Neurochem reports results for second quarter of fiscal 2007



    Neurochem will host a conference call, August 9, 2007, at 5:00 PM EDT.

    LAVAL, QC, Aug. 9 /CNW Telbec/ - Neurochem Inc. (NASDAQ:   NRMX; TSX: NRM)
reported results for the second quarter ended June 30, 2007. The Company
reported a net loss of $33,830,000 ($0.83 per share), compared to $20,374,000
($0.53 per share) for the corresponding period last year. The net loss for the
periods ended June 30, 2007, includes a non-cash charge under Canadian GAAP of
$11,651,000 relating to the US$40 million 5% senior subordinated convertible
notes which were converted into common shares during the current quarter at
US$9 per share. For the six-month period ended June 30, 2007, the net loss
amounted to $58,448,000 ($1.47 per share), compared to $37,508,000 ($0.97 per
share) for the same period last year. Research and development (R&D) expenses
amounted to $16,115,000 this quarter compared to $14,342,000 for the same
period last year. For the six-month period, R&D expenses were $35,827,000
compared to $28,068,000 for the corresponding period of the previous year. The
increase is due to expenses incurred in relation to the development of
tramiprosate (ALZHEMED(TM)) primarily in respect of the ongoing Phase III
clinical trial in Europe and the North American open-label extension of the
Phase III study, as well as the conduct of a QT cardiac status Phase I study.
Tramiprosate (ALZHEMED(TM)) is the Company's investigational product candidate
for the treatment of Alzheimer's disease (AD).
    As at June 30, 2007 the Company reported cash, cash equivalents and
marketable securities of $90,873,000, compared to $56,821,000 on December 31,
2006. The increase is primarily due to proceeds received from the issue of
convertible notes in May 2007 and is partially offset by funds used in
operating activities.

    Conference Call

    Neurochem will host a conference call on August 9, 2007, at 5:00 PM EDT.
The telephone numbers to access the conference call are 1-416-915-5784 or
1-800-796-7558. A replay of the call will be available until Thursday, August
16, 2007. The telephone numbers to access the replay of the call are
1-416-640-1917 or 1-877-289-8525. The access code for the replay is 21243266#.

    Consolidated Financial Results Highlights

    The following discussion and analysis should be read in conjunction with
the Company's unaudited consolidated financial statements for the six-month
period ended June 30, 2007, as well as the Company's audited consolidated
financial statements for the year ended December 31, 2006, which have been
prepared in accordance with Canadian generally accepted accounting principles
(GAAP). For discussion regarding related-party transactions, contractual
obligations, disclosure controls and procedures, internal control over
financial reporting, critical accounting policies and estimates, recent
accounting pronouncements, and risks and uncertainties, refer to the Annual
Report and the Annual Information Form for the year ended December 31, 2006,
which are available on SEDAR at www.sedar.com or on EDGAR at www.sec.gov. All
dollar figures are Canadian dollars, unless specified otherwise.

    Results of operations

    For the three-month period ended June 30, 2007, the net loss amounted to
$33,830,000 ($0.83 per share), compared to $20,374,000 ($0.53 per share) for
the corresponding period in the previous year. For the six-month period ended
June 30, 2007, the net loss amounted to $58,448,000 ($1.47 per share),
compared to $37,508,000 ($0.97 per share) for the same period last year.
    The net loss for the periods ended June 30, 2007, includes a non-cash
charge under Canadian GAAP of $11,651,000 relating to the US$40 million 5%
senior subordinated convertible notes which were converted into common shares
during the current quarter at US$9 per share.

