Isotechnika reports full year and fourth quarter 2006 financial results



    EDMONTON, March 16 /CNW/ - Isotechnika Inc. announced today its financial
results for the year ended December 31, 2006 and provided a review of the
Company's operational and scientific progress for 2006 and to the current date
in 2007.
    On February 15, 2007, the Company completed a bought deal financing. The
syndicate of underwriters led by GMP Securities, L.P. and including Canaccord
Capital Corporation, RBC Dominion Securities Inc. and National Bank Financial
Inc. (collectively the "Underwriters") purchased a total of 21,850,000 Units
at a price of $1.85 per Unit for gross proceeds of $40,422,500, representing
the base offering size of 19,000,000 Units and the full exercise by the
Underwriters of the over-allotment option to purchase an additional 2,850,000
Units. The Company intends to use the net proceeds of the Offering
($37.5 million) for clinical trial expenses, working capital and general
corporate purposes. These additional financial resources will support the
aggressive advancement of its lead immunosuppressive drug ISA247, a novel
calcineurin inhibitor, for both psoriasis and kidney transplant indications.
The Company believes that it has sufficient cash resources to complete the
Phase 2b ISA247 kidney transplant and the Phase 3 European/Canadian ISA247
psoriasis trials.
    On January 4, 2006, the first patient was enrolled in a North American
Phase 2b kidney transplant trial, called the PROMISE trial. A total of 332 de
novo (newly transplanted) kidney transplant patients will be enrolled in this
trial. As of March 13, 2007, 230 patients have been enrolled in the trial.
    On November 16, 2006, the Company released results from initial data for
the Phase 2b kidney transplant trial. Based on an early review of the
unaudited data, the Company has observed a similar incidence of rejection
episodes between the low (0.4 mg/kg twice daily) and mid (0.6 mg/kg twice
daily) ISA247 dosing groups as in the tacrolimus control arm. Based on the
initial data generated, very good kidney function has been observed in all of
the ISA247 dosing groups. Within the first month post-transplant, kidney
function showed improvement across all ISA247 dosing groups similar to that
observed in the tacrolimus group.
    On December 4, 2006, the Company enrolled its first patient in a pivotal
Phase 3 European/Canadian clinical trial (called the ESSENCE trial) for the
treatment of moderate to severe psoriasis with ISA247. The Company had
previously announced that it had received permission from the German Competent
Authority and Health Canada to conduct the pivotal Phase 3 psoriasis trial on
October 2, 2006 and October 4, 2006, respectively. As of March 13, 2007, 160
patients have been enrolled in the trial.
    Following the 24 week duration of a Canadian Phase 3 trial in patients
with moderate to severe psoriasis which was completed in August 2005, patients
were given the opportunity to continue therapy with ISA247 for an additional
36 weeks through an extension trial. The goal of the extension trial was to
gather long-term safety data while demonstrating continued therapeutic
benefit. The patients who enrolled in the open label extension trial received
oral administration of ISA247 at 0.3 mg/kg twice daily, which was the mid dose
used in the initial 24 week trial. Of the patients who completed the 24 week
trial, 90% chose to continue treatment and enrolled in the extension trial.
    The last patient completed the extension trial on July 14, 2006, and on
October 5, 2006, the Company reported final safety and efficacy data. All
safety and efficacy endpoints established by the Company were met. The final
60 week data was consistent with previously reported interim data on the drug.
    Over the course of the 24 week Canadian Phase 3 psoriasis trial, patients
exhibited a 60% mean improvement in Psoriasis Area and Severity Index ("PASI")
scores from pre-treatment levels. After an additional 36 weeks (extension
trial portion) of treatment continued therapeutic benefit was observed as PASI
scores remained 54% below pre-treatment levels. This beneficial effect was
still observed 12 weeks after discontinuing ISA247 treatment as indicated by
mean PASI scores remaining 35% below pre-treatment scores. Subsequent to
60 weeks of continuous treatment with ISA247, there were no clinically
significant changes in kidney function, cholesterol, triglycerides, new onset
diabetes, infectious complications or other laboratory parameters as compared
to pre-treatment values.
    On May 24, 2006, Isotechnika signed a licensing agreement with Lux
Biosciences, Inc. ("Lux") of Jersey City, New Jersey granting worldwide rights
to Lux to develop and commercialize ISA247 for the treatment and prophylaxis
of all ophthalmic diseases. The Company received an upfront payment of
$3.3 million (US$3.0 million) upon signing the agreement.
    In 2006 Lux received permission from the FDA to investigate ISA247,
referred to as LX211 by Lux, as a treatment for non-infectious uveitis and as
maintenance therapy in uveitis in three separate Phase 2/3 trials. The first
patient was enrolled on February 21, 2007. Lux has recently been granted
orphan drug designation from the FDA for ISA247 for the treatment of
non-infectious posterior, intermediate and panuveitis.
    On April 24, 2006, the Company signed an option agreement with Cellgate
Inc. ("Cellgate") of Redwood City, California. This agreement allows
Isotechnika the option to obtain an exclusive license to develop and
commercialize conjugates consisting of Cellgate's patented transporter
technology for the topical delivery of ISA247 in patients suffering from mild
to moderate psoriasis.
    Isotechnika was issued European Patent No.EP0991660 for ISA247. The
patent entitled "DEUTERATED AND UNDEUTERATED CYCLOSPORINE ANALOGS AND THEIR
USE AS IMMUNOMODULATING AGENTS" is the ninth patent to be issued
internationally in this patent family.
    On August 21, 2006, the Company reported results of its Phase 1 TAFA93
human clinical trials. TAFA93, a pro-drug of rapamycin, is a novel small
molecule mTOR inhibitor. This class is often used in combination with
calcineurin inhibitors for prevention of organ rejection in transplantation.
These anti-proliferative mTOR inhibitors also have utility in oncology and as
drug coating for coronary stents and surgical meshes. No serious adverse
events were noted in either of the Phase 1 trials. The successful completion
of these two Phase 1 trials fulfilled one of the Company's commitments to
Atrium Medical Corporation ("Atrium") and allows Atrium to continue moving
forward with their drug eluting stent technology program.
    On November 24, 2006, the Company announced that it received a Notice of
Allowance in the United States for TAFA93 and Methods of Use, based on U.S.
Patent Application Serial No. 10/845,747. This is the first patent to issue in
the United States for this technology. Furthermore, the Company has patents
pending in 15 countries around the world for this technology.

