Helix BioPharma reports 29.9% increase in total revenues for second-quarter fiscal 2010

Helix BioPharma Corp. (TSX, FSE: HBP / Pink Sheets: HXBPF) today announced financial results for the second quarter ended January 31, 2010.

HIGHLIGHTS

  • Helix's GMP clinical batch of L-DOS47 has been manufactured and vialed, and is currently undergoing quality control testing.
  • Announced that enrollment in the ongoing Phase II clinical trial of Topical Interferon Alpha-2b in patients with anogenital warts ("AGW") in Sweden and Germany was completed, with the required 120th patient randomized to enter the trial.
  • Announced positive preliminary primary endpoint findings from the ongoing Phase II pharmacokinetic clinical study of Topical Interferon Alpha-2b in patients with low-grade cervical lesions.

RESULTS FROM OPERATIONS

Three and six month periods ended January 31, 2010 compared to the same period in the previous year

Loss for the period

The Company recorded a loss of $3,675,000 and $7,148,000, respectively for the three and six month periods ended January 31, 2010 for a loss per common share of $0.06 and $0.12, respectively. In the comparative three and six month periods ended January 31, 2009, the Company recorded a loss of $4,252,000 and $6,573,000 respectively, for a loss per common share of $0.08 and $0.13, respectively.

Revenues

Revenues totaled $1,121,000 and $2,141,000 respectively for the three and six month periods ended January 31, 2010 and represent an increase of $258,000 (29.9%) and $159,000 (8.0%) when compared to the three and six month periods ended January 31, 2009.

Product revenues totaled $1,012,000 and $1,915,000 respectively for the three and six month periods ended January 31, 2010 and represent an increase of $272,000 (36.8%) and $254,000 (15.3%) when compared to the three and six month periods ended January 31, 2009.  Product revenue was higher in every product category for both the three and six month periods ended January 31, 2010 with the majority of the product revenue increase represented by the combined sales of Monovisc™ and Orthovisc®.  The Company commenced distribution of Monovisc™ in Canada during the fiscal first quarter of 2010.  While both products are used in the treatment of osteoarthritis, patients follow a three-injection regimen when using Orthovisc® and only a single injection regimen when being treated with Monovisc™.

License fees and royalties totaled $109,000 and $226,000 respectively for the three and six month periods ended January 31, 2010 and represent a decrease of $14,000 (11.4%) and $95,000 (29.6%) when compared to the three and six month periods ended January 31, 2009. The decrease in license fees and royalty revenues reflects a US$75,000 termination payment from Lumera Corporation ("Lumera") in the first quarter of fiscal 2009.  Excluding the Lumera termination payment, license fees and royalty revenues are comprised solely of royalties related to sales of Klean-Prep® outside of Canada.

Cost of sales and margins

Cost of sales totaled $461,000 and $879,000 respectively for the three and six month periods ended January 31, 2010 (three and six month periods ended January 31, 2009 were $338,000 and $785,000 respectively).  Margins, on a percentage basis, for the three and six month periods ended January 31, 2010 were 54.4% and 54.1% (three and six month periods ended January 31, 2009 were 54.3% and 52.7% respectively).  The increase in margins reflects higher margins on the sales of Monovisc™ (and to a lesser extent, Orthovisc®).

Research & development

Research and development costs for the three and six month periods ended January 31, 2010 totaled $2,335,000 and $5,260,000 respectively (three and six month periods ended January 31, 2009 were $2,734,000 and $4,502,000 respectively).  Lower research and development costs for the three month period ended January 31, 2010 mainly reflect lower costs associated with the stage of development of the Company's topical interferon programs.  The clinical portion of Helix's current ano-genital warts (AGW) Phase II trial in Europe is in the late stages, the Company having announced on November 5, 2009 that it had completed enrollment of the 120 patients sought for the trial.  With respect to the low-grade cervical lesion therapeutic indication (previously referred to as "cervical dysplasia" or "LSIL"), on February 12, 2010, the Company announced preliminary findings for the first ten patients that have completed the pharmacokinetic primary endpoint portion of the ongoing Phase II study, and its intention to conclude patient recruitment once a further two patients have done so.  Research and development costs for the Company's L-DOS47 program were flat for the three month period ended January 31, 2010 when compared to the prior year.  The increase in research and development expenditures for the six month period ended January 31, 2010 is mainly attributable to the L-DOS47 program, which includes ongoing laboratory studies,  preparations for definitive rodent and primate toxicology studies and the ongoing L-DOS47 manufacturing campaign in anticipation of furnishing product for future clinical testing.

Operating, general & administration

Operating, general and administration expenses for the three and six month periods ended January 31, 2010 totaled $770,000 and $1,446,000 respectively (three and six month periods ended January 31, 2009 were $1,191,000 and $2,124,000 respectively).  The reduction in operating, general and administration expenditures is the result of higher costs in fiscal 2009 associated with the filing of a Form 20-F registration statement with the SEC which became effective during the third quarter of fiscal 2009, the implementation of a new financial reporting system which was completed early in the second quarter of fiscal 2009, lower investor and media relations expenditures and associated marketing materials and consulting services which have since been terminated.

Sales and marketing

Sales and marketing expenses for the three and six month periods ended January 31, 2010 totaled $298,000 and $559,000 respectively (three and six month periods ended January 31, 2009 were $249,000 and $499,000 respectively).  The increase in sales and marketing expenditures is the result of increased marketing and promotion costs associated with the product launch of Monovisc™.

