Ondine Biopharma Announces Second Quarter 2008 Financial Results



    VANCOUVER, Aug. 14 /CNW/ - Ondine Biopharma Corporation (the "Company" or
"Ondine", TSX: OBP; AIM: OBP) a medical technology company developing
photodisinfection based products, today announced its financial results for
the second quarter ended June 30, 2008.
    "During the past quarter we made significant regulatory and clinical
progress with our photodisinfection technology and we are leveraging our
successes to advance discussions with prospective strategic partners," stated
Carolyn Cross, Ondine's President & CEO, "We also took steps to build on our
technology as we see the opportunity to address many unmet medical needs with
our photodisinfection platform. Accordingly, having validated Periowave (TM)
in the Canadian dental market, we are refocusing our resources on new product
development and obtaining appropriate strategic partners for the
commercialization and co-development of our photodisinfection-based product
pipeline."

    
    2008 Second Quarter Results and Recent Developments

    FINANCIAL RESULTS
    

    For the quarter ended June 30, 2008 (the "Second Quarter of 2008"), the
Company recorded a loss of $2.43 million or $0.04 per common share compared
with a loss of $3.79 million or $0.07 per common share during the quarter
ended June 30, 2007 (the "Second Quarter of 2007"). For the six months ended
June 30, 2008 (the "First Half of 2008"), the Company recorded a loss of
$4.9 million or $0.08 per common share compared with a loss of $7.24 million
or $0.13 per common share during the six months ended June 30, 2007 (the
"First Half of 2007"). Product sales of our laser base stations and treatment
kits during the Second Quarter of 2008 amounted to $0.26 million with a gross
margin of $0.18 million (69.8%) compared to product sales of $0.51 million and
a gross margin of $0.23 million (45.6%) during the Second Quarter of 2007.
Product sales of our laser base stations and treatment kits during the First
Half of 2008 amounted to $0.46 million with a gross margin of $0.32 million
(69.6%) compared to product sales of $1.18 million and a gross margin of
$0.49 million (43.9%) during the First Half of 2007.

    REGULATORY AND PRODUCT DEVELOPMENTS

    In May of 2008, the Company announced it received a Health Canada license
for the use of its non-antibiotic photodisinfection system for the treatment
of Otitis Externa. Otitis Externa is an inflammation of the outer ear and ear
canal often caused by bacteria such as Pseudomonas aeruginosa and
Staphylococcus aureus. Moderate Otitis Externa can result in narrowing of the
canal and swelling of soft tissue, while severe Otitis Externa can cause
significant obstruction of the ear canal and invasion of soft tissues. The
acute form affects four in 1,000 persons annually and the chronic form affects
approximately three to five percent of the population. Common treatments
include antibiotics, painkillers and steroids. In the United States,
approximately 7.5 million prescriptions are written yearly to treat Otitis
Externa, costing the healthcare system about US$310 million. The Company
intends to undertake a search for an appropriate partner for the
commercialization of this new application.
    In June of 2008, the Company received a Health Canada license for a
next-generation multi-purpose laser system that is suitable for a broad range
of applications in high volume settings, such as hospitals and large
institutions. This system will initially be directed towards decolonization of
potentially pathogenic bacteria such as Staphylococcus aureus and
methicillin-resistant Staphylococcus aureus ("MRSA") in the nose, as well as
for the decolonization of micro organisms from other sites.
    In July of 2008, a poster presentation titled "In vitro Bactericidal
Efficacy of Periowave Photodynamic Disinfection System", based on research
conducted by Loma Linda University School of Dentistry (Loma Linda,
California), was presented at the International Association for Dental
Research (IADR) 86th General Session & Exhibition in Toronto, Ontario, Canada.
Periowave(TM) was used in this study to eradicate Gram-negative bacteria
including E. faecalis, which can be difficult to kill even using bleach as a
disinfectant. The bacteria are unaffected by the light or the photosensitizer
when used alone. When exposed to the Periowave(TM) Photodisinfection System,
these virulent pathogens are completely eliminated within 60 seconds. Because
Periowave(TM) works so differently than antibiotics, it does not increase
bacterial resistance - an important advantage as more and more bacteria
develop immunity to the conventional agents used today.
    In July of 2008, the Company acquired an exclusive license for the human
therapeutic use of a gold-nanoparticle photosensitizer from UCL Business plc.
In vitro studies have shown this compound to be highly efficacious in killing
MRSA, a prominent hospital-acquired pathogen. Ondine intends to further
develop this new agent for integration into the Company's Photodisinfection
System for use in various medical applications.
    In August of 2008, the Company announced that the results of a study
using the Company's platform photodisinfection technology to eliminate
Pseudomonas aeruginosa would be published in the peer-reviewed journal
Photochemistry and Photobiology. The article has been e-published ahead of the
print version and is currently available online at
http://www3.interscience.wiley.com/journal/120121002/issue. P. aeruginosa is
an opportunistic pathogen that is able to live in practically any environment,
including distilled water or even some hospital disinfectant solutions. It is
resistant to almost all antibiotics, and it is often the source of intractable
infections in cystic fibrosis patients, where the fatality rate can approach
50%. In the recently published article titled "In Vitro Photodynamic
Eradication of Pseudomonas aeruginosa in Planktonic and Biofilm Culture",
Ondine researchers conclusively demonstrated rapid eradication of P.
aeruginosa in both free-floating (planktonic) and the highly-resistant biofilm
forms.

