,883,437    55,623,367    55,883,437    55,571,069
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

                      Three months  Three months    Six months    Six months
                          ended         ended         ended         ended
                         June 30       June 30       June 30       June 30
                           2009          2008          2009          2008
    -------------------------------------------------------------------------

    Cash flows provided
     by (used in):

    Operations:
      Net and
       comprehensive
       loss for the
       period         $ (1,755,476) $ (3,994,800) $ (3,724,757) $ (6,581,110)
      Items therein
       not requiring
       cash
        Debenture
         interest          122,412             -       214,327             -
        Stock based
         compensation      314,068       352,264       590,455       494,538
        Amortization of
         capital assets    200,634       213,183       392,486       358,365
        Amortization of
         intellectual
         property                -       110,537             -       221,074
        ---------------------------------------------------------------------
                        (1,118,362)   (3,318,816)   (2,527,489)   (5,507,133)
      Changes in
       non-cash working
       capital:
        Accounts
         receivable        215,256       397,391       435,066       861,483
        Investment tax
         credit
         recoverable       200,000       403,141       200,000       867,722
        Prepaid expenses
         and deposits      208,319       103,452       179,207        57,583
        Accounts payable
         and accrued
         liabilities      (572,595)      220,553    (1,363,907)      (17,018)
        Deferred revenue    (2,572)     (288,437)        9,234      (582,723)
        ---------------------------------------------------------------------
                        (1,069,954)   (2,482,716)   (3,067,889)   (4,320,086)

    Financing:
      Net proceeds from
       issuance of
       convertible
       debentures                -             -     2,193,993             -
      Proceeds from
       exercise of
       employee stock
       options                   -       220,350             -       251,100
      Restricted cash      912,605             -       912,605             -
      Payments on long
       term debt          (869,814)     (145,256)   (1,022,392)     (288,156)
      -----------------------------------------------------------------------
                            42,791        75,094     2,084,206       (37,056)

    Investments:
      Additions to
       capital assets       (1,420)      (20,057)       (5,348)     (233,161)
      -----------------------------------------------------------------------

    Increase (decrease)
     in cash and cash
     equivalents        (1,028,583)   (2,427,679)     (989,031)   (4,590,303)

    Cash and cash
     equivalents,
     beginning of
     period              1,453,947     9,116,406     1,414,395    11,279,030
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash and cash
     equivalents, end
     of period        $    425,364  $  6,688,727  $    425,364  $  6,688,727
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental cash
     flow information:
      Interest recevied      9,172        27,999        12,892       123,957
      Interest paid         16,609        28,172        35,081        58,700
    

SOURCE GeneNews Limited

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


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