    Revenue from collaboration agreement amounted to $340,000 for the current
quarter ($777,000 for the six-month period), compared to $608,000 for the same
period in the previous year ($1,215,000 for the six-month period). This
revenue is earned under the agreement with Centocor, Inc. (Centocor) in
respect of eprodisate (KIACTA(TM)), an oral investigational product candidate
for the treatment of Amyloid A (AA) amyloidosis. Revenue recognized is in
respect of the non-refundable upfront payment received from Centocor, which is
being amortized over the estimated period through to the anticipated
regulatory approval date of the investigational product candidate. The
estimated period is subject to change based on additional information that the
Company may receive periodically. The other portion of the upfront payment
received from Centocor (US$6,000,000) has been classified as deferred revenue
and is not being amortized as earned revenue given that it is potentially
refundable. In the event that the Company receives an approval letter issued
by the U.S. Food and Drug Administration (FDA), the amount would no longer be
refundable and would be amortized as earned revenue. In July 2007, the Company
received a second approvable letter from the FDA for eprodisate (KIACTA(TM))
for the treatment of AA amyloidosis. In this action letter, the FDA indicated
that an additional efficacy trial will be necessary before the FDA could
approve the investigational product candidate. The approvable letter states
that additional submissions, filed by Neurochem as part of its complete
response to this approvable letter, may address issues raised in this letter.
The FDA has indicated that additional submissions could persuade the agency to
eliminate the requirement for an additional trial. The FDA also asked for
additional information, including further pharmacokinetic studies, and again
acknowledged that a QT clinical study should be submitted as part of a Phase
IV (post-approval) commitment. The Company expects to file a complete response
to this second approvable letter in the near future. Neurochem is also seeking
marketing approval for eprodisate (KIACTA(TM)) for the treatment of AA
amyloidosis in the European Union, Switzerland and Canada. In September 2006,
the European Medicines Agency (EMEA) confirmed that it had commenced a
regulatory review of eprodisate (KIACTA(TM)). The Marketing Authorization
Application is being reviewed under the EMEA's centralized procedure. An
authorization from the EMEA would apply to all 27 European Union member
states, as well as Norway and Iceland.

    Reimbursable costs revenue amounted to $144,000 for the current quarter
($294,000 for the six-month period), compared to $205,000 for the same period
in the previous year ($435,000 for the six-month period) and consists of costs
reimbursable by Centocor in respect of eprodisate (KIACTA(TM))-related
activities. The Company earns no margin on these reimbursable costs.

    Research and development expenses, before research tax credits and
grants, amounted to $16,115,000 for the current quarter ($35,827,000 for the
six-month period), compared to $14,342,000 for the same period in the previous
year ($28,068,000 for the six-month period). The increase is due to expenses
incurred in relation to the development of tramiprosate (ALZHEMED(TM))
primarily in respect of the ongoing Phase III clinical trial in Europe and the
North American open-label extension of the Phase III study, as well as the
conduct of a QT cardiac status Phase I study. Tramiprosate (ALZHEMED(TM)) is
the Company's investigational product candidate for the treatment of AD.
Tramiprosate (ALZHEMED(TM)) completed its 18-month North American Phase III
clinical trial during the first quarter of 2007 and the Company announced in
April 2007 that the database had been locked. Neurochem has been advised by
its external team of statisticians (the statisticians) that adjustment to the
initial statistical model, as set out in the statistical plan, would be
necessary to provide accurate results. The procedure to arrive at a reliable
model involves a detailed analysis of potential confounding factors such as
the effect of concomitant medications, baseline characteristics of the study
population or differences in clinical sites. The statisticians have indicated
that they have made progress adjusting the statistical model, reaching an
acceptable level of validity for the disease modification endpoint, as
measured by magnetic resonance imaging (MRI). In July 2007, the FDA designated
tramiprosate (ALZHEMED(TM)) as a Fast Track Product for the treatment of AD.
Under the FDA Modernization Act of 1997, the Fast Track designation program is
intended to facilitate the development and expedite review of drugs developed
for the treatment of serious or life-threatening conditions and that
demonstrate the potential to address an unmet medical need for such a
condition. The Company is meeting the FDA in August to discuss the
tramiprosate (ALZHEMED(TM)) Phase III program and present an update on the
work accomplished to date on the North American Phase III clinical trial.
Neurochem will also seek the FDA's feedback and validation of the next steps
that would be acceptable to the agency, especially with respect to the
statistical models. The Company expects the results to be available in 2007.
The North American Phase III clinical trial included 1,052 patients at 67
clinical centers across the U.S. and Canada. All patients who completed the
North American Phase III clinical trial were eligible to receive tramiprosate
(ALZHEMED(TM)) in an open-label extension of the Phase III study. The European
Phase III clinical trial on tramiprosate (ALZHEMED(TM)) was launched in
September 2005. This study also has a duration of 18 months and the trial is
being conducted at approximately 70 clinical centers in ten European
countries. As of June 30, 2007, 939 patients were randomized in the European
clinical trial. Patient screening activities will stop in August 2007 as
Neurochem has exceeded its original patient enrolment objectives. However, in
light of the information and experience gained from the North American Phase
III clinical trial, Neurochem is presently considering modifications that
would need to be made to the design of the European trial. Both Phase III
clinical trials are multicentre, randomized, double-blind, placebo-controlled,
three-armed, parallel-designed trials. For the six-month period ended June 30,
2007, research and development expenses also included costs incurred to
support the North American Phase III clinical trial for tramiprosate
(ALZHEMED(TM)), the ongoing open-label extension of the eprodisate
(KIACTA(TM)) Phase II/III study, as well as ongoing drug discovery programs.

