Ondine Biopharma Announces 2006 Year End Financial Results



    VANCOUVER, March 8 /CNW/ - Ondine Biopharma Corporation ("the Company",
TSX: OBP; AIM: OBP) announced today its financial results for the year ended
December 31, 2006.
    "2006 was a year of significant progress for Ondine as we launched
Periowave(TM), our first commercial photodisinfection product, for the
treatment of periodontal diseases. Positive feedback from our Canadian
distributor and Periowave(TM) users, along with additional favorable clinical
trial data are confirming this technology's safety and efficacy. The results
to date support our conviction that Ondine's technology will become part of
the standard of care in dental practices for the treatment of periodontal
diseases," said Carolyn Cross, President and CEO of Ondine. "We continue to
pursue the use of our platform photodisinfection technology for other
applications, while preparing to launch Periowave(TM) into the larger markets
of the United States and Europe. Our multi-year research agreement with UCL
Business PLC and the obtaining of CE Mark approval for the use of our
photodisinfection technology for the treatment of
methicillin/multiple-resistant Staphylococcus aureus (MRSA) decolonization are
critical milestones in this process."

    
    2006 Highlights and Recent Developments

    -   Received both a Class II Medical Device License from Health Canada
        and European CE Mark for Periowave(TM)
    -   Product sales revenue for Periowave(TM) laser consoles and treatment
        kits, the Company's first commercially available photodisinfection
        ("PDD") product, for the year ended December 31, 2006 was
        $1,619,209 million generating a gross margin of $604,117 (37%).
        Initial sales of Periowave(TM) commenced in late April 2006. Product
        sales revenue for the fourth quarter of 2006 was $658,728
        representing a 23% increase when compared with the product sales
        revenue for the previous quarter
    -   Announced results from a prospective, randomized, controlled, blinded
        clinical trial of Periowave(TM) PDD for the treatment of periodontal
        disease which showed significant improvements in periodontal
        attachment and pocket depth recovery for the Periowave(TM) with
        scaling and root planing arm compared to the control arm treatment of
        scaling and root planing alone
    -   Established Ondine Biopharma (U.S.A.), Inc., a wholly-owned
        subsidiary of Ondine Biopharma to lead Periowave(TM)
        commercialization efforts in the United States, subject to regulatory
        clearance, and in Europe
    -   Signed a comprehensive multi-year research and development agreement
        with UCL Business PLC (formerly named UCL BioMedica Plc), a wholly-
        owned subsidiary of University College London, to develop additional
        applications to prevent and treat infectious diseases using PDD
        technology.
    -   Received CE mark approval for expanded use of its PDD system. The new
        indication is for decolonization of pathogenic bacteria like MRSA in
        the nose
    -   Strengthened its management team with the appointment of Jacqueline
        Walker as President of Ondine Biopharma (U.S.A.), Inc. and Chief
        Operating Officer of Ondine Biopharma Corporation and Thomas G.
        Leonardi as Vice-President, Sales and Marketing of Ondine Biopharma
        (U.S.A.), Inc.
    -   Strengthened its Board of Directors with the appointment of
        Mr. Michael Crane
    -   Completed an equity financing during the fourth quarter of 2006
        raising aggregate net proceeds of $9.78M on a bought deal basis

    Financial Review

    Consolidated statements of operations for the fourth quarter (unaudited -
in thousands except per share amounts):