    Financial results
    -----------------

    At December 31, 2006, the Company's cash, cash equivalents and short-term
investment position was $25.7 million as compared to $52.8 million at
December 31, 2005. On a pro-forma basis, after consideration of the bought
deal financing which was completed on February 15, 2007, for net proceeds of
$37.5 million, the Company's cash, cash equivalents and short-term investment
position would have been $63.2 million had the financing occurred on
December 31, 2006.
    For the year ended December 31, 2006, the Company reported a consolidated
net loss of $26.6 million or $0.32 per Common Share, as compared to a
consolidated net loss of $33.8 million or $0.43 per Common Share in 2005.
    The decrease in the consolidated loss in 2006 when compared to 2005
resulted primarily from recording $2.7 million of licence fee revenue in 2006
compared to $Nil in 2005, decreased clinical trial expenditures of
approximately $1.0 million and reduced corporate, administration and marketing
expenses totalling $2.5 million.
    Revenue increased to $4.1 million for the year ended December 31, 2006,
compared to $1.4 million for the year ended December 31, 2005. Revenue in 2006
was comprised of $2.7 million for licensing fees and $1.4 million for
diagnostic product sales, as compared to $nil for licensing fees and
$1.4 million for diagnostic product sales in 2005. Licensing fees represent
the amortization of deferred revenue related to upfront payments the Company
has received from its out-licensing agreement with Atrium. The $3.3 million
upfront licensing fee received from Lux has all been deferred and is recorded
as long term deferred revenue on the balance sheet.
    Research and development expenditures were $22.2 million for the year
ended December 31, 2006, compared to $23.1 million for the year ended
December 31, 2005, a decrease of approximately $900,000. Research and
development expenditures for 2006 consisted primarily of clinical trial costs
for the ISA247 Phase 2b kidney transplant trial, start up and implementation
costs related to the Phase 3 ISA247 European/Canadian psoriasis trial. In
addition, the Company incurred expenditures for the ongoing quarterly
non-clinical two year mouse and rat carcinogenicity studies, drug
manufacturing costs related to producing three stability batches of ISA247 for
clinical trial and regulatory requirements, ISA247 drug packaging and
encapsulation costs for the clinical trials and the purchase of third party
drugs required to conduct the trials.
    Corporate, administration and marketing costs totalled $7.2 million for
year ended 2006, compared to $9.8 million for the year ended December 31,
2005.
    For the three months ended December 31, 2006, the Company reported a
consolidated net loss of $7.6 million or $0.09 per Common Share, as compared
to a consolidated net loss of $9.2 million or $0.11 per Common Share for the
same period in 2005. Revenue from operations for the fourth quarter ended
December 31, 2006 was $885,000 compared to $429,000 for the comparable period
in 2005. Expenses for the quarter were $8.9 million compared to $9.8 million
for the comparable period in 2005.
    The audited financial statements and the Management's Discussion and
Analysis for the year ended December 31, 2006 are accessible on Isotechnika's
Web site at www.isotechnika.com or on SEDAR at www.sedar.com.

