GeneNews reports third quarter 2007 results

TORONTO, Nov. 8 /CNW/ - GeneNews Limited (TSX: GEN), a company focused on developing simple blood-based biomarker tests for the early detection of diseases and personalized health management, today reported operational and financial results for the third quarter and year-to-date ended September 30, 2007.

Financial results (CDN dollars) for the third quarter (Jul. 1, 2007 -

Sept. 30, 2007):

Total revenue for the quarter ended September 30, 2007 was $0.2 million compared to $0.9 million for the same period last fiscal year. Revenue in 2007 resulted from an agreement entered into by the Company with an Asian biomedical consortium to identify and validate a set of biomarkers in the field of prostate diseases, for a total fee of $2 million (USD), while revenues in 2006, resulted from a collaboration agreement with Pfizer completed in the first fiscal quarter of 2007.

Interest earned during the three months ended September 30, 2007 was $149,000, compared with $244,000 for the corresponding quarter in the prior year. The decrease was due to a reduction in short-term investments.

Total operating expenditures for the quarter ended September 30, 2007 were $3.4 million compared with $3.2 million for the same period last year. Research and development expenses for the quarter were $2.4 million compared with $2.3 million for the same period last year. General and administrative expenses for the first quarter were $0.7 million compared with $0.6 million for the corresponding quarter in the previous year.

The net loss for the quarter ended September 30, 2007 was $3.0 million or ($0.05) per common share compared with a net loss of $2.1 million or ($0.04) per common share for the same period last year. The net loss is reflective of the Company's continuing focus on research and development and the process leading to commercialization of its first product ColonSentry(TM), a convenient and patient-friendly blood-based test that can detect colon cancer, and the advancement of related products in the Company's pipeline.

Financial results (CDN dollars) for the nine month period ended September

30, 2007:

Total revenue for the nine-month period ended September 30, 2007 was $1.9 million compared with $2.6 million for the same period last fiscal year. Of the revenues in 2007, $0.2 resulted from the prostate disease biomarker development agreement and $1.7 from the final revenue from the Pfizer collaboration agreement. In 2006, revenues resulted entirely from the Pfizer agreement.

Interest earned during the nine-month period ended September 30, 2007 was $691,000, compared to $397,000 for the corresponding period during the prior year, the result of higher balances of cash and short-term investments.

Total operating expenditures for the nine-month period ended September 30, 2007 were $9.5 million compared with $9.2 million for the same period last year. Research and development expenses for the quarter were $6.8 million, the same as for the period last year. General and administrative expenses for the nine-month period ended September 30, 2007 were $2.0 million compared with $1.6 million for the corresponding period in 2006.

The net loss for the nine-month period ended September 30, 2007 was $7.0 million or ($0.13) per common share compared to a net loss of $6.2 million or ($0.13) per common share for the same period last year. The Company's continuing focus is on research and development leading to commercialization of its first product and the development of related products in the Company's pipeline.

As at September 30, 2007 the Company had cash and cash equivalents totalling $13.0 million compared to $20.6 million as at December 31, 2006. Accounts payable and accrued liabilities at September 30, 2007 were $2.1 million compared with $1.8 million at December 31, 2006.

As at September 30, 2007 the Company had 55,450,571 common shares, and 625,000 broker warrants were outstanding.

Restatement of second quarter results:

GeneNews also announced it is issuing restated unaudited consolidated financial statements for its second quarter ended June 30, 2007. The restatement reflects changes to the accounting treatment of payments under a collaboration agreement with an Asian biomedical consortium and has no effect on the Company's current cash position or operating expenses.

During the second quarter, the Company received an advance payment of US$500,000 pursuant to a letter of intent executed on May 7, 2007. It has been subsequently determined that generally accepted accounting principles governing the treatment of this amount should be to record the receipt as deferred revenue. The effect of this change is to reduce revenue in the quarter by $539,950, to reduce general and administrative expense by $8,250 resulting from a related foreign exchange gain, to increase the net loss for the period by $531,700 and to increase the loss per share by $0.01. The deficit and deferred revenue as at June 30, 2007 are increased by $531,700.

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 detect colon cancer. For more information on GeneNews, visit www.genenews.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.

    
    GeneNews Limited

    Consolidated Balance Sheets

    Amounts in Canadian dollars                           "Unaudited"
    -------------------------------------------------------------------------
                                                 September 30    December 31
                                                         2007           2006
    -------------------------------------------------------------------------

    ASSETS
    Current assets:
      Cash and cash equivalents                 $  13,030,325  $  20,593,568
      Accounts receivable                           2,270,796        135,315
      Investment tax credits recoverable              796,900        796,900
      Prepaid expenses and deposits                   236,378        685,819
      -----------------------------------------------------------------------
                                                   16,334,399     22,211,602

    Capital assets                                  3,634,949      1,645,488
    Intellectual property                             510,917        842,528
    -------------------------------------------------------------------------
                                                $  20,480,265  $  24,699,618
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES and SHAREHOLDERS' EQUITY