                                                          Three months ended
                                                              December 31,
                                                           2006         2005
                                                         --------------------
                                                            $            $
    -------------------------------------------------------------------------
    REVENUE
    Product sales                                           659            -
    Cost of sales                                           421            -
    -------------------------------------------------------------------------
    Gross margin                                            238            -
    -------------------------------------------------------------------------
    EXPENSES
    Research and development                              1,635        1,224
    Marketing and sales                                   1,028          295
    General and administration                            1,073          823
    Depreciation and amortization                            73           39
    -------------------------------------------------------------------------
                                                         (3,809)      (2,381)
    -------------------------------------------------------------------------
    Other
    Interest income                                         135          121
    Foreign exchange loss                                   (41)         (57)
    -------------------------------------------------------------------------
                                                             94           64
    -------------------------------------------------------------------------
    Loss before income tax                               (3,477)      (2,317)
    Income tax recovery (expense)                            13          (22)
    -------------------------------------------------------------------------
    Net loss for the period                              (3,464)      (2,339)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted loss per common share               (0.07)       (0.05)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    For the quarter ended December 31, 2006 (the "Current Quarter") the
Company recorded a net loss of $3.46 million or $0.07 per common share
compared with a loss of $2.34 million or $0.05 per common share during the
quarter ended December 31, 2005 (the "Prior Quarter"). For the year ended
December 31, 2006 (the "Current Year") the Company recorded a net loss of
$11.96 million, or $0.25 per common share, compared with a loss of
$8.54 million, or $0.21 per common share, for the year ended December 31, 2005
(the "Prior Year"). Product sales of our laser consoles and treatment kits
during the Current Quarter amounted to $0.66 million with a gross margin of
$0.24 million. Product sales during the Current Year amounted to $1.62 million
with a gross margin of $0.60 million. There were no sales in the Prior Quarter
or Prior Year as the Company commenced sales of its first product,
Periowave(TM), in April of 2006.
    The increase in loss during the Current Quarter and the Current Year,
when compared to the Prior Quarter and Prior Year, is primarily due to the
increase in costs incurred in research and development (R&D) and in marketing
and sales activities, together with an increase in the Company's
administrative infrastructure required to support those activities. These
expenses have increased significantly when compared to the same periods in the
prior year and are expected to continue to increase during 2007 as the Company
continues to execute its marketing and sales strategy for the sale of
Periowave(TM) in Canada, to introduce Periowave(TM) in certain countries in
Europe, and to begin initial preparations for marketing Periowave(TM), subject
to regulatory approval, in the United States in 2008. These increases were
partially offset by the gross profit earned during the Current Year and by a
decrease in foreign exchange loss, as the Prior Year's loss included a loss on
a cash equivalent that was denominated in British Pound Sterling.
    R&D expenses for the Current Quarter were $1.64 million compared to
$1.22 million during the Prior Quarter and for the Current Year were $5.71
million compared to $4.59 million during the Prior Year. During the first
quarter of 2006, development of the Company's photodisinfection ("PDD")
technology progressed with completion of demonstration and testing units of
the Company's Periowave(TM) product. During 2006, in addition to an ongoing
clinical study in China that completed during the fourth quarter of 2006, a
number of clinical studies using Periowave(TM) commenced in Canada and an
additional study commenced at University College London Hospital in the United
Kingdom. The Company expects to complete these studies during 2007. The
results from the studies are expected to be used as part of a submission to
the United States Food and Drug Administration (FDA). FDA approval of
Periowave(TM) is required to enable us to sell Periowave(TM) in the United
States. In addition, the Company currently has underway research programs at
University College London on potential new applications of PDD, principally
for the non-antibiotic treatment of methicillin-resistant staphylococcus
aureus (MRSA) and other topical infections.
    General and administration costs for the Current Quarter were
$1.07 million compared to $0.82 million during the Prior Quarter and for the
Current Year were $3.93 million compared to $3.04 million in the Prior Year,
as additional administrative staff were added to support the increase in the
Company's activities. The costs for the Prior Year include a credit in
connection with the forfeiture of stock options and a severance payment to the
Company's former CEO which were not duplicated in the Current Year. In
addition the Company incurred a for
    Marketing and sales expenses for the Current Quarter were $1.03 million
compared to $0.30 million during the Prior Quarter and for the Current Year
were $3.03 million compared to $0.82 million in the Prior Year, as the Company
hired its Canadian sales force and commenced the sale of Periowave(TM) in
Canada in April 2006. The Company has undertaken a number of marketing
initiatives, primarily in Canada, during 2006, including advertising
campaigns, market research, attendance at industry trade shows, conducting
product seminars, and preparation of marketing materials.
    As at December 31, 2006 the Company had cash, cash equivalents and short
term investments totaling $15.38 million compared with $15.49 million as at
December 31, 2005. During the Current Year the Company used cash of
$10.84 million for its operating activities, $0.97 million was provided by its
investing activities, and $11.39 million was provided by the issuance of
common shares, including i) $9.78 million raised from the closing of a bought
deal equity financing and the partial exercise of a related over-allotment
option that occurred during the fourth quarter of 2006; and ii) $1.58 million
from the exercise of warrants.
    As at December 31, 2006 the Company had 54,592,493 common shares
outstanding.

