SemBioSys announces second quarter results

CALGARY, Aug. 13 /CNW/ - SemBioSys Genetics Inc. (TSX:SBS), SemBioSys Genetics, Inc. a development stage biotechnology Company that utilizes its patented plant seed oilbody expression technology platforms to develop biosimilar drug candidates and high value proteins, today announced its operational and financial results for the second quarter, ended June 30, 2010.

"We made great progress during the second quarter, especially with respect to our partnering discussions in China and the rest of the world, with highly qualified candidates for both our SBS Insulin and Apo AI(Milano) programs. We are in the diligence phase with a number of parties and are working towards closing our first strategic pharmaceutical development deal in an expedient manner," stated James Szarko, President and CEO of SemBioSys. "Subsequent to the end of the quarter, in preparation for managing several strategic global initiatives, we hired a new President of U.S. and International Operations and announced the appointments of three new Vice Presidents. These announcements included a new head of business development to assist in advancing our partnering activities on insulin and Apo AIMilano. We continue to be resourceful and use innovative methods to extend our cash runway in order to facilitate a successful partnership."

Operational Highlights

    
    -   Received positive final results from an in vivo animal study of
        plant-derived Apo AI(Milano), conducted by an independent third
        party, demonstrating a statistically significant increase in reverse
        cholesterol transport in treated animals versus control.
    -   Achieved inventory threshold of Apo AI(Milano) expressing seed to
        meet planned Active Pharmaceutical Ingredient ("API") requirements
        for the completion of preclinical and toxicology studies to support
        the filing of an investigational new drug application (IND) to the
        U.S. Food and Drug Administration (FDA).
    -   Planted approximately 40 acres of Apo AI(Milano) expressing seed in
        North America.
    -   Completed the first outdoor planting of our second generation,
        humanized insulin expressing seed line.
    -   Advanced partnering discussions for our insulin and Apo AI(Milano)
        programs.
    -   Appointed Rick Pierce as President of U.S. and International
        Operations and Karen Boodram as Vice President of Business
        Development, to lead the Company's partnering process, and promoted
        Dr. Joe Boothe to Vice President of Research and Development and Dr.
        Harm Deckers to Vice President of Operations and Legal Affairs.
    

Financials

SemBioSys has historically operated in two reportable segments: (i) Biopharmaceuticals and Bioproducts and (ii) Specialty Ingredients. Effective July 29, 2009, the Company divested its majority interest in Botaneco Specialty Ingredients Inc. and Botaneco Inc. (collectively referred to as "Botaneco"), and, therefore, it no longer has control nor significant influence over these entities. As a result, the Specialty Ingredients segment is no longer being consolidated and its operating results are included in discontinued operations. On November 20, 2009 the Company disposed of our remaining investment in Botaneco.

Net loss for the three months ended June 30, 2010 compared to the same period last year:

    
    -   $2,891,999 or $0.06 per share from continuing operations compared to
        $2,615,412 or $0.09 per share;
    -   $nil from discontinued operations compared to $1,270,700 or $0.04 per
        share; and
    -   $2,891,999 or $0.06 per share in total net loss compared to
        $3,886,112 or $0.13 per share.
    

Net loss for the three months ended June 30, 2010 increased over the same period last year, due to a one time non-cash expense of $625,000 for the renegotiation of an existing license agreement.

Net loss for the six months ended June 30, 2010 compared to the same period last year:

    
    -   $4,955,750 or $0.10 per share from continuing operations compared to
        $5,073,087 or $0.18 per share;
    -   $nil from discontinued operations compared to $2,641,478 or $0.09 per
        share; and
    -   $4,955,750 or $0.10 per share in total net loss compared to
        $7,714,565 or $0.27 per share.
    

Net loss decreased in 2010 as a result of completing the insulin clinical trials in the first quarter of 2009, combined with the savings realized from the cost reduction program implemented in the third quarter of 2009.

Revenue for the three months ended June 30, 2010 compared to the same period last year:

    
    -   $111,039 in revenue from continuing operations compared to $290,199;
    -   $nil in revenue from discontinued operations compared to $199,331;
        and
    -   $111,039 in total revenue compared to $489,530.
    

Revenue for the six months ended June 30, 2010 compared to the same period last year:

    
    -   $467,504 in revenue from continuing operations compared to
        $1,451,694;
    -   $nil in revenue from discontinued operations compared to $337,300;
        and
    -   $467,504 in total revenue compared to $1,788,994.
    