    Current liabilities:
      Accounts payable and accrued liabilities  $   2,081,443  $   1,821,355
      Deferred revenue                              1,797,038
      Current portion of long term debt                69,311        102,549
      -----------------------------------------------------------------------
                                                    3,947,792      1,923,904

    Long term debt                                    314,194              -

    Shareholders' equity:
      Capital stock                                44,261,205     44,234,409
      Contributed surplus                           2,656,158      2,255,390
      Deficit                                     (30,699,084)   (23,714,085)
      -----------------------------------------------------------------------
                                                   16,218,279     22,775,714
    -------------------------------------------------------------------------
                                                $  20,480,265  $  24,699,618
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    GeneNews Limited

    Consolidated Statements of Operations and Deficit

    Amounts in
     Canadian dollars                     "Unaudited"
    -------------------------------------------------------------------------
                      Three months  Three months   Nine months   Nine months
                         ended         ended         ended         ended
                      September 30  September 30  September 30  September 30
                          2007          2006          2007          2006
    -------------------------------------------------------------------------

    Revenue
      Milestones      $    189,162  $          -  $  1,855,398  $          -
      Fees for service           -       191,584             -       581,835
      One-time payment           -       686,691             -     2,037,682
      -----------------------------------------------------------------------
                           189,162       878,275     1,855,398     2,619,517

    Expenses
      Research and
       development       2,362,671     2,322,044     6,802,402     6,790,173
      General and
       administrative      738,387       551,620     1,975,397     1,554,372
      Stock compensation   123,917       246,859       402,103       543,266
      Amortization of
       intellectual
        property           110,537       110,537       331,611       331,611
      Foreign exchange
       loss                  8,185             -         8,185             -
      Interest on long
       term debt             7,145         4,440        11,335        16,380
      -----------------------------------------------------------------------
                         3,350,842     3,235,500     9,531,033     9,235,802

    Interest income        149,451       244,207       690,637       396,977
    -------------------------------------------------------------------------

    Net loss for the
     period             (3,012,229)   (2,113,018)   (6,984,998)   (6,219,308)

    Deficit, beginning
     of period         (27,686,855)  (18,884,702)  (23,714,086)  (14,778,412)
    -------------------------------------------------------------------------

    Deficit, end of
     period           $(30,699,084) $(20,997,720) $(30,699,084) $(20,997,720)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Net loss per
     common share
      Basic and
       fully diluted  $      (0.05) $      (0.04) $      (0.13) $      (0.13)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average
     number of
     common shares
     outstanding
      Basic and
       fully diluted    55,450,571    55,336,712    55,444,238    46,965,426
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    GeneNews Limited

    Consolidated Statements of Cash Flows

    Amounts in
     Canadian dollars                     "Unaudited"
    -------------------------------------------------------------------------
                      Three months  Three months   Nine months   Nine months
                         ended         ended         ended         ended
                      September 30  September 30  September 30  September 30
                          2007          2006          2007           2006
    -------------------------------------------------------------------------
    Cash flows provided
     by (used in):

    Operations:
      Net loss for
       the period     $ (3,012,229) $ (2,113,018) $ (6,984,998) $ (6,219,308)
      Items therein
       not requiring
       cash
        Stock based
         compensation      123,917       246,859       402,103       543,266
        Amortization of
         capital assets   (279,277)       99,015      (104,415)      290,543
        Amortization of
         intellectual
         property          110,537       110,537       331,611       331,611
      -----------------------------------------------------------------------
                        (3,057,052)   (1,656,607)   (6,355,699)   (5,053,888)

      Changes in
       non-cash working
       capital:
        Accounts
         receivable     (1,823,774)      (65,941)   (2,135,480)    1,233,895
        Investment tax
         credit recoverable      -             -             -       658,022
        Prepaid expenses
         and deposits      207,770      (112,134)      449,440      (141,304)
        Accounts payable
         and accrued
         liabilities       139,370       146,472       260,088       378,184
        Deferred revenue 1,265,338      (686,929)    1,797,038    (2,038,460)
    -------------------------------------------------------------------------
                        (3,268,348)   (2,375,139)   (5,984,613)   (4,963,551)

    Financing:
      Net proceeds from
       issue of capital
       stock                     -        39,148        25,459    24,064,287
      Payments on long
       term debt           356,357       (35,357)      280,956      (103,009)
    -------------------------------------------------------------------------
                           356,357         3,791       306,415    23,961,278

    Investments:
      Additions to
       capital assets     (608,014)      (26,944)   (1,885,045)     (262,842)
    -------------------------------------------------------------------------

    Increase (decrease)
     in cash and cash
     equivalents        (3,520,005)   (2,398,292)   (7,563,243)   18,734,885


                        16,550,330    25,814,059    20,593,568     4,680,882

    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end
     of period        $ 13,030,325  $ 23,415,767  $ 13,030,325  $ 23,415,767
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

SOURCE GeneNews Limited

For further information: For further information: Dr. K. Wayne Marshall, President & CEO, (416) 650-0060 x 234, wmarshall@genenews.com; James Smith, (416) 815-0700 x 229, jsmith@equicomgroup.com


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