Ondine Biopharma Announces its Third Quarter 2007 Financial Results



    VANCOUVER, Nov. 13 /CNW/ - Ondine Biopharma Corporation ("the Company",
TSX: OBP; AIM: OBP), a medical technology company developing
photodisinfection-based products, today announced its financial results for
the quarter ended September 30, 2007.

    
    Q3 2007 Highlights and Recent Developments

    -   Filed a 510(k) submission to the United States Food and Drug
        Administration (FDA) seeking clearance to market the Periowave(TM)
        System in the United States.
    -   Achieved product sales revenue for Periowave(TM) laser consoles and
        treatment kits for the nine months ended September 30, 2007 of
        approximately $1,477,000 generating a gross margin of $768,000
        (52.0%).
    -   Announced results of a meta-analysis (statistical review of pooled
        clinical trial data) on the use of its Periowave(TM)
        Photodisinfection system for the treatment of gum disease. Among
        other data, the meta-analysis found that Periowave(TM) used in a re-
        treatment protocol (six weeks apart) produced 2.3 times more
        clinically relevant (2+mm) pocket depth reductions than the gold
        standard of scaling and root planning (SRP) alone
        (p(less than)0.0001).
    -   Announced, jointly with UCL Business PLC, the development of a
        nanotechnology-based photosensitizer that dramatically enhanced
        antimicrobial lethality at very small unit doses. The Company owns
        exclusive rights to worldwide patent applications covering this
        nanotechnology-based photosensitizer technology, with widespread
        antimicrobial indications including eradication of methicillin-
        resistant Staphylococcus aureus (MRSA) from the nose and other areas,
        treatment of conditions such as periodontal diseases, otitis externa,
        nailbed fungus and the disinfection of burns and wounds.
    -   Announced the appointments of Dr. Tim Rose as chairman of Ondine's
        Clinical Advisory Board (CAB) and of Dr. Angelo Mariotti as a member
        of Ondine's CAB. Dr. Rose practices Periodontology in Wisconsin, USA
        and is a former president of both the American Academy of
        Periodontology and the American Dental Association. Dr. Mariotti is a
        Professor and Chair, Section of Periodontology, College of Dentistry
        at Ohio State University and an Adjunct Professor, Periodontics and
        Preventive Dentistry, at the University of Pittsburgh in the United
        States.
    