    About Isotechnika Inc.
    ----------------------

    Isotechnika Inc. is an international biopharmaceutical company
headquartered in Edmonton, Alberta, Canada. Drawing upon its expertise in
medicinal chemistry and immunology, the Company is focused on the discovery
and development of novel immunosuppressive therapeutics that are safer than
currently available treatments. Its entrepreneurial management and world-class
team of scientists are building a pipeline of immunosuppressive drug
candidates for treatment of autoimmune diseases and for use in the prevention
of organ rejection in transplantation. Isotechnika looks to become the leader
in development of immunosuppressant therapies.
    Isotechnika's lead compound, ISA247 has successfully completed a Phase 3
Canadian trial for the treatment of moderate to severe psoriasis. ISA247 is
currently being investigated in a combined Phase 3 European/Canadian psoriasis
trial and a Phase 2b North American trial for the prevention of kidney graft
rejection. The Company also has an additional immunosuppressive compound in
its drug pipeline, TAFA93 which successfully completed Phase 1 clinical
trials.
    Isotechnika Inc. is a publicly traded company on the Toronto Stock
Exchange under the symbol ISA. More information on Isotechnika can be found at
www.isotechnika.com.

    Partnerships with Isotechnika Inc.
    ----------------------------------

    Isotechnika Inc. signed a collaboration agreement with Hoffman La Roche
on April 9, 2002, which licensed the worldwide rights to develop and
commercialize ISA247 for all transplant indications.
    On September 29, 2005, Isotechnika Inc. entered into an exclusive
worldwide licensing agreement with Atrium for the use of ISA247 and TAFA93
specifically with drug eluting devices for the non-systemic treatment of
vascular, cardiovascular, target vessel and tissue disorders.
    Isotechnika and Cellgate signed an option agreement on April 24, 2006,
granting Isotechnika the option to obtain an exclusive license to develop and
commercialize conjugates consisting of Cellgate's patented transporter
technology for the topical delivery of ISA247 in patients suffering from mild
to moderate psoriasis.
    On May 24, 2006, Isotechnika signed an agreement with Lux granting Lux
worldwide rights to develop and commercialize Isotechnika's lead drug, ISA247
for the treatment and prophylaxis of all ophthalmic diseases.

    Forward-Looking Statements
    --------------------------

    This press release may contain forward-looking statements. Forward
looking statements, including the Company's belief as to the potential of its
products, the Company's expectations regarding the issuance of additional
patents and the Company's ability to protect its intellectual property,
involve known and unknown risks and uncertainties, which could cause the
Company's actual results to differ materially from those in the forward
looking statements. Such risks and uncertainties include, among others, the
availability of funds and resources to pursue research and development
projects, the ability to economically manufacture its products, the potential
of its products, the success and timely completion of clinical studies and
trials, the Company's ability to successfully commercialize its products, the
ability of the Company to defend its patents from infringement by third
parties, and the risk that the Company's patents may be subsequently shown to
be invalid or infringe the patents of others. Investors should consult the
Company's quarterly and annual filings with the Canadian commissions for
additional information on risks and uncertainties relating to the forward-
looking statements. Investors are cautioned against placing undue reliance on
forward-looking statements.