    Research tax credits and grants amounted to $541,000 this quarter
($1,134,000 for the six-month period), compared to $494,000 for the
corresponding period in the previous year ($1,029,000 for the six-month
period). Research tax credits represent refundable tax credits earned under
the Quebec Scientific Research and Experimental Development Program for
expenditures incurred in Quebec.

    General and administrative expenses totaled $3,464,000 for the current
quarter ($7,518,000 for the six-month period), compared to $3,366,000 for the
same quarter in the previous year ($6,808,000 for the six-month period). These
costs are incurred to support the overall activities of the Company.

    Arbitral award amounted to nil for the current quarter and six-month
period compared to $2,089,000 for the quarter and six-month period ended June
30, 2006. This expense relates to the dispute with Immtech Pharmaceuticals,
Inc. (formerly known as Immtech International, Inc. (Immtech)), which came to
a conclusion in January 2007 when Immtech, the University of North Carolina at
Chapel Hill (UNC), and Georgia State University Research Foundation, Inc.
filed with the Federal District Court for the Southern District of New York,
U.S.A. a Notice of Voluntary Dismissal. The plaintiffs voluntarily dismissed
their complaint against Neurochem in the Federal District Court without any
payment, license, business agreement, concession or compromise by Neurochem.
The dispute concerned an agreement entered into between Immtech and Neurochem
in April 2002 under which Neurochem had the right to apply its proprietary
anti-amyloid technology to test certain compounds to be provided by Immtech.

    Reimbursable costs amounted to $144,000 for the current quarter ($294,000
for the six-month period), compared to $205,000 for the same period in the
previous year ($435,000 for the six-month period), and consist of costs
incurred on behalf of Centocor in respect of eprodisate (KIACTA(TM))-related
activities and reimbursable by Centocor.

    Stock-based compensation amounted to $1,025,000 for the current quarter
($2,106,000 for the six-month period), compared to $1,016,000 for the
corresponding quarter in the previous year ($1,932,000 for the six-month
period). This expense relates to stock options and stock-based incentives,
whereby compensation cost in relation to stock options is measured at fair
value at the date of grant and is expensed over the award's vesting period.

    Depreciation, amortization and patent cost write-off amounted to $395,000
for the current quarter ($802,000 for the six-month period), compared to
$409,000 for the same quarter in the previous year ($902,000 for the six-month
period). The decrease in the six-month period is mainly attributable to
certain patent costs of $106,000 written off during the first quarter of 2006.

    Interest income amounted to $1,057,000 for the current quarter
($1,775,000 for the six-month period), compared to $580,000 for the same
quarter in the previous year ($1,223,000 for the six-month period). The
increase is mainly attributable to higher average cash balances and higher
interest rates during the current periods, compared to the same periods in the
previous year.