    Financial Review

    For the quarter ended September 30, 2007 (the "Current Quarter") the
Company recorded a net loss of $3.18 million or $0.06 per common share
compared with a loss of $2.78 million or $0.06 per common share for the
quarter ended September 30, 2006 (the "Prior Quarter"). For the nine months
ended September 30, 2007 (the "Current Period") the Company recorded a net
loss of $10.42 million or $0.19 per common share compared with a loss of
$8.50 million or $0.18 per common share for the nine months ended September
30, 2006 (the "Prior Period"). Product sales of our laser consoles and
treatment kits during the Current Quarter generated $0.36 million and a gross
margin of $0.28 million (77.3%) compared to $0.54 million and a gross margin
of $0.19 million (35.1%) during the Prior Quarter. Product sales during the
Current Period generated $1.48 million and gross margin of $0.77 million
(52.0%) compared to $0.96 million and a gross margin of $0.37 million (38.1%)
during the Prior Period. There were no sales during the three months ended
March 31, 2006 in the Prior Period as the Company commenced sales of its first
product, Periowave(TM), in April of 2006. The increase in sales and the
improvement in gross margin during the Current Period, as compared to the
Prior Period, are primarily due to higher treatment kit sales during the
Current Period. Sales during the Current Quarter include a $271,000 sale of
Periowave(TM) laser base stations and treatment kits to a distributor in
Germany as an initial order. The balance of product sales revenue for the
Current Quarter consisted primarily of treatment kit sales to the Company's
exclusive distributor in Canada. Sales revenue for the Prior Quarter included
sales of laser base stations to the Canadian distributor as the distributor
built up its inventory to meet expected demand. The Canadian distributor's
level of laser base station inventory during the Current Quarter was
sufficient to meet demand and as a result the distributor did not reorder
during the period. In order to maintain its exclusivity, the Canadian
distributor is required to meet certain pre-agreed annual sales targets.
    The Company is seeing increasing market acceptance for Periowave(TM),
however its sales to date have been limited and there is not sufficient sales
history to reasonably predict future demand, including the full impact of
seasonality on its sales. The Company expects that the summer months will
generally be a slower sales period and this may have a negative impact on
third quarter sales. In addition, substantially all of the Company's sales in
Canada are to one distributor, Henry Schein Ash Arcona, which is contractually
obligated to carry inventories to cover future sales to dental offices. As a
result, sales by the Company to its distributor are not necessarily reflective
of the distributor's sales to dental offices. Until the Company has adequate
sales history to accurately forecast demand on an ongoing basis, the
fluctuations in the distributor's inventory levels could significantly impact
sales in future quarters.
    The increase in loss during the Current Period, when compared to the
Prior Period, was primarily due to an increase in operating costs. The
increase in loss during the Current Quarter, when compared to the Prior
Quarter, was primarily due to the increases in research and development (R&D)
and marketing and sales (M&S). General and administration costs were lower
during the Current Quarter, when compared to the Prior Quarter. The higher
rate of M&S expenses incurred during the Current Period are expected to
continue through the balance of fiscal 2007 and into 2008 as the Company
continues to i) execute its marketing and sales strategy for the sale of
Periowave(TM) in Canada, ii) introduce and sell Periowave(TM) in certain other
countries, principally in Europe, and iii) in connection with preparing to
market Periowave(TM), subject to U.S. Food and Drug Administration (FDA)
clearance, in the United States in the latter part of 2008. The Company also
incurred an increase in its general and administration (G&A) expenses during
the Current Period, when compared to the Prior Period, principally as a result
of higher G&A costs during the six months ended June 30, 2007 as the Company
built its infrastructure to support its higher R&D and M&S activities. During
the Current Quarter the Company was able to reduce its G&A expenses as further
explained below. The increase in total operating expenses during the Current
Period, as compared to the Prior Period, and during the Current Quarter, as
compared to the Prior Quarter, were partially offset by the increased gross
margin earned on sales during these periods.
    R&D expenses for the Current Quarter were $1.37 million compared to
$1.30 million during the Prior Quarter and for the Current Period were
$4.62 million compared to $4.07 million during the Prior Period as the Company
invested in research and development programs on potential new applications of
the Company's photodisinfection technology, incurred costs in connection with
a number of ongoing clinical studies in Canada and at University College
London Hospital in the United Kingdom on the use of Periowave(TM) for the
treatment of periodontitis, and incurred additional costs in connection with
the preparation of its submission to the FDA. The Company expects to complete
these studies by the end of 2007.
    In addition, the Company currently has underway research programs at
University College London on potential new applications of photodisinfection,
principally for the non-antibiotic treatment of methicillin-resistant
Staphylococcus aureus (MRSA) and other topical infections. During the Current
Period, the Company was successful in expanding the scope of its license in
Canada for the use of its Periowave(TM) photodisinfection system to include
the treatment of other indications in the oral cavity and for the
decolonization of pathogenic bacteria, such as MRSA, in the nose. During the
Current Quarter, as compared to the Prior Quarter, and during the Current
Period, as compared to the Prior Period, the Company incurred increases in R&D
costs, primarily due to an increase in the costs associated with its clinical
studies.
    General and administration costs for the Current Quarter were
$0.87 million compared to $1.04 million during the Prior Quarter and for the
Current Period were $3.33 million compared to $2.86 million during the Prior
Period, as additional administrative staff and administrative facilities were
added to support the increase in the Company's activities. In addition, during
the Current Period, as compared to the Prior Period, the Company incurred an
increase in legal fees in connection with general corporate matters, a
severance payment to a former executive, and costs associated with its office
in York, PA, which has now been closed. These increases were partially offset
by a decrease in stock-based compensation costs due to the forfeiture of
unvested stock options and a reduction in travel costs. The reduction in costs
during the Current Quarter, as compared to the Prior quarter, primarily
reflects a reduction in administrative staff and a decrease in travel costs.
    Marketing and sales expenses for the Current Quarter were $1.07 million
compared to $0.59 million during the Prior Quarter and for the Current Period
were $3.00 million compared to $2.00 million during the Prior Period.
Marketing and sales expenses during the Current Period, as compared to the
Prior Period, increased primarily due to the Current Period including costs
incurred in connection with market research studies and plans done for the
United States market and for the development of marketing materials and
telemarketing activities in the Canadian market, additional advertising and
promotional costs, primarily in connection with activities in Europe, and an
increase in staff costs due principally to an increase in sales staff.
    The Company incurred a foreign exchange loss of $226,000 during the
Current Period and $107,000 during the Current Quarter, compared to an
exchange gain of $6,000 in the Prior Period and an exchange loss of $2,100 in
the Prior Quarter, primarily due to the decrease in the value of its cash and
cash equivalents denominated in United States dollars as a result of a
decrease during the second and third quarters of 2007 in the value of the
United States dollar in relation to the value of the Canadian dollar. The
Company's R&D activities are conducted primarily in the United States and
accordingly a substantial portion of its expenses are incurred in United
States dollars.
    As at September 30, 2007, the Company had cash, cash equivalents and
short term investments totaling $5.93 million compared with $15.50 million as
at December 31, 2006. During the Current Period the Company used cash of
$9.21 million for its operating activities, $0.39 million was used by its
investing activities for the acquisition of capital assets, $0.03 million was
provided by the issuance of common shares from the exercise of options, and
$6.13 million was provided from net redemptions of short-term investments.
    As at September 30, 2007 the Company had 54,692,493 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
photosensitive compounds to specifically target and destroy microbial
pathogens and thereby reduce the symptoms of disease. The compounds are
topically applied and lasers of appropriate wavelength and intensity are used
to disinfect the treatment site. The Company's Periowave(TM) photodisinfection
system is currently approved in Canada for: nasal eradication of pathogenic
bacteria such as MRSA and for oral treatment of periodontitis, gingivitis,
peri-implantitis, peri-mucositis and endodontics; and in the European Union
for: nasal eradication of MRSA, and for oral treatment of periodontitis,
endodontics and peri-implantitis. The use of photodisinfection technology for
oral applications was developed by Professor Michael Wilson and colleagues at
the Eastman Dental Institute, University College London, and is licensed to
Ondine by UCL Business PLC, University College London.