    
    Isotechnika Inc.
    Consolidated Balance Sheets
    As at December 31, 2006 and 2005
    -------------------------------------------------------------------------

    (expressed in thousands of Canadian dollars)


                                                            2006        2005
                                                               $           $
    Assets

    Current assets
    Cash and cash equivalents                             15,574      19,402
    Short-term investments                                10,174      33,425
    Accounts receivable                                      463         447
    Inventories                                              299         312
    Prepaid expenses and other deposits                    1,035         830
                                                    -------------------------

                                                          27,545      54,416
    Property and equipment                                 5,561       6,506
    Patents                                                2,604       2,200
                                                    -------------------------

                                                          35,710      63,122
                                                    -------------------------
                                                    -------------------------

    Liabilities

    Current liabilities
    Accounts payable and accrued liabilities               5,305       5,649
    Current portion of deferred revenue                      750       3,489
    Current portion of long-term debt                      2,007       1,887
    Current portion of deferred lease inducements             16          61
                                                    -------------------------

                                                           8,078      11,086

    Deferred revenue                                       3,322           -
    Long-term debt                                           714       2,717
    Deferred lease inducements                                90         125
                                                    -------------------------

                                                          12,204      13,928
                                                    -------------------------


    Shareholders' Equity

    Share capital
    Common stock
    Authorized
      Unlimited number of common shares without
       par value
    Issued and outstanding
      84,333,492 (2005 - 84,108,492)                     158,276     157,812
      Warrants                                                 -       1,094
    Contributed surplus                                    4,422       2,843
    Deficit                                             (139,192)   (112,555)
                                                    -------------------------

                                                          23,506      49,194
                                                    -------------------------

                                                          35,710      63,122
                                                    -------------------------
                                                    -------------------------


    Isotechnika Inc.
    Consolidated Statements of Changes in Shareholders' Equity
    For the years ended December 31, 2006 and 2005
    -------------------------------------------------------------------------
    (expressed in thousands of Canadian dollars, except numbers of shares
     and warrants)

                                        Common stock                Warrants
                              ----------------------  -----------------------

                                   Number     Amount      Number      Amount
                                      No.          $          No.          $

    Balance - December 31,
          2004                74,882,992     138,915   1,293,147       1,094
    Issue of common shares     8,900,000      18,417           -           -
    Exercise of stock options    325,500         480           -           -
    Issue of stock options             -           -           -           -
    Net loss for the year              -           -           -           -
                              -----------------------------------------------

    Balance - December 31,
          2005                84,108,492     157,812   1,293,147       1,094

    Exercise of stock
     options                     225,000         464           -           -
    Issue of stock options             -           -           -           -
    Expiry of warrants                 -           -  (1,293,147)     (1,094)
    Net loss for the year              -           -           -           -
                              -----------------------------------------------

    Balance - December 31,
          2006                84,333,492     158,276           -           -
                              -----------------------------------------------
                              -----------------------------------------------



                                                                      Share-
                                         Contributed                holders'
                                             surplus     Deficit      equity
                                                   $           $           $
    Balance - December 31,
          2004                                 1,529     (78,787)     62,751
    Issue of common shares                         -           -      18,417
    Exercise of stock options                    (41)          -         439
    Issue of stock options                     1,355           -       1,355
    Net loss for the year                          -     (33,768)    (33,768)
                              -----------------------------------------------

    Balance - December 31,
          2005                                 2,843    (112,555)     49,194
    Exercise of stock
     options                                    (109)          -         355
    Issue of stock options                       594           -         594
    Expiry of warrants                         1,094           -           -
    Net loss for the year                          -     (26,637)    (26,637)
                              -----------------------------------------------
    Balance - December 31,
          2006                                 4,422    (139,192)     23,506
                              -----------------------------------------------
                              -----------------------------------------------




    Isotechnika Inc.
    Consolidated Statements of Operations
    -------------------------------------------------------------------------
    (expressed in thousands of Canadian dollars, except per share amounts)



                                   Three Months Ended         Year Ended
                                      December 31            December 31
                                      (Unaudited)

                                    2006        2005        2006        2005
                                       $           $           $           $

    Revenue
    Licensing revenue                506           -       2,739           -
    Product sales and
     contract analysis               379         429       1,367       1,368
                              -----------------------------------------------
                                     885         429       4,106       1,368
                              -----------------------------------------------

    Expenses
    Research and development       6,195       5,251      22,151      23,141
    Corporate, administration
     and marketing                 1,988       3,247       7,219       9,756
    Amortization of property
     and equipment                   390         736       1,749       2,093
    Product sales and contract
     analysis                        214         413         696       1,049
    Interest on long-term debt        63          97         313         443
    Loss (gain) on disposal of
     property and equipment           17           2          72        (324)
    Amortization and write-
     down of patent costs             30          11          59         388
                              -----------------------------------------------

                                   8,897       9,757      32,259      36,546
                              -----------------------------------------------