The decrease in revenue in 2010 for continuing operations is due mainly to the recognition of licensing option fees in 2009 from an option agreement entered into with MannKind related to the Company's Biosimilar Insulin program; offset by licensing fees recorded 2010 related to the Company's GLA program.

Expenditures (net of cost recoveries in each case) for the three months ended June 30, 2010 compared to the same period last year:

    
    -   $2,931,651 in expenditures from continuing operations compared to
        $2,905,538;
    -   $nil in expenditures from discontinued operations compared to
        $1,267,980; and
    -   $2,931,651 in total expenses net of cost recoveries compared to
        $4,173,518.
    

Expenditures (net of cost recoveries in each case) for the six months ended June 30, 2010 compared to the same period last year:

    
    -   $5,247,543 in expenditures from continuing operations compared to
        $6,494,788;
    -   $nil in expenditures from discontinued operations compared to
        $2,610,677; and
    -   $5,247,543 in total expenses net of cost recoveries compared to
        $9,105,465.
    

The overall decrease in expenditures is primarily due to the cost reductions implemented in the third quarter of 2009, in addition to decreased post-clinical costs as the majority of the post-clinical work for the insulin clinical trial was completed in early 2009.

At June 30, 2010, the Company had cash and cash equivalents of $1,635,926 as compared to $3,687,548 at December 31, 2009. The decrease in cash during the period resulted primarily from our net cash burn offset by the proceeds received relating to the private placement completed in March 2010. Total short-term debt and convertible debentures were $2,326,047 at June 30, 2010 compared to $1,534,535 at December 31, 2009. The increase in debt relates mainly to the $625,000 of convertible debentures issued in June to UTI Limited Partnerships as part of the consideration paid to renegotiate certain terms of our existing technology license agreement.

At June 30, 2010, the Company had a net negative working capital balance of $267,648 as compared to December 31, 2009, when it had a positive net working capital of $1,595,217. The decrease in working capital is primarily due to the increase in the short-term portion of long-term debt resulting from the accrued royalties on the $1,350,000 of funding SemBioSys received from AVAC in 2009 that is secured by certain SemBioSys assets. Also contributing to the decrease is the short-term portion of the convertible debentures issued in June 2010. SemBioSys has initiated discussions with AVAC regarding repayment of the outstanding investment and accrued royalties of $1,656,319. The discussions have contemplated pushing back the repayment of the investment and accrued royalties from November 2010 to the end of 2011. If the Company is successful in obtaining these terms the investment would be reclassified from short-term debt to long-term debt. Had the investment been reclassified on June 30, 2010 and December 31, 2009, the Company would have had positive working capital of $1,923,967 and $3,129,752 respectively.

As at August 13, 2010, the Company had 51,374,536 common shares outstanding, 12,655,341 warrants, 4,666,773 options, 1,423,840 broker warrants, 672,628 deferred share units and debentures which are convertible into 3,587,406 common shares.

About SemBioSys

Calgary, Alberta-based SemBioSys is a development stage biotechnology Company that utilizes its patented plant seed oilbody expression technology platforms to develop biosimilar drug candidates and high value proteins. SemBioSys' seed-based protein expression system can enable exceptionally low cost of production with unprecedented scalability and reliability. SemBioSys is focusing the platform selectivity to develop biosimilar product candidates with tremendous commercial value. The Company's current pharmaceutical development programs include insulin (SBS-1000, regulated as a biosimilar in Europe) and Apo AI(Milano), a new chemical entity and next-generation cardiovascular therapy with blockbuster revenue potential if it reaches market for treatment of atherosclerosis. SemBioSys' Apo AI(Milano) is a des-1,2- variant of Apo AI(Milano) as previously described in scientific literature. SemBioSys is listed on the Toronto Stock Exchange under the ticker SBS. More information is available at www.sembiosys.com.

