GeneNews Reports Fourth Quarter and 2009 Annual Results

TORONTO, March 15 /CNW/ - GeneNews Limited (TSX: GEN), an emerging molecular diagnostics company focused on the application of functional genomics to enable early diagnosis and personalized health management, today reported operational and financial results for the year ended December 31, 2009.

    
    Highlights for 2009:

    -  Granted a U.S. patent for the Company's core platform technology, the
       Sentinel Principle(R), a powerful method for identifying clinically
       actionable biomarkers relating to disease and health from a basic
       blood sample.

    -  Publication of positive validation data in the International Journal
       of Cancer for a novel blood-based, seven-gene biomarker panel for
       colorectal cancer that can stratify average risk patients according to
       their current relative risk of actually having colorectal cancer, the
       basis of the Company's lead product ColonSentry(TM).

    -  Publication of a paper in the Journal of Clinical Gastroenterology
       reporting data using GeneNews' core Sentinel Principle(R) platform
       technology to identify complex changes in blood gene expression
       patterns that were differentially regulated between active and
       inactive Crohn's disease.

    -  Obtained a commitment of MYR 5 million (CDN$1.53 million) from the
       Malaysian Ministry of Health for the development of diagnostic tests
       for liver cancer and hepatitis based on the Company's core Sentinel
       Principle(R) platform technology.

    -  Entered into an agreement allowing Eli Lilly and Company (NYSE:   LLY)
       select access to clinical data from GeneNews' osteoarthritis genomic
       biomarker program.

    -  Appointed Dr. David Sable, a portfolio manager at New York-based
       Special Situations Funds, to the GeneNews Board of Directors.

    -  Strengthened the Company's balance sheet by completing two non-
       brokered common share private placements for total gross proceeds in
       the amount of approximately $4.3 million and two tranches of a
       convertible debenture placement for gross proceeds of approximately
       $2.2 million.

    Outlook for 2010

    The Company anticipates the achievement of the following milestones in
2010:

    -  The commercial launch of ColonSentry(TM) in New York and New Jersey by
       GeneNews' exclusive partner for these U.S. states, Enzo Clinical Labs.

    -  The engagement of additional partners to establish a global
       ColonSentry(TM) marketing and distribution network that will make this
       lead product available to patients in Europe, China, Malaysia, and
       regions of the United States not covered by GeneNews' current
       agreement with Enzo.

    -  The initiation of additional clinical and economic studies to support
       the pursuit of public and private health insurance reimbursement for
       ColonSentry(TM).

    -  Expanded adoption and use of ColonSentry(TM) in Canada.

    -  Additional patent issuances to expand the scope of protection for the
       Company's Sentinel Principle(R) platform technology to include all
       aspects of personalized health management from early detection, to
       determining response, to treatment, and to protect the use of
       biomarkers derived from the application of the Sentinel Principle(R)
       to specific clinical applications.

    -  Partnering to advance further development of GeneNews' pipeline of
       molecular products based upon the Sentinel Principle(R).

    -  Expansion of the Company's shareholder base and access to additional
       working capital to support the pursuit of its milestones.
    

"We went into 2009 confident that our focus on the refinement and initial execution of our global ColonSentry(TM) commercialization plan would generate improved operational and financial performance throughout the year," said Gailina Liew, President and Chief Operating Officer. "Our 2009 achievements demonstrate the success of that focus. Now, as we move through 2010, our primary goal will be to drive awareness and clinical adoption of ColonSentry(TM) as a cost-effective and patient-friendly first step to facilitate greater adherence to colorectal cancer screening guidelines."

"GeneNews' position as an emerging leader in the fields of molecular diagnostics and personalized health management is well protected by the expanding patent position of its disruptive Sentinel Principle(R) technology platform. We expect this leadership position, combined with continued strong management execution, will result in the realization of additional quality commercialization opportunities in 2010," added Dr. Heiner Dreismann, Lead Director and interim CEO.

In February 2010, a second US patent protecting the application of blood biomarkers identified by the Company's core Sentinel Principle(R) platform technology to any health management context was granted.

