Ondine Biopharma Announces its Second Quarter 2007 Financial Results



    VANCOUVER, Aug. 14 /CNW/ - Ondine Biopharma Corporation ("the Company",
TSX: OBP; AIM: OBP), a medical technology company, announced today its
financial results for the second quarter ended June 30, 2007.

    Q2 2007 Highlights and Recent Developments

    
    -   Achieved product sales revenue for Periowave(TM) laser consoles and
        treatment kits for the six months ended June 30, 2007 of
        approximately $1,118,000 generating a gross margin of $491,000
        (43.9%).
    -   Announced that the European Commission approved the Company's
        Periowave(TM) PDD system for the treatment of dental peri-implant
        disease and for endodontic disinfection.
    -   Completed the move of its US-based R&D facilities to a new facility
        in Bothell, Washington. The expanded facilities in Bothell, which
        includes a microbiology laboratory facility, will provide the basis
        for accelerated product development in both the oral care and MRSA
        sectors.
    

    Financial Review

    For the quarter ended June 30, 2007 (the "Current Quarter") the Company
recorded a net loss of $3.79 million or $0.07 per common share compared with a
loss of $2.88 million or $0.06 per common share during the quarter ended
June 30, 2006 (the "Prior Quarter"). For the six months ended June 30, 2007
(the "Current Period") the Company recorded a net loss of $7.24 million or
$0.13 per common share compared with a loss of $5.71 million or $0.12 per
common share during the six months ended June 30, 2006 (the "Prior Period").
Product sales of our laser consoles and treatment kits during the Current
Quarter generated $0.51 million and a gross margin of $0.23 million (45.6%)
compared to $0.42 million and a gross margin of $0.18 million (41.9%) during
the Prior Quarter. Product sales during the Current Period generated $1.12
million and gross margin of $0.49 million (43.9%) compared to $0.42 million
and a gross margin of $0.18 million (41.9%) 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 Quarter, as compared to the Prior Quarter, are primarily due to higher
treatment kit sales during the Current Quarter. Sales during the Current
Quarter include a $220,000 sale of Periowave(TM) laser base stations to the
Radcliffe Foundation which they donated to certain universities and colleges
across Canada. We expect these Periowave(TM) systems will be used by the
institutions for training and education of dental students while providing low
cost dental services to patients that may not otherwise have access to these
services.
    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 impact of
seasonality on its 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, and during the Current Quarter, when compared to the Prior
Quarter, are primarily due to the increases in expenses incurred in connection
with the Company's research and development (R&D) and marketing and sales
activities, together with an increase in the Company's administrative
infrastructure required to support those activities. The higher rate of
expenses incurred during the Current Period are expected to continue through
the balance of fiscal 2007 as the Company continues to execute its marketing
and sales strategy for the sale of Periowave(TM) in Canada, to introduce
Periowave(TM) in certain countries in Europe, and to begin initial
preparations for marketing Periowave(TM), subject to U.S. Food and Drug
Administration (FDA) clearance, in the United States in 2008. The increases in
expenses incurred during the Current Period, when compared to the Prior
Period, and during the Current Quarter, when 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 $1.60 million compared to
$1.39 million during the Prior Quarter and for the Current Period were
$3.25 million compared to $2.78 million during the Prior Period as the Company
invested in research and development programs on potential new applications of
the Company's PDD technology and incurred costs in connection with a number of
ongoing clinical studies. Subsequent to March 31, 2006, a number of clinical
studies on the use of Periowave(TM) for the treatment of periodontitis
commenced in Canada and a study commenced at University College London
Hospital in the United Kingdom. The Company expects to complete these studies
during 2007. The results from the studies are expected to be used as part of a
submission to the FDA.
    In addition, the Company currently has underway research programs at
University College London on potential new applications of PDD, principally
for the non-antibiotic treatment of methicillin-resistant Staphylococcus
aureus (MRSA) and other topical infections. During the Current Period, the
Company was successful in obtaining a number of licenses in Canada for the use
of Periowave(TM) photodisinfection system for 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
$1.30 million compared to $0.96 million during the Prior Quarter and for the
Current Period were $2.46 million compared to $1.82 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.
    Marketing and sales expenses for the Current Quarter were $1.00 million
compared to $0.75 million during the Prior Quarter and for the Current Period
were $1.93 million compared to $1.41 million during the Prior Period.
Marketing and sales expenses during the Current Period, as compared to the
Prior Period, included costs incurred in connection with a research study done
for the United States market, additional advertising and promotional costs,
primarily in connection with activities in Europe, increased staff costs, and
an increase in consulting and professional fees, primarily for the development
of marketing materials and telemarketing activities in the Canadian market.
    The Company incurred a foreign exchange loss of $119,000 during the
Current Period and $99,000 during the Current Quarter, compared to an exchange
gain of $8,025 in the Prior Period and an exchange loss of $4,000 in the Prior
Quarter, primarily due to the decrease during the three months ended June 30,
2007 in the value of its cash and cash equivalents denominated in United
States dollars as a result of a decrease in the value of the United States
dollar in relation to the value of the Canadian dollar.
    As at June 30, 2007, the Company had cash, cash equivalents and short
term investments totaling $8.72 million compared with $15.50 million as at
December 31, 2006. During the Current Period the Company used cash of
$6.45 million for its operating activities, $0.35 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
$3.98 million was provided from net redemptions of short-term investments.
    As at June 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 reduce the symptoms of disease. The compounds are topically
applied and lasers of appropriate wavelength and intensity are used to
disinfect the treatment site.