    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. The Company is headquartered in Vancouver, British
Columbia, Canada, with a research laboratory in Bothell, Washington, USA, 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                         (Unaudited - expressed in Canadian dollars)

    -------------------------------------------------------------------------
                                                  September 30,  December 31,
                                                          2007          2006
                                                             $             $
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash and cash equivalents                        1,082,446     4,522,877
    Short-term investments                           4,849,047    10,980,656
    Accounts receivable                                529,729       762,250
    Inventories                                        536,921       746,404
    Prepaid expenses and deposits                      567,372       570,213
    -------------------------------------------------------------------------
    Total current assets                             7,565,515    17,582,400
    Capital assets                                   1,061,661       810,527
    Intangible assets                                  122,263        71,204
    -------------------------------------------------------------------------
                                                     8,749,439    18,464,131
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Accounts payable and accrued liabilities         1,989,864     1,714,361
    Income taxes payable                                17,443        49,290
    Current portion of deferred tenant inducement       38,981        11,700
    Future income tax                                   56,393        66,064
    -------------------------------------------------------------------------
    Total current liabilities                        2,102,681     1,841,415
    Deferred tenant inducement, net of
     current portion                                   165,007        31,224
    -------------------------------------------------------------------------
    Total liabilities                                2,267,688     1,872,639
    -------------------------------------------------------------------------
    Shareholders' equity
    Share capital                                   45,496,690    45,453,690
    Contributed surplus                              2,070,343     1,801,209
    Deficit                                        (41,083,649)  (30,663,407)
    Accumulated other comprehensive loss                (1,633)            -
    -------------------------------------------------------------------------
    Total shareholders' equity                       6,481,751    16,591,492
    -------------------------------------------------------------------------
                                                     8,749,439    18,464,131
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Ondine Biopharma Corporation