Financial results for the fourth quarter and year-ended December 31, 2009:

For the three months ended December 31, 2009, the Company reported a consolidated net loss of $463,654, or $0.00 loss per common share, as compared to a consolidated net loss of $2,673,688, or $0.05 loss per common share for the three months ended December 31, 2008. For the year ended December 31, 2009, the Company reported a consolidated net loss of $5,593,869 or $0.09 loss per common share, as compared to a consolidated net loss of $13,171,503 or $0.24 loss per common share for the year ended December 31, 2008. This improved financial performance is primarily due to a 76% reduction in research and development costs that resulted from reductions in the number of scientific and technical staff needed to support the Company's research and development activities through its Canadian operations and significant reductions in direct program costs associated with the ColonSentry(TM) sampling program that was completed in the fourth quarter of 2008.

As at December 31, 2009, the Company's unrestricted cash and cash equivalents and cash held in trust amounted to $2.8 million as compared with $1.4 million as at December 31, 2008. Since the fourth quarter of 2008, the Company has taken measures to conserve cash and has substantially reduced the overall use of capital in the near term. Even with these measures in place, the Company's cash and cash equivalents and cash held in trust are only sufficient to support the Company's activities into the fourth quarter of 2010. The Company is in discussions with several potential strategic partners to obtain additional operating capital and provide access to additional commercialization capabilities. The Company has also engaged financial advisors to assist the Company to raise further funds.

The Company had 69,027,881 common shares, 9,171,463 stock options and 13,009,372 warrants outstanding as at December 31, 2009.

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

Notice of Annual General Meeting:

GeneNews will hold its Annual Shareholder Meeting at 4:30pm on May 3, 2010 at the offices of Fasken Martineau DuMoulin LLP located at 66 Wellington St. W., 42nd floor, Toronto, Ontario.

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

GeneNews is an emerging molecular diagnostics company focused on the application of functional genomics to enable early diagnosis and personalized health management based on disease-specific biomarkers. The Company has been granted two U.S. patents for its core platform technology, the Sentinel Principle(R), which has the power to detect and stage virtually any disease or medical condition from a simple blood sample. GeneNews is currently applying the Sentinel Principle(R) in major areas with unmet clinical needs such as cancer, arthritis, cardiovascular disease and neurological disorders. GeneNews launched its first commercial product, ColonSentry(TM), a blood-based test to assess an individual's risk for colorectal cancer, in Canada in 2008. The Company expects ColonSentry(TM) to be introduced to the New York and New Jersey markets, via GeneNews' exclusive partnership for these U.S. states with Enzo Clinical Labs, in the second half of 2010. For more information on GeneNews and ColonSentry(TM), visit www.genenews.com and www.colonsentry.com.

Forward-Looking Statements

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.

    
    GeneNews Limited

                         CONSOLIDATED BALANCE SHEETS

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

    ASSETS
    Current
    Cash and cash equivalents                         510,806      1,414,395
    Cash held in trust                              2,286,200              -
    -------------------------------------------------------------------------
                                                    2,797,006      1,414,395
    -------------------------------------------------------------------------
    Restricted cash                                   252,054      1,239,605
    Short-term investments                             91,710              -
    Accounts receivable                               293,528        549,134
    Investment tax credits recoverable                400,000        400,000
    Prepaid expenses and deposits                     126,505        284,423
    -------------------------------------------------------------------------
    Total current assets                            3,960,803      3,887,557
    -------------------------------------------------------------------------

    Property, plant and equipment, net              2,698,450      3,400,298
    -------------------------------------------------------------------------
                                                    6,659,253      7,287,855
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Accounts payable and accrued liabilities        1,159,141      3,117,937
    Deferred revenue                                   10,200         54,331
    Current portion of long-term debt                  82,690      1,061,368
    -------------------------------------------------------------------------
    Total current liabilities                       1,252,031      4,233,636
    -------------------------------------------------------------------------
    Convertible debentures                          2,662,677        729,646
    Long-term debt                                    136,858        219,548
    -------------------------------------------------------------------------
    Total liabilities                               4,051,566      5,182,830
    -------------------------------------------------------------------------

    Commitments

    Shareholders' equity
    Share capital                                  48,752,731     44,542,030
    Warrants                                        1,020,486        328,704
    Contributed surplus                             4,947,972      3,753,924
    Deficit                                       (52,113,502)   (46,519,633)
    -------------------------------------------------------------------------
    Total shareholders' equity                      2,607,687      2,105,025
    -------------------------------------------------------------------------
                                                    6,659,253      7,287,855
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    GeneNews Limited