    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)
    -------------------------------------------------------------------------
                                                       June 30,  December 31,
                                                          2007          2006
                                                             $             $
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash and cash equivalents                        1,717,051     4,522,877
    Short-term investments                           7,006,253    10,980,656
    Accounts receivable                                629,967       762,250
    Inventory                                          602,905       746,404
    Prepaid expenses and deposits                      569,965       570,213
    -------------------------------------------------------------------------
    Total current assets                            10,526,141    17,582,400
    Capital assets                                   1,163,127       810,527
    Intangible assets                                   54,723        71,204
    -------------------------------------------------------------------------
                                                    11,743,991    18,464,131
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Accounts payable and accrued liabilities         1,922,607     1,714,361
    Income taxes payable                                18,681        49,290
    Current portion of deferred tenant inducement       47,700        11,700
    Future income tax                                   60,395        66,064
    -------------------------------------------------------------------------
    Total current liabilities                        2,049,383     1,841,415
    Deferred tenant inducement, net of current
     portion                                           141,374        31,224
    -------------------------------------------------------------------------
    Total liabilities                                2,190,757     1,872,639
    -------------------------------------------------------------------------
    Shareholders' equity
    Share capital                                   45,496,690    45,453,690
    Contributed surplus                              1,959,380     1,801,209
    Deficit                                        (37,900,658)  (30,663,407)
    Accumulated other comprehensive loss                (2,178)            -
    -------------------------------------------------------------------------
    Total shareholders' equity                       9,553,234    16,591,492
    -------------------------------------------------------------------------
                                                    11,743,991    18,464,131
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    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,
                        -------------------------- --------------------------
                              2007          2006          2007          2006
                                 $             $             $             $
    -------------------------------------------------------------------------
    REVENUE
    Product sales          510,574       424,397     1,118,133       424,397
    Cost of sales          277,821       246,571       627,575       246,571
    -------------------------------------------------------------------------
    Gross margin           232,753       177,826       490,558       177,826
    -------------------------------------------------------------------------
    EXPENSES
    Research and
     development         1,600,850     1,391,569     3,253,193     2,778,328
    General and
     administration      1,304,785       962,389     2,461,603     1,815,511
    Marketing and sales  1,003,645       745,872     1,926,947     1,411,138
    Depreciation and
     amortization          110,136        54,906       198,299       102,096
    -------------------------------------------------------------------------
                        (4,019,416)   (3,154,736)   (7,840,042)   (6,107,073)
    -------------------------------------------------------------------------
    Other
    Interest income         96,217       105,273       214,166       206,871
    Foreign exchange
     gain (loss)           (98,960)       (4,301)     (119,334)        8,025
    -------------------------------------------------------------------------
                            (2,743)      100,972        94,832       214,896
    -------------------------------------------------------------------------
    Loss before income
     taxes              (3,789,406)   (2,875,938)   (7,254,652)   (5,714,351)
    Income tax recovery          -             -        13,000             -
    -------------------------------------------------------------------------
    Loss for the period (3,789,406)   (2,875,938)   (7,241,652)   (5,714,351)
    Unrealized gain on
     short-term
     investments               282             -         2,223             -
    -------------------------------------------------------------------------
    Comprehensive loss
     for the period     (3,789,124)   (2,875,938)   (7,239,429)   (5,714,351)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and diluted
     loss per common
     share                   (0.07)        (0.06)        (0.13)        (0.12)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average
     number of common
     shares
     outstanding        54,692,493    47,788,267    54,643,874    46,106,689
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    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                   -             -       176,171
    Reallocation of contributed
     surplus arising from
     stock-based compensation on
     exercise of stock options                 -        18,000       (18,000)
    Loss for the period                        -             -             -
    Unrealized gain on short-term
     investments                               -             -             -
    -------------------------------------------------------------------------
    Balance, June 30, 2007            54,692,493    45,496,690     1,959,380
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                  (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                   -             -       176,171
    Reallocation of contributed
     surplus arising from
     stock-based compensation on
     exercise of stock options                 -             -             -
    Loss for the period               (7,241,652)            -    (7,241,652)
    Unrealized gain on short-term
     investments                               -         2,223         2,223
    -------------------------------------------------------------------------
    Balance, June 30, 2007           (37,900,658)       (2,178)    9,553,234
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Ondine Biopharma Corporation