    Financial Review

    The improvement in gross margin percentage during the Second Quarter of
2008, as compared to the Second Quarter of 2007, is primarily due to a higher
percentage of treatment kit sales compared to total product sales in the
quarter, as the Company earns a significantly higher margin on its treatment
kit sales as compared to the margin it earns on the sales of its laser base
stations. Having cancelled the Company's exclusive distribution agreement with
a Canadian dental distributor in February of 2008, the Company commenced sales
of its products to additional dental distributors in Canada during the Second
Quarter of 2008, including the sale of its laser base stations to one of the
new distributors. Product sales in the Second Quarter of 2007 included a
$220,000 sale of Periowave(TM) laser base stations to the Radcliffe Foundation
which donated them to certain universities and colleges across Canada, which
did not recur in the Second Quarter of 2008.
    The Company is seeing additional market acceptance for its products in
Canada. Our top users in Canada are currently deploying Periowave(TM) two to
three times per day in their practices. Information obtained from the
Company's Canadian distributors show an increase of 13% in the number of
treatment kits sold by them during the First Half of 2008, when compared to
the First Half of 2007. In addition, a number of dental offices in Canada have
purchased more than one laser base station. The priority for the Canadian
market launch of Periowave(TM) is to establish the appropriate marketing and
sales strategies, as well as identifying key strategic partnership
opportunities, for the larger United States and European markets.
    Although the Company is seeing increasing market acceptance for
Periowave(TM), 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 have been to one distributor, Henry Schein Canada, Inc. ("HSC"). In
February 2008, the Company elected to cancel its exclusive distribution
agreement with HSC for the Canadian market. Thereafter, the relationship
continues on a non-exclusive basis. The Company expects that the sale of its
products through additional distributors in Canada will add to the installed
base of its Periowave(TM) PDD systems in Canada as the Company continues to
work on increasing the utilization rate of its consumable product by end
users.
    Sales by the Company to its distributors are not necessarily reflective
of the distributors' sales to dental offices. Until the Company has adequate
sales history to accurately forecast demand on an ongoing basis, fluctuations
in distributors' inventory levels could significantly impact sales in future
quarters.
    During the Second Quarter of 2008, the Company continued to work with
leading hygiene and dental schools across Canada by assisting them with the
adoption of Periowave(TM) into their educational programs and training
clinics. Validation by these dental schools adds significant credibility to
the novel approach of using photodisinfection ("PDD") to treat gum disease. We
are confident that in time, the Periowave(TM) system will be incorporated into
their teaching curriculums and this will have a positive effect on the market
penetration of Periowave(TM) in the general dental community in Canada.
    During the Second Quarter of 2008 the Company continued to invest in
research and development including, among other things: i) a number of
research and development programs on potential new applications of the
Company's PDD technology, including research programs at University College
London, principally for the non-antibiotic treatment of MRSA and other topical
infections; and ii) analysis of the data collected from a clinical study of
Periowave(TM) for the treatment of periodontitis conducted by the University
College London Eastman Dental Hospital. This analysis is expected to be
completed in the second half of 2008. In addition, the Company is having
ongoing communications with the United States Food and Drug Administration
(FDA) in connection with the Company's submission for regulatory clearance to
market Periowave(TM) in the United States. The objective of these
communications is to assist the FDA in their determination of the appropriate
regulatory pathway for review of the Company's submission.
    The decrease in loss for the Second Quarter of 2008, when compared to the
Second Quarter of 2007, was primarily due to decreases in operating costs as
further described below.
    Research and development expenses for the Second Quarter of 2008 were
$1.16 million, a decrease of $0.44 million when compared to $1.6 million
incurred during the Second Quarter of 2007. The decrease was primarily due to
a reduction in clinical trial staff, which reduced salaries and benefits
costs, and a reduction in clinical trial costs following the conclusion of the
Company's clinical trials utilizing Periowave(TM) for the treatment of
periodontitis. These reductions were partially offset by regulatory consulting
fees, primarily in connection with the Company's FDA submission, and higher
legal fees, primarily relating to patent costs in connection with the
development of the Company's IP.
    General and administration expenses for the Second Quarter of 2008 were
$0.86 million, a decrease of $0.44 million when compared to $1.3 million
incurred during the Second Quarter of 2007. The decrease was primarily due to
a reduction in staff which reduced salaries and benefits costs.
    Marketing and sales expenses for the Second Quarter of 2008 were
$0.56 million, a decrease of $0.44 million when compared to $1 million
incurred during the Second Quarter of 2007. The decrease was primarily due to
reductions in advertising and promotions activities and in consulting fees as
the Company transitions to its priority of obtaining FDA clearance for
Periowave(TM) to be sold in the United States market and to a renewed focus on
its research and development activities.
    As at June 30, 2008 the Company had cash, cash equivalents and short-term
investments totaling $5.05 million compared with $10.15 million as at December
31, 2007. During the First Half of 2008 the Company used cash of approximately
$5.1 million for its operating activities, $3.7 million was provided by net
redemptions of short-term investments, $0.09 million was used for the purchase
of capital assets, and $0.08 million was provided by the issuance of common
shares on exercise of stock options.
    As at June 30, 2008 the Company had 61,342,509 common shares outstanding.
    Additional analysis of the Company's financial results for the three
months and six months ended June 30, 2008 is included in our management's
discussion and analysis of financial condition and results of operations (MDA)
for Second Quarter 2008, which will be available on the Company's website and
on www.sedar.com.