Amortization of intangible and capital assets

Amortization of intangible assets for the three and six month periods ended January 31, 2010 totaled $nil and $nil respectively (three and six month periods ended January 31, 2009 were $3,000 and $6,000 respectively).  Management determined the carrying value of intangible assets was impaired and wrote down the balance at July 31, 2009.  Amortization of capital assets for the three and six month periods ended January 31, 2010 totaled $107,000 and $205,000 respectively (three and six month periods ended January 31, 2009 were $63,000 and $127,000 respectively).

Stock-based compensation

Stock-based compensation expense for the three and six month periods ended January 31, 2010 totalled $605,000 and $765,000 respectively (three and six month periods ended January 31, 2009 were $631,000 and $631,000 respectively).  The stock-based compensation expense in fiscal 2010 relates to the ongoing amortization of compensation costs of stock options granted on December 17, 2008, and December 14, 2009, respectively over their vesting period.

Interest income

Interest income for the three and six month periods ended January 31, 2010 totaled $10,000 and $24,000 respectively (three and six month periods ended January 31, 2009 were $100,000 and $305,000 respectively). The decrease in interest income in fiscal 2010 reflects lower interest rates earned on deposits and lower cash balances.

Foreign exchange gain/loss

Foreign exchange losses for the three and six month periods ended January 31, 2010 totaled $230,000 and $188,000 respectively (three and six month periods ended January 31, 2009 were a gain of $18,000 and a loss of $132,000 respectively).  Foreign exchange gains and losses are mainly the result of the foreign currency translation of the Company's integrated foreign operation in Ireland as well as a value added tax receivable, both denominated in Euro dollars.  

Income taxes

Income tax expense for the three and six month periods ended January 31, 2010 totaled $nil and $11,000 respectively (three and six month periods ended January 31, 2009 were $24,000 and $54,000 respectively).  All income taxes are attributable to the Company's operations in Ireland.

CASH FLOW

Operating activities

Cash used in operating activities for the three and six month periods ended January 31, 2010 totaled $3,098,000 and $5,446,000 respectively, including a net loss of $3,675,000 and $7,148,000 respectively. Cash used in operating activities for the three and six month periods ended January 31, 2009 totaled $3,256,000 and $4,874,000 respectively, including a net loss of $4,252,000 and $6,573,000 respectively.

Significant adjustments for the three and six month periods ended January 31, 2010 include amortization of capital assets of $107,000 and $205,000 respectively (2009 – $63,000 and $127,000), amortization of intangible assets of $nil and $nil respectively (2009 – $3,000 and $6,000), deferred lease credits of $5,000 and $13,000 (2009 – $nil and $nil), stock-based compensation related to earlier stock option grants of $605,000 and $765,000 respectively (2009 – $631,000 and $631,000), foreign exchange losses of $230,000 and $188,000 respectively (2009 – $18,000 gain and $132,000 loss) and changes in non-cash working capital balances related to operations of $(360,000) and $557,000 (2009 – $317,000 and $803,000).

Financing activities

Financing activities for the three and six month periods ended January 31, 2010 totaled $nil and $11,597,000 respectively (three and six month periods ended January 31, 2009 were $nil and $9,659,000 respectively).  All financing activities reflect the net proceeds of two separate private placements.

Investing activities

Use of cash in investing activities for the three and six month periods ended January 31, 2010 totaled $239,000 and $484,000 respectively (three and six month periods ended January 31, 2009 were $37,000 and $74,000 respectively) and represents capital acquisitions in both fiscal periods.

Liquidity and Capital Resources

Since inception, the Company has financed its operations from public and private sales of equity, the exercise of warrants and stock options, and, to a lesser extent, interest income from funds available for investment, government grants, investment tax credits, and revenues from distribution, licensing and contract services. Since the Company does not have net earnings from its operations, the Company's long-term liquidity depends on its ability to access the capital markets, which depends substantially on the success of the Company's ongoing research and development programs.

At January 31, 2010, the Company had cash and cash equivalents totaling $19,973,000 (July 31, 2009 – $14,494,000).  The increase in cash and cash equivalents in fiscal 2010 is the result of a private placement completed on September 8, 2009 where the Company issued 6,625,000 units at $2.05 per unit, for gross proceeds of $13,581,250.  Each unit consists of one common share and one common share purchase warrant with each whole common share purchase warrant entitling the holder to purchase, subject to adjustment, one common share at a price of $2.87 until 5pm (Toronto time) on September 7, 2012.  The total number of common shares issued as at January 31, 2010 was 59,800,335 (July 31, 2009 – 53,175,335).

At January 31, 2010, the Company's working capital was $20,218,000 (July 31, 2009 – $15,296,000).

Based on our planned expenditures and assuming no material unanticipated expenses, our forecasts indicate that our cash reserves and expected cash from operations will be sufficient to meet our anticipated cash needs for working capital and capital expenditures to the end of fiscal 2011.  These planned expenditures do not include those necessary to conduct the proposed U.S. Phase I and Polish Phase I/II clinical trials for L-DOS47 or the proposed U.S. Phase II/III and European Phase III clinical trials for Topical Interferon Alpha-2b (low-grade cervical lesions).  As previously stated, these trials will require substantial funding beyond the Company's current resources.

SOURCE Helix BioPharma Corp.

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