    CONSOLIDATED STATEMENTS OF CASH FLOWS

                                  (Unaudited - expressed in Canadian dollars)
    -------------------------------------------------------------------------
                            Three months ended            Six months ended
                                   June 30,                    June 30,
                        -------------------------- --------------------------
                              2007          2006          2007          2006
                                 $             $             $             $
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Loss for the
     period             (3,789,406)   (2,875,938)   (7,241,652)   (5,714,351)
    Add items not
     affecting cash:
      Depreciation and
       amortization        110,136        54,906       198,299       102,096
      Stock-based
       compensation        (11,487)      149,130       176,171       332,778
      Deferred leasehold
       inducement           (2,925)       (2,925)       (5,850)       (5,850)
      Unrealized foreign
       exchange gain        (5,288)            -        (5,669)            -
      Gain on redemption
       of short-term
       investments               -       (10,099)            -       (16,411)
    Changes in non-cash
     working capital
     items relating to
     operations:
      Accounts receivable  166,011      (290,130)      132,283      (324,149)
      Inventory            244,571      (344,804)      143,499      (494,612)
      Prepaid expenses
       and deposits       (124,799)     (501,994)          248      (162,670)
      Accounts payable
       and accrued
       liabilities         376,690       486,851       179,246       832,680
      Income taxes
       payable              (1,565)       (8,303)      (10,431)       (8,064)
    -------------------------------------------------------------------------
    Cash used in
     operating
     activities         (3,038,062)   (3,343,306)   (6,454,034)   (5,458,553)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
    Issuance of share
     capital, net of
     issue costs                 -        11,743        25,000     1,590,094
    -------------------------------------------------------------------------
    Cash provided by
     financing
     activities                  -        11,743        25,000     1,590,094
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES
    Net redemptions
     of short-term
     investments         3,337,699     2,857,443     3,976,626     3,637,836
    Purchase of capital
     assets               (168,915)      (97,240)     (353,418)     (386,183)
    Acquisition of
     intangible asset            -             -             -       (74,812)
    -------------------------------------------------------------------------
    Cash provided by
     investing
     activities          3,168,784     2,760,203     3,623,208     3,176,841
    -------------------------------------------------------------------------
    Increase (decrease)
     in cash and cash
     equivalents during
     the period            130,722      (571,360)   (2,805,826)     (691,618)
    Cash and cash
     equivalents,
     beginning of
     period              1,586,329     2,894,059     4,522,877     3,014,317
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end
     of period           1,717,051     2,322,699     1,717,051     2,322,699
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

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

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ONDINE BIOPHARMA CORPORATION

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