    Accretion expense amounted to $13,712,000 for the current quarter
($14,885,000 for the six-month period), and mainly represents the imputed
interest under GAAP on the US$42,085,000 aggregate principal amount of 6%
convertible senior notes issued in November 2006, as well as on the
US$40,000,000 6% senior convertible notes (Senior Notes) and US$40,000,000 5%
senior subordinated convertible notes (Junior Notes) issued in May 2007. The
Company accretes the carrying values of the convertible notes to their face
value through a charge to earnings over their expected lives of 60 months, 54
months and one month, respectively. Of the total accretion expense recorded in
the quarter and six-month period ended June 30, 2007, $11,838,000 relates to
accretion expense on the Junior Notes, which were fully converted during the
second quarter of 2007.

    Change in fair value of derivative-related asset amounted to a loss of
$2,122,000 for the current periods and represents the variation in the fair
value of the embedded derivatives included in the aggregate US$80,000,000
Senior and Junior Notes issued in May 2007.

    Foreign exchange gain amounted to $581,000 for the current quarter (gain
of $702,000 for the six-month period), compared to a loss of $524,000 for the
same quarter in the previous year (loss of $570,000 for the six-month period).
Foreign exchange gains or losses arise on the movement in foreign exchange
rates related to the Company's net monetary assets held in foreign currencies,
primarily U.S. dollars.

    Other income amounted to $530,000 for the current quarter ($814,000 for
the six-month period), compared to $308,000 for the same quarter in the
previous year ($593,000 for the six-month period). Other income consists of
non-operating revenue, primarily sub-lease revenue.

    Share of loss in a company subject to significant influence amounted to
nil for the current quarter ($372,000 for the six-month period), compared to
$891,000 for the corresponding quarter in the previous year ($1,707,000 for
the six-month period). Non-controlling interest amounted to nil for the
current quarter ($123,000 for the six-month period), compared to $296,000 for
the corresponding quarter in the previous year ($558,000 for the six-month
period). These items result from the consolidation of the Company's interest
in a holding company (Innodia Holding) that owns shares of Innodia Inc., for
which Neurochem is the primary beneficiary. The share of loss recorded in the
current year has reduced the Company's long-term investment in Innodia Holding
to nil. Innodia Inc. is a private, development-stage company engaged in
developing novel drugs for the treatment of type 2 diabetes and underlying
diseases.