    CONSOLIDATED STATEMENTS OF LOSS
    AND COMPREHENSIVE LOSS

                                  (Unaudited - expressed in Canadian dollars)

    -------------------------------------------------------------------------
                           Three months ended          Nine months ended
                              September 30,               September 30,
                       --------------------------  --------------------------
                              2007          2006          2007          2006
                                 $             $             $             $
    -------------------------------------------------------------------------
    REVENUE
    Product sales          358,826       536,084     1,476,959       960,481
    Cost of sales           81,409       347,950       708,984       594,521
    -------------------------------------------------------------------------
    Gross margin           277,417       188,134       767,975       365,960
    -------------------------------------------------------------------------
    EXPENSES
    Research and
     development         1,365,411     1,295,567     4,618,604     4,073,895
    General and
     administration        865,720     1,041,915     3,327,323     2,857,426
    Marketing and sales  1,069,913       591,485     2,996,860     2,002,623
    Depreciation and
     amortization          118,736        68,512       317,035       170,608
    -------------------------------------------------------------------------
                        (3,419,780)   (2,997,479)  (11,259,822)   (9,104,552)
    -------------------------------------------------------------------------
    Other
    Interest income         66,447        90,180       280,613       297,051
    Foreign exchange
     gain (loss)          (107,075)       (2,058)     (226,409)        5,967
    -------------------------------------------------------------------------
                           (40,628)       88,122        54,204       303,018
    -------------------------------------------------------------------------
    Loss before income
     taxes              (3,182,991)   (2,721,223)  (10,437,643)   (8,435,574)
    Income tax recovery
     (expense)                   -       (63,219)       13,000       (63,219)
    -------------------------------------------------------------------------
    Loss for the period (3,182,991)   (2,784,442)  (10,424,643)   (8,498,793)
    Change in unrealized
     loss on short-term
     investments               545             -         2,768             -
    -------------------------------------------------------------------------
    Comprehensive loss
     for the period     (3,182,446)   (2,784,442)  (10,421,875)   (8,498,793)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and diluted
     loss per common
     share                   (0.06)        (0.06)        (0.19)        (0.18)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average
     number of common
     shares outstanding  54,692,493   47,804,992    54,660,259    46,679,011
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Ondine Biopharma Corporation

    CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                                  (Unaudited - expressed in Canadian dollars)
    -------------------------------------------------------------------------
                                                         Share   Contributed
                                       Number of       Capital       Surplus
                                   Common Shares             $             $
    -------------------------------------------------------------------------
    Balance, December 31, 2005        43,812,143    34,045,959     1,158,104
    Common shares issued for
     cash during the year for:
      Exercise of warrants             3,945,878     1,578,351             -
      Exercise of options                121,972        30,493             -
      Equity financing, net of
       issue costs                     6,250,000     9,095,152             -
      Exercise of over allotment
       option                            462,500       681,780             -
    Stock-based compensation                   -             -       665,060
    Reallocation of contributed
     surplus arising from
     stock-based compensation on
     exercise of stock options                 -        21,955       (21,955)
    Loss for the year                          -             -             -
    -------------------------------------------------------------------------
    Balance, December 31, 2006        54,592,493    45,453,690     1,801,209
    Transitional adjustment to
     beginning balance on adoption
     of new accounting policy                  -             -             -
    Common shares issued for
     cash during the period for:
      Exercise of options                100,000        25,000             -
    Stock-based compensation                   -             -       287,134
    Reallocation of contributed
     surplus arising from
     stock-based compensation on
     exercise of stock options                 -        18,000       (18,000)
    Loss for the period                        -             -             -
    Change in unrealized loss on
     short-term investments                    -             -             -
    -------------------------------------------------------------------------
    Balance, September 30, 2007       54,692,493    45,496,690     2,070,343
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                  (Unaudited - expressed in Canadian dollars)

