Quarter Highlights: PREVU(x) LT cleared for sale in Canada and
CE-marked in Europe TORONTO, Nov. 8 /PRNewswire-FirstCall/ --
Predictive medicine company PreMD Inc. (TSX: PMD; Amex: PME) today
announced results for the third quarter of fiscal 2006 ended
September 30, 2006 (Q3 2006). Recent Highlights - Announced that on
December 28th PreMD will reacquire the rights to PREVU(x) from
McNeil Consumer Healthcare - transition currently in process; -
Received clearance from the U.S. Food and Drug Administration (FDA)
for the new cordless color PREVU(x) reader, enhancing the market
appeal of PREVU(x) POC; - PREVU(x) LT, the lab-processed format of
the PREVU(x) technology was cleared for sale in Canada and
Conformite Europeene (CE)-marked in Europe. PREVU(x) LT has been
developed for use within the life insurance industry and diagnostic
laboratories; - Completed PREPARE study which evaluated PREVU(x) LT
within the life insurance industry. Subsequent to Q3 2006,
submitted a 510(k) application to the FDA. The consolidated net
loss for Q3 2006 was $1,120,000 or $0.05 per share compared with a
loss of $1,444,000 or $0.07 per share for the quarter ended
September 30, 2005 (Q3 2005), a decrease of $324,000. For the nine
months ended September 30, 2006, the net loss was $5,609,000, or
$0.26 per share, compared with $4,201,000, or $0.20 per share for
the nine months ended September 30, 2005. The year to date increase
was primarily due to increased research and development expenses
related to the acceleration of clinical trials in the first six
months of 2006 and to interest and imputed interest expenses on
convertible debentures issued on August 30, 2005. The Company
reduced research and development expenses to historical levels in
Q3 and expects to maintain this level for the balance of fiscal
2006, and with further reductions expected in 2007 as several
additional clinical trials are completed. Cash used to fund
operating activities during Q3 2006 amounted to $1,608,000 compared
with $1,180,000 in Q3 2005; the increase in cash usage resulting
from payment of Q2 accounts payable associated with clinical
trials. Total product related sales to McNeil Consumer Healthcare
("McNeil") were $1,000 for Q3 2006 compared with $40,000 for Q3
2005. McNeil continues to use inventory purchased in 2005 for sales
and marketing proposals to potential customers and has purchased
only a small quantity of new products in 2006. License revenue was
$577,000 for Q3 2006, compared to $80,000 for Q3 2005, reflecting
milestone payments earned during the recent quarter. "This quarter
consisted of both challenges and exciting opportunities," said Dr.
Brent Norton, President and Chief Executive Officer. "The decision
by McNeil Consumer Healthcare to terminate our marketing
partnership provides us with an opportunity to more fully realize
the potential of the PREVU(x) product line while availing ourselves
of the initial value McNeil has built. Transition plans are
underway and we are developing our longer term marketing strategy
surrounding PREVU(x). In the near term, we are continuing to build
on the momentum that has been generated with market segments such
as in-store pharmacies and retail health clinics." Dr. Norton
continued, "the clearance of our second skin sterol test in Canada
and Europe marks a significant milestone for the company. We have
also recently filed for approval of PREVU(x) LT in the U.S. and
believe this product, geared toward the life insurance industry,
has much potential. Furthermore, due to our existing relationships
with life insurers, we are well positioned for the commercial
launch of this product." Shortly after the close of the quarter,
PreMD announced legal action surrounding certain intellectual
property involving part of PreMD's cancer products, which include
ColorectAlert(TM), LungAlert(TM) and a breast cancer test. PreMD is
committed to protecting its intellectual property and will defend
its position vigorously. Outlook ------- "We are working closely
with McNeil and the transfer of information is orderly and
cooperative. Key contacts and programs are being turned over to us
and we are managing the marketing of PREVU(x) while we evaluate our
longer term commercialization plans," said Dr. Norton. "In
addition, on the oncology side of our business, we anticipate
several near term data events that have the potential to further
validate our technology and increase the value of our oncology
product line. While we continue to make progress against our
objectives, due to the termination by McNeil future anticipated
milestone payments will not be forthcoming. Thus, our target date
of reaching break-even will shift to 2007." PreMD's near-term
objectives include: - Obtain U.S. FDA regulatory clearance for use
in life insurance screening for PREVU(x) LT, based on the PREPARE
clinical trial; - Evaluate the opportunity of working with
companies such as Medivon, LLC ("Medivon") to distribute PREVU(x)
POC as part of risk assessment programs to the retail pharmacy
market; - Continue to supply product and support customers and
programs developed by McNeil in Canada, the U.S. and Europe; -
Negotiate partnership agreements with one or more companies to
market PREVU(x) in various market segments; - File 510(k) with U.S.