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

    Years ended December 31

                                                       2009           2008
                                                         $              $
    -------------------------------------------------------------------------

    REVENUE
    Milestone                                         478,805      1,041,102
    Non-refundable license                            616,838        371,160
    Sales                                              50,200          9,628
    -------------------------------------------------------------------------
                                                    1,145,843      1,421,890
    -------------------------------------------------------------------------

    EXPENSES
    Research and development                        2,332,811      9,823,363
    Sales and marketing                               457,046        466,767
    General and administrative                      1,586,595      2,382,260
    Stock-based compensation                        1,195,550      1,020,362
    Amortization of property, plant and equipment     707,034        815,520
    Amortization of intellectual property                   -        400,380
    Foreign exchange loss (gain)                        1,080       (228,237)
    Interest on long-term debt                        475,477        120,544
    -------------------------------------------------------------------------
                                                    6,755,593     14,800,959
    -------------------------------------------------------------------------

    Interest income                                    15,881        207,566
    -------------------------------------------------------------------------
    Net loss and comprehensive loss for the year   (5,593,869)   (13,171,503)

    Deficit, beginning of year                    (46,519,633)   (33,348,130)
    -------------------------------------------------------------------------
    Deficit, end of year                          (52,113,502)   (46,519,633)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net loss and comprehensive loss per
     common share
    Basic and fully diluted                            $(0.09)        $(0.24)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average number of common
     shares outstanding
    Basic and fully diluted                        59,760,918     55,728,108
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                       (Expressed in Canadian dollars)

    Years ended December 31
                                                       2009           2008
                                                         $              $
    -------------------------------------------------------------------------

    OPERATING ACTIVITIES
    Net loss for the year                          (5,593,869)   (13,171,503)
    Add items not involving cash
      Debenture interest                              430,820              -
      Stock-based compensation                      1,195,550      1,020,362
      Impairment loss on property, plant
       and equipment                                        -         27,000
      Amortization of property, plant
       and equipment                                  707,034        815,520
      Amortization of intellectual property                 -        400,380
      Issuance of common shares for general
       legal services                                  21,926              -
    -------------------------------------------------------------------------
                                                   (3,238,539)   (10,908,241)
    Changes in non-cash working capital balances
     related to operations
      Accounts receivable                             255,606      1,033,108
      Investment tax credits recoverable                    -        638,199
      Prepaid expenses and deposits                   157,918        228,491
      Accounts payable and accrued liabilities     (1,958,796)     1,457,244
      Deferred revenue                                (44,131)    (1,589,805)
    -------------------------------------------------------------------------
    Cash used in operating activities              (4,827,942)    (9,141,004)
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Proceeds from share issuances, net              4,185,473              -
    Proceeds from exercise of employee
     stock options                                      1,800        251,100
    Proceeds of issuance of convertible
     debentures                                     2,193,993      1,058,350
    Restricted cash                                   987,551       (839,605)
    Repayment of long-term debt                    (1,061,368)      (585,903)
    -------------------------------------------------------------------------
    Cash provided by (used in) financing
     activities                                     6,307,449       (116,058)
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Purchase of short-term investments                (91,710)             -
    Additions to property, plant and equipment         (5,186)      (607,573)
    -------------------------------------------------------------------------
    Cash used in investing activities                 (96,896)      (607,573)
    -------------------------------------------------------------------------

    Net increase (decrease) in cash, cash
     equivalents and cash held in trust during
     the year                                       1,382,611     (9,864,635)
    Cash, cash equivalents and cash held in
     trust, beginning of year                       1,414,395     11,279,030
    -------------------------------------------------------------------------
    Cash, cash equivalents and cash held in
     trust, end of year                             2,797,006      1,414,395
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash and cash equivalents are comprised
     of the following:
    Cash and cash equivalents                         510,806      1,414,395
    Cash held in trust                              2,286,200              -
    -------------------------------------------------------------------------
                                                    2,797,006      1,414,395
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental cash flow information
    Interest received                                  15,881        205,113
                                                            -              -
    Interest paid                                      44,657        118,157
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

%SEDAR: 00009903E

SOURCE GeneNews Limited

For further information: For further information: Gailina Liew, President & COO, Office: (905) 739-2036, Mobile: (416) 844-0649, gliew@genenews.com


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