    -------------------------------------------------------------------------
                                                   Accumulated
                                                         other         Total
                                                 comprehensive  Shareholders'
                                         Deficit          loss        Equity
                                               $             $             $
    -------------------------------------------------------------------------
    Balance, December 31, 2005       (18,700,311)            -    16,503,752
    Common shares issued for
     cash during the year for:
      Exercise of warrants                     -             -     1,578,351
      Exercise of options                      -             -        30,493
      Equity financing, net of
       issue costs                             -             -     9,095,152
      Exercise of over allotment
       option                                  -             -       681,780
    Stock-based compensation                   -             -       665,060
    Reallocation of contributed
     surplus arising from
     stock-based compensation on
     exercise of stock options                 -             -             -
    Loss for the year                (11,963,096)            -   (11,963,096)
    -------------------------------------------------------------------------
    Balance, December 31, 2006       (30,663,407)            -    16,591,492
    Transitional adjustment to
     beginning balance on adoption
     of new accounting policy              4,401        (4,401)            -
    Common shares issued for
     cash during the period for:
      Exercise of options                      -             -        25,000
    Stock-based compensation                   -             -       287,134
    Reallocation of contributed
     surplus arising from
     stock-based compensation on
     exercise of stock options                 -             -             -
    Loss for the period              (10,424,643)            -   (10,424,643)
    Change in unrealized loss on
     short-term investments                    -         2,768         2,768
    -------------------------------------------------------------------------
    Balance, September 30, 2007      (41,083,649)       (1,633)    6,481,751
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Ondine Biopharma Corporation

    CONSOLIDATED STATEMENTS OF CASH FLOWS

                                  (Unaudited - expressed in Canadian dollars)

    -------------------------------------------------------------------------
                           Three months ended           Nine months ended
                              September 30,               September 30,
                       --------------------------  --------------------------
                              2007          2006          2007          2006
                                 $             $             $             $
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Loss for the
     period             (3,182,991)   (2,784,442)  (10,424,643)   (8,498,793)
    Add items not
     affecting cash:
      Depreciation and
       amortization        120,331        68,512       318,630       170,608
      Stock-based
       compensation        110,963       160,608       287,134       493,386
      Deferred leasehold
       inducement           14,914        (2,925)        9,064        (8,775)
      Gain on redemption
       of short-term
       investments               -             -             -       (16,411)
      Unrealized foreign
       exchange (gain)
       loss                 (4,002)       63,219        (9,671)       63,219
    Changes in non-cash
     working capital
     items relating to
     operations:
      Accounts receivable  100,238       127,449       232,521      (196,700)
      Inventories           65,984      (123,140)      209,483      (617,752)
      Prepaid expenses
       and deposits          2,593       354,517         2,841       191,847
      Accounts payable
       and accrued
       liabilities          20,083        20,889       199,329       853,569
      Income taxes
       payable              (1,238)         (373)      (31,847)       (8,437)
    -------------------------------------------------------------------------
    Cash used in
     operating
     activities         (2,753,125)   (2,115,686)   (9,207,159)   (7,574,239)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
    Issuance of share
     capital, net of
     issue costs                 -             -        25,000     1,590,094
    -------------------------------------------------------------------------
    Cash provided by
     financing activities        -             -        25,000     1,590,094
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES
    Net redemptions
     of short-term
     investments         2,157,751     1,244,920     6,134,377     4,882,756
    Purchase of capital
     assets                (39,231)     (142,130)     (392,649)     (528,313)
    Acquisition of
     intangible asset            -             -             -       (74,812)
    -------------------------------------------------------------------------
    Cash provided by
     investing
     activities          2,118,520     1,102,790     5,741,728     4,279,631
    -------------------------------------------------------------------------
    Decrease in
     cash and cash
     equivalents
     during the period    (634,605)   (1,012,896)   (3,440,431)   (1,704,514)
    Cash and cash
     equivalents,
     beginning of
     period              1,717,051     2,332,699     4,522,877     3,014,317
    -------------------------------------------------------------------------
    Cash and cash
     equivalents,
     end of period       1,082,446     1,309,803     1,082,446     1,309,803
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





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; Irma
Gomez-Dib, Media & Investors Relations, FD International, (212) 850-5761,
Irma.gomez.dib@fd.com; Nominated Adviser, Neil Johnson/Ryan Gaffney, Canaccord
Adams Ltd, +44(0)20 7050 6500

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ONDINE BIOPHARMA CORPORATION

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