    Loss before the
     undernoted                   (8,012)     (9,328)    (28,153)    (35,178)
                              -----------------------------------------------

    Other income (expense)
    Investment income                331          86       1,607       1,295
    Foreign exchange
     translation (loss) gain          63          77         (92)        116
                              -----------------------------------------------

                                     394         163       1,515       1,411
                              -----------------------------------------------

    Loss before capital taxes     (7,618)     (9,165)    (26,638)    (33,767)

    Capital taxes                     (1)          1          (1)          1

    Net loss for the period       (7,617)     (9,166)    (26,637)    (33,768)
                              -----------------------------------------------
                              -----------------------------------------------
    Basic and diluted loss
     per share                     (0.09)      (0.11)      (0.32)      (0.43)
                              -----------------------------------------------
                              -----------------------------------------------




    Isotechnika Inc.
    Consolidated Statements of Cash Flows
    -------------------------------------------------------------------------
    (expressed in thousands of Canadian dollars)


                                     Three Months ended        Year ended
                                        December 31            December 31
                                        (Unaudited)

                                    2006        2005        2006        2005
                                       $           $           $           $

    Cash provided by (used in)

    Operating activities
    Net loss for the period       (7,617)     (9,166)    (26,637)    (33,768)
    Items not affecting cash
      Amortization of
       deferred revenue             (506)          -      (2,739)          -
      Loss (gain) on disposal
       of property and
       equipment                      17           2          72        (324)
      Amortization of property
       and equipment                 390         736       1,749       2,093
      Amortization and write
       down of patent costs           30          11          59         388
      Unrealized foreign
       exchange translation
       (gain) loss related
       to non-operating
       activities                   (206)          -         (35)        277
      (Recovery) write down in
       value of short-term
       investments                   (58)        358        (266)        358
      Stock-based compensation        67          25         594       1,355
      Amortization of deferred
       lease inducements              (4)       (124)        (80)       (192)
                              -----------------------------------------------

                                  (7,887)     (8,158)    (27,283)    (29,813)
    Licensing fee proceeds
     received                          -           -       3,322       3,489
    Net change in other
     operating assets and
     liabilities                   1,119       2,143        (552)      1,667
                              -----------------------------------------------

                                  (6,768)     (6,015)    (24,513)    (24,657)
                              -----------------------------------------------
    Investing activities
    Decrease in short-term
     investments                   5,682       3,285      23,509       8,209
    Proceeds on disposal of
     property and equipment           19           4          85       1,153
    Purchase of property and
     equipment                      (302)       (272)       (961)       (408)
    Patent costs                    (140)       (235)       (463)       (440)
                              -----------------------------------------------
                                   5,259       2,782      22,170       8,514
                              -----------------------------------------------
    Financing activities
    Proceeds from long-term
     debt                              -         590           -         590
    Repayment of long-term
     debt                           (457)       (446)     (1,838)     (1,725)
    Issuance of share
     capital-net of share
     issue costs                      21          15         355      18,859
                              -----------------------------------------------
                                    (436)        159      (1,483)     17,724
                              -----------------------------------------------
    Effect of foreign
     exchange rate
     fluctuations on cash and
     cash equivalents                 19           -          (2)        (68)
                              -----------------------------------------------

    (Decrease) increase in
     cash and cash equivalents    (1,926)     (3,074)     (3,828)      1,513

    Cash and cash equivalents
     - Beginning of period        17,500      22,476      19,402      17,889
                              -----------------------------------------------

    Cash and cash equivalents
     - End of period              15,574      19,402      15,574      19,402
                              -----------------------------------------------
                              -----------------------------------------------

    Cash and cash equivalents
     are comprised of
    Cash on deposit                5,320       3,189       5,320       3,189
    Money market securities
     and investment deposits      10,254      16,213      10,254      16,213
                              -----------------------------------------------
                                  15,574      19,402      15,574      19,402
                              -----------------------------------------------
                              -----------------------------------------------
    

    %SEDAR: 00010508E




For further information:

For further information: Dr. Randall Yatscoff, President & CEO,
Isotechnika Inc., (780) 487-1600 (246), (780) 484-4105 (fax),
ryatscoff@isotechnika.com; Dennis Bourgeault, Chief Financial Officer,
Isotechnika Inc., (780) 487-1600 (226), (780) 484-4105 (fax),
dbourgeault@isotechnika.com

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ISOTECHNIKA PHARMA INC.

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