    About Periowave(TM)

    Periowave(TM) is a photodisinfection system commercialized by Ondine that
utilizes low-intensity lasers and microbiological stains to target and destroy
microbial pathogens and reduce the symptoms of disease. The photodisinfection
technology was developed by Professor Michael Wilson and colleagues at the
Eastman Dental Institute, University College London, and licensed to Ondine by
UCL Business plc, a wholly-owned subsidiary of University College London.
Periowave(TM) is currently approved in Canada and the European Union for
several oral indications. Additional information about Periowave(TM) is
available at www.periowave.com

    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 developing 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 based in Vancouver, British Columbia,
Canada, with a research and development 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 public 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)
    -------------------------------------------------------------------------
                                                    June 30,     December 31,
                                                      2008           2007
                                                       $              $
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash and cash equivalents                        3,188,338     4,540,245
    Short-term investments                           1,860,124     5,606,836
    Accounts receivable                                614,417       653,448
    Inventories                                        626,473       570,561
    Prepaid expenses and deposits                      515,181       526,520
    -------------------------------------------------------------------------
    Total current assets                             6,804,533    11,897,610
    Capital assets                                     918,109       991,606
    Intangible assets                                   94,530       114,714
    -------------------------------------------------------------------------
                                                     7,817,172    13,003,930
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Accounts payable and accrued liabilities         1,213,348     1,873,860
    Income taxes payable                                31,646        30,765
    Current portion of deferred tenant inducement       45,311        42,374
    Future income tax                                   68,947        67,026
    -------------------------------------------------------------------------
    Total current liabilities                        1,359,252     2,014,025
    Deferred tenant inducement, net of
     current portion                                   130,280       145,967
    -------------------------------------------------------------------------
    Total liabilities                                1,489,532     2,159,992
    -------------------------------------------------------------------------
    Shareholders' equity
    Share capital                                   51,329,202    51,193,823
    Contributed surplus                              3,710,441     3,467,847
    Deficit                                        (48,711,747)  (43,816,528)
    Accumulated other comprehensive loss                  (256)       (1,204)
    -------------------------------------------------------------------------
    Total shareholders' equity                       6,327,640    10,843,938
    -------------------------------------------------------------------------
                                                     7,817,172    13,003,930
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Ondine Biopharma Corporation