    Liquidity and Capital Resources

    As at June 30, 2007, the Company had available cash, cash equivalents and
marketable securities of $90,873,000, compared to $56,821,000 at December 31,
2006. The increase is primarily due to proceeds received from the issue of
convertible notes in May 2007 and is partially offset by funds used in
operating activities.
    On May 2, 2007, the Company issued US$80,000,000 aggregate principal
amount of convertible notes, consisting of US$40,000,000 6% senior convertible
notes due in 2027 and US$40,000,000 5% senior subordinated convertible notes
due in 2012. The 6% senior convertible notes have an initial conversion price
equal to the lesser of US$12.68 or the 5-day weighted average trading price of
the common shares preceding any conversion, subject to adjustments in certain
circumstances. The Company will pay interest on the 6% senior convertible
notes until maturity on May 2, 2027, subject to earlier repurchase, redemption
or conversion. The 5% senior subordinated convertible notes were subject to
mandatory conversion into common shares under certain circumstances. In
connection with this transaction, the Company issued warrants to purchase an
aggregate of 2,250,645 common shares until May 2, 2012, at an initial purchase
price of US$12.68 per share, subject to adjustments in certain circumstances.
During the quarter ended June 30, 2007, US$10,500,000 of the 6% senior
convertible notes were converted into 1,653,859 common shares and the totality
of the 5% senior subordinated convertible notes were converted into 4,444,449
common shares.
    Subsequent to June 30, 2007, an additional US$25,000,000 6% senior
convertible notes were converted into common shares at an average price of
US$6.3044. The Company issued 3,965,462 common shares in connection with these
conversions.
    In August 2006, the Company entered into a securities purchase agreement
in respect of an equity line of credit facility (ELOC) with Cityplatz Limited
(Cityplatz), that provides the Company up to US$60,000,000 of funds in return
for the issuance of common shares at a discount of 3.0% to market price at the
time of draw downs over term, less a placement fee equal to 2.4% of gross
proceeds payable to the placement agent, Rodman & Renshaw, LLC. The ELOC
established by the securities purchase agreement will terminate on February 9,
2009. The ELOC shall also terminate if (i) the Company's common shares are
de-listed from NASDAQ unless the common shares are listed at such time on
another trading market specified in the agreement and such de-listing is in
connection with a subsequent listing on another trading market specified in
the agreement, (ii) the Company is subject to a change of control transaction,
or (iii) the Company suffers a material adverse effect which cannot be cured
prior to the next drawdown notice. The Company may terminate the securities
purchase agreement (i) if Cityplatz fails to fund a properly notified drawdown
within five trading days of the end of the applicable settlement period or
(ii) after it has drawn down at least US$25,000,000 under the ELOC. Either
party may also terminate the securities purchase agreement if the
volume-weighted average price of the Company's common shares is below US$5 for
more than 30 consecutive trading days, as adjusted. As at June 30, 2007, the
Company had not drawn any funds under the ELOC.
    As at June 30, 2007, the Company's workforce comprised 184 employees.
During the year ended December 31, 2006 and the first quarter of 2007, the
Company increased its workforce in anticipation of commercialization and
completion of clinical programs. During the second quarter of 2007, the
workforce was reduced due to delays encountered in the product candidate
development programs.
    As at July 31, 2007, the Company had 44,880,641 common shares
outstanding, 220,000 common shares issuable to the Chief Executive Officer
upon the achievement of specified performance targets, 2,744,176 options
granted under the stock option plan, 7,051,137 shares potentially issuable
under the convertible notes and 2,250,645 warrants outstanding, for a total of
57,146,599 common shares, on a fully diluted basis.
    The Company believes that its available cash and short-term investments,
expected interest income, potential funding from partnerships, research
collaborations and licensing agreements, potential proceeds from the equity
line of credit facility, research tax credits, grants, and access to capital
markets should be sufficient to finance the Company's operations and capital
needs during the ensuing year. However, in light of the uncertainties
associated with the regulatory approval process, clinical trial results, and
the Company's ability to secure additional licensing, partnership and/or other
agreements, further financing may be required to support the Company's
operations in the future.
    Effective July 1, 2007, the Company adopted the U.S. dollar as its
functional and reporting currency, as a result of a significant portion of its
revenue, expenses, assets, liabilities and financing is now denominated in
U.S. dollars.

    
    Neurochem Inc.
    Consolidated Financial Information(1)
    (in thousands of Canadian dollars,
     except per share data)

                                     Three-month              Six-month
                                     period ended            period ended
                                       June 30                  June 30
    -------------------------------------------------------------------------
    Consolidated Statements
    of Operations                   2007        2006        2007        2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                             (unaudited) (unaudited) (unaudited) (unaudited)
    Revenues:
      Collaboration agreement       $340        $608        $777      $1,215
      Reimbursable costs             144         205         294         435
    -------------------------------------------------------------------------
                                     484         813       1,071       1,650
    -------------------------------------------------------------------------

    Expenses (Income):
      Research and development    16,115      14,342      35,827      28,068
      Research tax credits and
       grants                       (541)       (494)     (1,134)     (1,029)
      General and administrative   3,464       3,366       7,518       6,808
      Arbitral award                   -       2 089           -       2 089
      Reimbursable costs             144         205         294         435
      Stock-based compensation     1,025       1,016       2,106       1,932
      Depreciation, amortization
       and patent cost write-off     395         409         802         902
      Interest and bank charges       46          23         141          50
    -------------------------------------------------------------------------
                                  20,648      20,956      45,554      39,255
    -------------------------------------------------------------------------
      Net loss before undernoted
       items                     (20,164)    (20,143)    (44,483)    (37,605)