This press release contains certain forward-looking statements, including, without limitation, statements containing the words "believe", "may", "plan", "will", "estimate", "continue", "anticipate", "intend", "expect" and other similar expressions which constitute "forward-looking information" within the meaning of applicable securities laws. Forward-looking statements reflect the Company's current expectation and assumptions, and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. These forward-looking statements involve risks and uncertainties including, but not limited to, changing market conditions and market size, the acceptance of an IND by the FDA in respect of clinical studies, the submission of a CTA to the appropriate European authorities, the successful initiation and timely and successful completion of clinical studies, the fact that Apo AI(Milano) is currently a development stage drug, the establishment of corporate alliances and partnerships, the impact of competitive products and pricing, new product development, uncertainties related to the regulatory approval process and other risks detailed from time-to-time in the Company's ongoing filings with the Canadian securities regulatory authorities which filings can be found at www.sedar.com. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements either as a result of new information, future events or otherwise, except as required by applicable Canadian securities laws.

    
    SemBioSys Genetics Inc.
    CONSOLIDATED BALANCE SHEETS

    (unaudited)
    (expressed in Canadian dollars)
    -------------------------------------------------------------------------

                                                       June 30,  December 31,
                                                          2010          2009
                                                             $             $
                                                   ------------  ------------
    ASSETS

    Current assets
    Cash and cash equivalents                        1,635,926     3,687,548
    Investment                                         207,974       380,601
    Accounts receivable                                215,404       124,083
    GST receivable                                     111,246        52,649
    Prepaid expenses, deposits and other               282,566       175,894
                                                   ------------  ------------
                                                     2,453,116     4,420,775

    Property and equipment                           2,984,902     3,683,462
                                                   ------------  ------------

                                                     5,438,018     8,104,237
                                                   ------------  ------------
                                                   ------------  ------------

    LIABILITIES

    Current liabilities
    Accounts payable and accrued liabilities           917,040     1,291,023
    Short-term portion of long-term debt             1,698,251     1,534,535
    Short-term portion of convertible debenture        105,470             -
                                                   ------------  ------------
                                                     2,720,761     2,825,558

    Long-term portion of convertible debenture         522,326             -
                                                   ------------  ------------
                                                     3,243,087     2,825,558
                                                   ------------  ------------
                                                   ------------  ------------

    SHAREHOLDERS' EQUITY

    Capital stock                                   75,444,408    73,726,414
    Warrants                                         3,527,425     3,527,425
    Contributed surplus                             14,033,943    13,764,398
    Accumulated other comprehensive loss              (169,909)      (54,372)
    Deficit                                        (90,640,936)  (85,685,186)
                                                   ------------  ------------
                                                     2,194,931     5,278,679
                                                   ------------  ------------

                                                     5,438,018     8,104,237
                                                   ------------  ------------
                                                   ------------  ------------



    SemBioSys Genetics Inc.
    CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT

    (unaudited)
    (expressed in Canadian dollars, except shares)
    -------------------------------------------------------------------------
                        Three month period ended     Six month period ended
                           June 30,      June 30,      June 30,      June 30,
                              2010          2009          2010          2009
                                 $             $             $             $
                       ------------  ------------  ------------  ------------
    REVENUE

    Contract research      111,039        38,151       151,715        38,151
    Licensing fees               -       252,048       315,789       252,048
    Licensing option fees        -             -             -     1,161,495
                       ------------  ------------  ------------  ------------
                           111,039       290,199       467,504     1,451,694

    EXPENSES

    Research and
     development         1,104,589     1,691,554     2,202,654     3,714,462
    General and
     administration        327,127       328,602       700,450       890,000
    Intellectual
     property costs        903,196       281,508     1,134,869       546,739
    Business development   174,917       123,419       314,379       279,193
    Stock-based
     compensation           91,050       126,054       214,548       356,699
    Amortization           344,522       366,901       698,560       740,500
    Cost recoveries        (13,750)      (12,500)      (17,917)      (32,805)
                       ------------  ------------  ------------  ------------
                         2,931,651     2,905,538     5,247,543     6,494,788
                       ------------  ------------  ------------  ------------

    Loss before the
     undernoted         (2,820,612)   (2,615,339)   (4,780,039)   (5,043,094)
                       ------------  ------------  ------------  ------------
                       ------------  ------------  ------------  ------------

    Interest income          1,985         2,084         2,007         7,500
    Interest expense       (53,706)      (28,183)     (151,112)      (48,311)
    Foreign exchange
     gain (loss)               723        26,026        (6,217)       10,818
    Realized loss on
     disposal of
     investment            (20,389)            -       (20,389)            -
                       ------------  ------------  ------------  ------------
                       ------------  ------------  ------------  ------------

                           (71,387)          (73)     (175,711)      (29,993)
                       ------------  ------------  ------------  ------------