    CONSOLIDATED STATEMENTS OF LOSS
    AND COMPREHENSIVE LOSS

                                  (Unaudited - expressed in Canadian dollars)
    -------------------------------------------------------------------------
                            Three months ended            Six months ended
                                   June 30,                    June 30,
                        -------------------------   -------------------------
                              2008          2007          2008          2007
                                 $             $             $             $
    -------------------------------------------------------------------------
    REVENUE
    Product sales          260,387       510,574       462,415     1,118,133
    Cost of sales           78,664       277,821       140,391       627,575
    -------------------------------------------------------------------------
    Gross margin           181,723       232,753       322,024       490,558
    -------------------------------------------------------------------------
    EXPENSES
    Research and
     development         1,161,564     1,600,850     2,268,427     3,253,193
    General and
     administration        855,244     1,304,785     1,679,657     2,461,603
    Marketing and sales    556,872     1,003,645     1,237,239     1,926,947
    Depreciation and
     amortization           89,495       110,136       181,659       198,299
    -------------------------------------------------------------------------
                        (2,663,175)   (4,019,416)   (5,366,982)   (7,840,042)
    -------------------------------------------------------------------------
    Other
    Interest income         45,474        96,217       123,232       214,166
    Foreign exchange
     gain (loss)             3,761       (98,960)       26,507      (119,334)
    -------------------------------------------------------------------------
                            49,235        (2,743)      149,739        94,832
    -------------------------------------------------------------------------
    Loss before income
     taxes              (2,432,217)   (3,789,406)   (4,895,219)   (7,254,652)
    Income tax recovery          -             -             -        13,000
    -------------------------------------------------------------------------
    Loss for the period (2,432,217)   (3,789,406)   (4,895,219)   (7,241,652)
    Unrealized gain on
     short-term
     investments               355           282           948         2,223
    -------------------------------------------------------------------------
    Comprehensive loss
     for the period     (2,431,862)   (3,789,124)   (4,894,271)   (7,239,429)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and diluted
     loss per common
     share                   (0.04)        (0.07)        (0.08)        (0.13)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average
     number of common
     shares
     outstanding        61,342,509    54,692,493    61,192,919    54,643,874
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Ondine Biopharma Corporation

    CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                                  (Unaudited - expressed in Canadian dollars)
    -------------------------------------------------------------------------
                                                         Share   Contributed
                                       Number of       Capital       Surplus
                                   Common Shares             $             $
    -------------------------------------------------------------------------
    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 year for:
      Exercise of stock options          100,000        25,000             -
      Private placement of units
       (net of issue costs)            6,335,182     5,697,133     1,267,036
    Reallocation of contributed
     surplus arising from
     stock-based compensation on
     exercise of stock options                 -        18,000       (18,000)
    Stock-based compensation                   -             -       417,602
    Loss for the year                          -             -             -
    Unrealized gain on
     short-term investments                    -             -             -
    -------------------------------------------------------------------------
    Balance, December 31, 2007        61,027,675    51,193,823     3,467,847
    Common shares issued for
     cash during the period for:
      Exercise of stock options          314,834        78,709             -
    Reallocation of contributed
     surplus arising from
     stock-based compensation on
     exercise of stock options                 -        56,670       (56,670)
    Stock-based compensation                   -             -       299,264
    Loss for the period                        -             -             -
    Unrealized gain on
     short-term investments                    -             -             -
    -------------------------------------------------------------------------
    Balance, June 30, 2008            61,342,509    51,329,202     3,710,441
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                  (Unaudited - expressed in Canadian dollars)
    -------------------------------------------------------------------------
                                                   Accumulated
                                                         Other         Total
                                                 Comprehensive  Shareholders'
                                         Deficit          Loss        Equity
                                               $             $             $
    -------------------------------------------------------------------------
    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 year for:
      Exercise of stock options                -             -        25,000
      Private placement of units
       (net of issue costs)                    -             -     6,964,169
    Reallocation of contributed
     surplus arising from
     stock-based compensation on
     exercise of stock options                 -             -             -
    Stock-based compensation                   -             -       417,602
    Loss for the year                (13,157,522)            -   (13,157,522)
    Unrealized gain on
     short-term investments                    -         3,197         3,197
    -------------------------------------------------------------------------
    Balance, December 31, 2007       (43,816,528)       (1,204)   10,843,938
    Common shares issued for
     cash during the period for:
      Exercise of stock options                -             -        78,709
    Reallocation of contributed
     surplus arising from
     stock-based compensation on
     exercise of stock options                 -             -             -
    Stock-based compensation                   -             -       299,264
    Loss for the period               (4,895,219)            -    (4,895,219)
    Unrealized gain on
     short-term investments                    -           948           948
    -------------------------------------------------------------------------
    Balance, June 30, 2008           (48,711,747)         (256)    6,327,640
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Ondine Biopharma Corporation

    CONSOLIDATED STATEMENTS OF CASH FLOWS

                                  (Unaudited - expressed in Canadian dollars)
    -------------------------------------------------------------------------
                            Three months ended            Six months ended
                                   June 30,                    June 30,
                        -------------------------   -------------------------
                              2008          2007          2008          2007
                                 $             $             $             $
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Loss for the period (2,432,217)   (3,789,406)   (4,895,219)   (7,241,652)
    Add items not
     affecting cash:
      Depreciation and
       amortization         89,495       110,136       181,659       198,299
      Stock-based
       compensation        198,319       (11,487)      299,264       176,171
      Deferred leasehold
       inducement           (3,791)       (2,925)      (12,750)       (5,850)
      Unrealized foreign
       exchange gain          (459)       (5,288)        1,921        (5,669)
    Changes in non-cash
     working capital
     items relating to
     operations:
      Accounts
       receivable           82,872       166,011        39,031       132,283
      Inventory             30,719       244,571       (55,912)      143,499
      Prepaid expenses
       and deposits        (69,018)     (124,799)       11,339           248
      Accounts payable
       and accrued
       liabilities         (61,392)      376,690      (660,512)      179,246
      Income taxes
       payable                  66        (1,565)          881       (30,609)
    -------------------------------------------------------------------------
    Cash used in
     operating
     activities         (2,165,406)   (3,038,062)   (5,090,298)   (6,454,034)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
    Issuance of share
     capital                     -             -        78,709        25,000
    -------------------------------------------------------------------------
    Cash provided by
     financing
     activities                  -             -        78,709        25,000
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES
    Net redemptions of
     short-term
     investments         3,798,345     3,337,699     3,747,660     3,976,626
    Purchase of capital
     assets                (43,366)     (168,915)      (87,978)     (353,418)
    -------------------------------------------------------------------------
    Cash provided by
     investing
     activities          3,754,979     3,168,784     3,659,682     3,623,208
    -------------------------------------------------------------------------
    Increase (decrease)
     in cash and cash
     equivalents during
     the period          1,589,573       130,722    (1,351,907)   (2,805,826)
    Cash and cash
     equivalents,
     beginning of period 1,598,765     1,586,329     4,540,245     4,522,877
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end
     of period           3,188,338     1,717,051     3,188,338     1,717,051
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

For further information: Carolyn Cross, President and Chief Executive
Officer, Ondine Biopharma Corporation, (604) 669-0555,
ccross@ondinebiopharma.com; Adam Peeler, Investor Relations, The Equicom Group
Inc., (416) 815-0700 ext. 225, apeeler@equicomgroup.com; Canaccord Adams Ltd,
Nominated Adviser & Broker, Neil Johnson, Ryan Gaffney, +4420 7050 6500

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ONDINE BIOPHARMA CORPORATION

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