    About Periowave(TM) and Photodisinfection

    Periowave(TM) is a Photodisinfection system developed by Ondine that
utilizes low-intensity lasers and wavelength-specific, light-activated
compounds to specifically target and destroy microbial pathogens and reduce
the symptoms of disease. The compounds are generally topically applied and one
or more lasers are used to activate the compounds and complete the
disinfection. The Photodisinfection technologies were developed by Professor
Michael Wilson and colleagues at the Eastman Dental Institute, University
College London, and licensed to Ondine by UCL Business PLC, University College
London. Additional information about Periowave(TM) is available at
www.periowave.com.

    About Periodontal Disease

    Periodontitis (gum disease) is a common human affliction, affecting one
third of all adults, and over half of the population over the age of 50.
Periodontitis results in gum tissue detachment, bleeding gums, oral malodour,
bone and tooth loss as well as other complications. The standard of care for
treating periodontal disease is Scaling and Root Planing (SRP), or gum
surgery, or both. SRP is the sub-gingival removal of plaque biofilm adhering
to the root surfaces. Periodontitis is associated with a host of other serious
conditions including heart disease, stroke, premature births and diabetes.

    About Ondine Biopharma Corporation

    Ondine is developing non-antibiotic therapies for the treatment of a
broad spectrum of bacterial, fungal and viral infections. The Company is
focused on creating and commercializing leading-edge products utilizing its
patented light-activated technology. Photodisinfection provides broad-spectrum
antimicrobial efficacy without encouraging the formation and spread of
antibiotic resistance. Ondine has developed Periowave(TM) for the treatment of
chronic periodontitis in adults, and is extending its platform technology into
other applications both within and outside the oral cavity. The Company is
headquartered in Vancouver, British Columbia, Canada, with a research
laboratory in Redmond, Washington, USA, a sales and marketing subsidiary in
York, Pennsylvania, and an international office in St. Michael, Barbados. For
additional information, please visit the Company's website at:
www.ondinebiopharma.com.

    Forward-Looking Statements:

    Certain statements contained in this release containing words like
"believe", "intend", "may", "expect" and other similar expressions, are
forward-looking statements that involve a number of risks and uncertainties.
Factors that could cause actual results to differ materially from those
projected in the Company's forward-looking statements include the following:
market acceptance of our technologies and products; our ability to obtain
financing; our financial and technical resources relative to those of our
competitors; our ability to keep up with rapid technological change;
government regulation of our technologies; our ability to enforce our
intellectual property rights and protect our proprietary technologies; the
ability to obtain and develop partnership opportunities; the timing of
commercial product launches; the ability to achieve key technical milestones
in key products and other risk factors identified from time to time in the
Company's filings.

    The TSX Exchange has not reviewed and does not accept responsibility for
    the adequacy or accuracy of this release


    
    Ondine Biopharma Corporation
    Incorporated under the laws of British Columbia

    CONSOLIDATED BALANCE SHEETS

    As at December 31                         (expressed in Canadian dollars)

                                                           2006         2005
                                                            $            $
    -------------------------------------------------------------------------

    ASSETS
    Current
    Cash and cash equivalents                         4,522,877    3,014,317
    Short-term investments                           10,852,560   12,473,345
    Accounts receivable                                 890,346      314,223
    Inventory                                           746,404      124,240
    Prepaid expenses and deposits                       570,213      764,923
    -------------------------------------------------------------------------
    Total current assets                             17,582,400   16,691,048
    -------------------------------------------------------------------------
    Capital assets                                      810,527      430,473
    Intangible assets                                    71,204       29,355
    Other assets                                              -       98,482
    -------------------------------------------------------------------------
                                                     18,464,131   17,249,358
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Accounts payable and accrued liabilities          1,714,361      635,378
    Income taxes payable                                 49,290       55,604
    Current portion of deferred leasehold inducement     11,700       11,700
    Future income tax                                    66,064            -
    -------------------------------------------------------------------------
    Total current liabilities                         1,841,415      702,682
    Deferred leasehold inducement, net of current
     portion                                             31,224       42,924
    -------------------------------------------------------------------------
    Total liabilities                                 1,872,639      745,606
    -------------------------------------------------------------------------