      Interest income              1,057         580       1,775       1,223
      Accretion expense          (13,712)          -     (14,885)          -
      Change in fair value of
       derivative-related asset   (2,122)          -      (2,122)          -
      Foreign exchange
       gain (loss)                   581        (524)        702        (570)
      Other income                   530         308         814         593
      Share of loss in a company
       subject to significant
       influence                       -        (891)       (372)     (1 707)
      Non-controlling interest         -         296         123         558
    -------------------------------------------------------------------------
      Net loss                  ($33,830)   ($20,374)   ($58,448)   ($37,508)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Net loss per share:
        Basic and diluted         ($0.83)     ($0.53)     ($1.47)     ($0.97)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

      Weighted average number
      of common shares
      outstanding             40,586,251  38,792,486  39,750,174  38,475,059
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                            At            At
                                                       June 30   December 31
    Consolidated Balance Sheets                           2007          2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                    (unaudited)     (audited)

      Cash, cash equivalents and
       marketable securities                           $90,873       $56,821
      Other current assets                              13,076        12,191
      Total current assets                             103,949        69,012
      Capital assets and patents                        10,807        10,479
      Other long-term assets                             1,328         3,720
    -------------------------------------------------------------------------
      Total assets                                    $116,084       $83,211
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

      Current liabilities                              $25,392       $26,078
      Long-term liabilities                             72,302        58,288
      Non-controlling interest                             722           845
      Shareholders' equity (deficiency)                 17,668        (2,000)
    -------------------------------------------------------------------------

      Total liabilities and shareholders'
       equity (deficiency)                            $116,084       $83,211
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Condensed from the Company's unaudited consolidated financial
        statements.
    

    About Neurochem

    Neurochem Inc. is focused on the development and commercialization of
innovative therapeutics to address critical unmet medical needs. Eprodisate
(KIACTA(TM)) is currently being developed for the treatment of Amyloid A (AA)
amyloidosis, and is under regulatory review for marketing approval by the U.S.
Food and Drug Administration, European Medicines Agency and Swissmedic.
Tramiprosate (ALZHEMED(TM)), for the treatment of Alzheimer's disease, has
completed a Phase III clinical trial in North America and is currently in a
Phase III clinical trial in Europe, while tramiprosate (CEREBRIL(TM)), for the
prevention of Hemorrhagic Stroke caused by Cerebral Amyloid Angiopathy, has
completed a Phase IIa clinical trial.

    To Contact Neurochem

    For additional information on Neurochem and its drug development
programs, please call the North American toll-free number 1 877 680-4500 or
visit our Web Site at: www.neurochem.com.

    Certain statements contained in this news release, other than statements
of fact that are independently verifiable at the date hereof, may constitute
forward-looking statements. Such statements, based as they are on the current
expectations of management, inherently involve numerous risks and
uncertainties, known and unknown, many of which are beyond Neurochem's
control. Such risks include but are not limited to: the impact of general
economic conditions, general conditions in the pharmaceutical industry,
changes in the regulatory environment in the jurisdictions in which Neurochem
does business, stock market volatility, fluctuations in costs, and changes to
the competitive environment due to consolidation, that actual results may vary
once the final and quality-controlled verification of data and analyses has
been completed, as well as other risks disclosed in public filings of
Neurochem. Consequently, actual future results may differ materially from the
anticipated results expressed in the forward-looking statements. The reader
should not place undue reliance, if any, on the forward-looking statements
included in this news release. These statements speak only as of the date made
and Neurochem is under no obligation and disavows any intention to update or
revise such statements as a result of any event, circumstances or otherwise.
Please see the Annual Information Form for further risk factors that might
affect the Company and its business.




For further information:

For further information: Lise Hébert, Ph.D., Vice President, Corporate
Communications, (450) 680-4572, lhebert@neurochem.com


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890