    Net loss from
     continuing
     operations         (2,891,999)   (2,615,412)   (4,955,750)   (5,073,087)

    Discontinued
     operations                  -    (1,270,700)            -    (2,641,478)
                       ------------  ------------  ------------  ------------

    Net loss            (2,891,999)   (3,886,112)   (4,955,750)   (7,714,565)

    Deficit - Beginning
     of the period     (87,748,937)  (82,924,757)  (85,685,186)  (79,096,304)
                       ------------  ------------  ------------  ------------
                       ------------  ------------  ------------  ------------

    Deficit - End of
     the period        (90,640,936)  (86,810,869)  (90,640,936)  (86,810,869)
                       ------------  ------------  ------------  ------------
                       ------------  ------------  ------------  ------------
    Loss per share
    Basic and diluted
     from continuing
     operations              (0.06)        (0.09)        (0.10)        (0.18)
    Basic and diluted
     from discontinued
     operations                  -         (0.04)            -         (0.09)
    Basic and diluted        (0.06)        (0.13)        (0.10)        (0.27)
                       ------------  ------------  ------------  ------------
                       ------------  ------------  ------------  ------------
    Weighted average
     shares
     outstanding        51,259,536    28,788,251    47,607,001    28,545,450
                       ------------  ------------  ------------  ------------
                       ------------  ------------  ------------  ------------



    SemBioSys Genetics Inc.
    CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

    (unaudited)
    (expressed in Canadian dollars)
    -------------------------------------------------------------------------
                        Three month period ended     Six month period ended
                           June 30,      June 30,      June 30,      June 30,
                              2010          2009          2010          2009
                                 $             $             $             $
                       ------------  ------------  ------------  ------------
    Net loss for the
     period             (2,891,999)   (3,886,112)   (4,955,750)   (7,714,565)

    Other comprehensive
     loss
      Foreign currency
       translation
       adjustment                -       (19,063)            -        13,557
      Foreign currency
       translation
       adjustment
       transferred to
       net income from
       discontinued
       operations during
       the year                  -        19,063             -       (13,557)
      Unrealized loss on
       investment          (81,554)            -      (135,926)            -
      Realized loss on
       investment           20,389             -        20,389             -
                       ------------  ------------  ------------  ------------

    Comprehensive
     loss               (2,953,164)   (3,886,112)   (5,071,287)   (7,714,565)
                       ------------  ------------  ------------  ------------
                       ------------  ------------  ------------  ------------



    CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE LOSS

    (unaudited)
    (expressed in Canadian dollars)
    -------------------------------------------------------------------------
                        Three month period ended     Six month period ended
                           June 30,      June 30,      June 30,      June 30,
                              2010          2009          2010          2009
                                 $             $             $             $
                       ------------  ------------  ------------  ------------

    Accumulated other
     comprehensive loss
     - beginning of
     the period           (108,744)            -       (54,372)            -

    Foreign currency
     translation
     adjustments
      Change in
       accounting policy         -             -             -        26,534
      Adjustments during
       the year                  -             -             -       (12,977)
      Transferred to
       net income from
       discontinued
       operations during
       the year                  -             -             -       (13,557)
                       ------------  ------------  ------------  ------------
                          (108,744)            -       (54,372)            -

    Unrealized loss on
     Investment            (81,554)            -      (135,926)            -
    Realized loss on
     investment             20,389             -        20,389             -
                       ------------  ------------  ------------  ------------

    Accumulated other
     comprehensive loss
     - end of the
     period               (169,909)            -      (169,909)            -
                       ------------  ------------  ------------  ------------
                       ------------  ------------  ------------  ------------



    SemBioSys Genetics Inc.
    CONSOLIDATED STATEMENTS OF CASH FLOWS


                        Three month period ended     Six month period ended
    (unaudited)            June 30,      June 30,      June 30,      June 30,
    (expressed in             2010          2009          2010          2009
     Canadian dollars)           $             $             $             $
    -------------------------------  ------------  ------------  ------------

    Cash provided by
     (used in)