    Shareholders' equity
    Share capital                                    45,453,690   34,045,959
    Contributed surplus                               1,801,209    1,158,104
    Deficit                                         (30,663,407) (18,700,311)
    -------------------------------------------------------------------------
    Total shareholders' equity                       16,591,492   16,503,752
    -------------------------------------------------------------------------
                                                     18,464,131   17,249,358
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Ondine Biopharma Corporation

    CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT

    Year ended December 31                    (expressed in Canadian dollars)

                                                           2006         2005
                                                            $            $
    -------------------------------------------------------------------------
    REVENUE
    Product sales                                     1,619,209            -
    Cost of sales                                     1,015,092            -
    -------------------------------------------------------------------------
    Gross margin                                        604,117            -
    -------------------------------------------------------------------------

    EXPENSES
    Research and development                          5,708,908    4,594,278
    Marketing and sales                               3,030,371      821,539
    General and administration                        3,929,721    3,038,209
    Depreciation and amortization                       244,041      111,787
    -------------------------------------------------------------------------
                                                    (12,913,041)  (8,565,813)
    -------------------------------------------------------------------------
    Other
    Interest income                                     431,549      411,118
    Foreign exchange loss                               (35,217)    (309,178)
    -------------------------------------------------------------------------
                                                        396,332      101,940
    -------------------------------------------------------------------------
    Loss before income taxes                        (11,912,592)  (8,463,873)
    Income tax expense                                  (50,504)     (75,196)
    -------------------------------------------------------------------------
    Net loss for the year                           (11,963,096)  (8,539,069)
    Deficit, beginning of year                      (18,700,311) (10,161,242)
    -------------------------------------------------------------------------
    Deficit, end of year                            (30,663,407) (18,700,311)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted loss per common share               (0.25)       (0.21)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average number of common shares
     outstanding                                     47,907,443   40,574,616
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Ondine Biopharma Corporation

    CONSOLIDATED STATEMENTS OF CASH FLOWS

    Year ended December 31                    (expressed in Canadian dollars)

                                                           2006         2005
                                                            $            $
    -------------------------------------------------------------------------

    OPERATING ACTIVITIES
    Net loss for the year                           (11,963,096)  (8,539,069)
    Add items not affecting cash:
      Depreciation and amortization                     244,041      111,787
      Stock-based compensation                          665,060      440,571
      Unrealized loss on short-term investments           4,401       16,411
      Gain on redemption of short-term investments      (16,411)           -
      Deferred leasehold inducement                     (11,700)      (1,950)
      Future income tax expense                          66,064            -
    Changes in non-cash working capital items
     relating to operations:
      Accounts receivable                              (576,123)    (194,173)
      Inventory                                        (622,164)    (124,240)
      Prepaid expenses and deposits                     293,192     (336,701)
      Accounts payable and accrued liabilities        1,078,984      184,921
      Income taxes payable                               (6,314)      55,604
    -------------------------------------------------------------------------
    Cash used in operating activities               (10,844,066)  (8,386,839)
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Issuance of share capital, net of issue costs    11,385,776   11,394,424
    -------------------------------------------------------------------------
    Cash provided by financing activities            11,385,776   11,394,424
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Short-term investments                            1,632,795     (991,963)
    Purchase of capital assets                         (591,133)    (321,955)
    Leasehold inducement received                             -       56,574
    Acquisition of intangible asset                     (74,812)           -
    -------------------------------------------------------------------------
    Cash provided by (used in) investing activities     966,850   (1,257,344)
    -------------------------------------------------------------------------
    Net increase in cash and cash equivalents         1,508,560    1,750,241
    Cash and cash equivalents, beginning of year      3,014,317    1,264,076
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of year            4,522,877    3,014,317
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    




For further information:

For further information: Carolyn Cross, President and Chief Executive
Officer, Ondine Biopharma Corporation, (604) 669-0555,
ccross@ondinebiopharma.com; Christina Bessant, Investor Relations, The Equicom
Group Inc., (416) 815-0700 ext. 269, cbessant@equicomgroup.com

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ONDINE BIOPHARMA CORPORATION

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