    Operating activities
    Net loss for the
     period from
     continuing
     operations         (2,891,999)   (2,615,412)   (4,955,750)   (5,073,087)
    Add items not
     affecting cash:
      Amortization         344,522       366,901       698,560       740,500
      Stock-based
       compensation         91,050       126,054       214,548       356,699
      Shares issued for
       services                  -             -        92,935       152,985
      Deferred stock
       units issued         54,997             -        54,997             -
      Unrealized
       foreign exchange
       loss                 (6,672)      (18,057)       14,828       (14,678)
      Non-cash interest
       expense              50,910        15,473       148,082        15,473
      Loss on disposal
       of shares            20,389             -        20,389             -
      Non-cash interest
       on convertible
       debentures            2,796             -         2,796             -
      Non-cash license
       fees expensed       625,000             -       625,000             -
                       ------------  ------------  ------------  ------------
                        (1,709,007)   (2,125,041)   (3,083,615)   (3,822,108)
                       ------------  ------------  ------------  ------------
                       ------------  ------------  ------------  ------------

    Change in non-cash
     working capital
     and other balances
     related to
     operations            312,555       131,899      (404,922)     (237,516)
                       ------------  ------------  ------------  ------------

    Cash used in
     operating
     activities         (1,396,452)   (1,993,142)   (3,488,537)   (4,059,624)
                       ------------  ------------  ------------  ------------
                       ------------  ------------  ------------  ------------

    Financing activities
    Issuance of capital
     stock                       -             -     1,778,595     1,752,000
    Share issue costs      (11,247)      (26,411)     (158,290)      (69,724)
    Issuance of warrants         -             -             -        81,600
    Warrant issue costs          -             -        (6,340)       (2,017)
    Costs related to the
     corporate
     reorganization              -             -      (182,794)            -
    Proceeds from
     long-term debt              -       950,000             -       950,000
    Repayment of
     long-term debt         (4,659)     (134,190)      (30,957)     (269,653)
                       ------------  ------------  ------------  ------------

    Cash provided by
     (used in) financing
     activities            (15,906)      789,399     1,400,214     2,442,206
                       ------------  ------------  ------------  ------------
                       ------------  ------------  ------------  ------------

    Investing activities
    Proceeds on
     disposition of
     shares                 36,701             -        36,701             -
    Acquisition of
     property and
     equipment                   -             -             -       (17,311)
                       ------------  ------------  ------------  ------------

    Cash provided by
     (used in) investing
     activities             36,701             -        36,701       (17,311)
                       ------------  ------------  ------------  ------------
                       ------------  ------------  ------------  ------------

    Net change in cash
     from continuing
     operations         (1,375,657)   (1,203,743)   (2,051,622)   (1,634,729)

    Cash flow from
     discontinued
     operations

    Operating
     activities                  -      (906,035)            -    (1,726,554)
    Financing
     activities                  -        12,046             -       507,833
    Investing
     activities                  -       (53,609)            -      (115,566)
                       ------------  ------------  ------------  ------------

    Net change in cash
     from discontinued
     operations                  -      (947,598)            -    (1,334,287)
                       ------------  ------------  ------------  ------------

    Decrease in cash
     and cash
     equivalents        (1,375,657)   (2,151,341)   (2,051,622)   (2,969,016)

    Cash and cash
     equivalents -
     Beginning of
     period              3,011,583     3,002,121     3,687,548     3,819,796
                       ------------  ------------  ------------  ------------
                       ------------  ------------  ------------  ------------

    Cash and cash
     equivalents - End
     of period           1,635,926       850,780     1,635,926       850,780
                       ------------  ------------  ------------  ------------
                       ------------  ------------  ------------  ------------

      Cash and cash
       equivalents -
       discontinued
       operations                -       358,542             -       358,542

    Cash and cash
     equivalents -
     from continuing
     operations          1,635,926       492,238     1,635,926       492,238
                       ------------  ------------  ------------  ------------
                       ------------  ------------  ------------  ------------

    Supplemental
     Information
     (continuing
     operations)
    Cash interest
     received                1,985         4,827         2,118        11,806
    Cash interest
     paid                        -        12,309           234        32,342
                       ------------  ------------  ------------  ------------
                       ------------  ------------  ------------  ------------
    

SOURCE SemBioSys Genetics Inc.

For further information: For further information: SemBioSys Genetics Inc., Rick Pierce, President, U.S. and International Operations, Phone: (617) 447-8299, E-mail: piercer@sembiosys.com; The Equicom Group Inc., Ross Marshall, Vice President, Phone: (416) 815-0700 ext. 238, E-mail: rmarshall@equicomgroup.com

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