FDA to obtain broader regulatory claim for PREVU(x) in the U.S.
based on the PASA clinical trial; - Complete analysis of new
LungAlert(TM) data and expand participation in I-ELCAP to
additional sites; and - Complete pivotal study for the breast
cancer test at the University of Louisville. PREVU(x)
Commercialization Update --------------------------------- Although
the agreement with McNeil will terminate on December 28, 2006, they
continue to advance initiatives in targeted segments of the risk
assessment market as well as the life insurance industry: - McNeil
showcased the new handheld cordless PREVU(x) POC reader to
cardiologists and other medical professionals at the World Congress
of Cardiology 2006, an event organized by the European Society of
Cardiology and the World Heart Federation, held in Barcelona, Spain
in September. - The initial pilot programs with Costco in Florida
are being extended to additional stores in the fourth quarter. -
McNeil has a sales broker contract with Medivon, LLC ("Medivon"), a
Florida-based healthcare company that provides heart disease risk
assessment programs and PreMD is evaluating the opportunity of
working directly with Medivon to market screening programs in
retail pharmacies in the U.S. - In the life insurance market, PreMD
and McNeil presented PREVU(x) LT at the Association of Home Office
Underwriters (AHOU) Conference in Las Vegas and management of PreMD
is working on a business model to market PREVU(x) directly to the
insurance industry. Financial Review ---------------- During Q3
2006, the Company focused on completing some key clinical trials,
including the PASA trial to support additional claims for PREVU(x)
Point of Care (POC) Skin Sterol Test, and the PREPARE trial for use
of PREVU(x) LT in the life insurance industry. As a result,
research and development expenditures for Q3 2006 decreased by
$20,000 to $841,000 from $861,000 in Q3 2005. The variance for the
quarter reflects: - an increase of $96,000 in spending on clinical
trials for skin cholesterol, particularly related to the PREPARE
and PASA trials, as well as the trials for the lung, colorectal and
breast cancer technologies; - a decrease of $20,000 in legal fees
on intellectual property; and - a decrease of $95,000 in
subcontract research due to the completion of the development of
the second-generation spectrometer. Total research and development
expenditures for the nine months ended September 30, 2006 and 2005
amounted to $3,826,000 and $2,309,000, respectively. As a result of
the completion of enrolment in the above-noted trials, clinical
trial costs are expected to continue to diminish for the balance of
2006 and into 2007. General and administration expenses amounted to
$499,000 for Q3 2006 compared with $590,000 in Q3 2005, a decrease
of $91,000. For the nine months ended September 30, 2006, general
and administration expenses amounted to $1,765,000 compared to
$2,125,000 in 2005, a decrease of $360,000. Interest on convertible
debentures amounted to $172,000 in Q3 2006 compared with $55,000 in
Q3 2005. Based on the debenture issue date of August 30, 2005, the
Q3 2005 expense only reflected one month's expense. For the nine
months ended September 30, 2006, interest amounted to $510,000
compared with $55,000 for the corresponding period in 2005. The
debentures bear interest at an annual rate of 7%, payable quarterly
in either cash or common shares. The interest expenses for Q2 and
Q3 2006 were paid in common shares, of which 31,065 and 1,450
respectively were issued during Q3 2006 and 60,598 were issued
subsequent to the quarter, on October 5, 2006. Imputed interest for
the three and nine months ended September 30, 2006 amounted to
$204,000 and $609,000, respectively, compared with $63,000 for the
corresponding periods in 2005. As mentioned above, the Q3 2005
expense only reflects one month's expense. This is a non-cash
expense and represents the fair value of the warrants and equity
conversion features of the debentures, amortized over the life of
the debentures. Amortization expenses for equipment and acquired
technology for Q3 2006 amounted to $45,000 compared with $54,000
for Q3 2005. For the nine months ended September 30, 2006 and 2005,
amortization amounted to $135,000 and $160,000, respectively.
Purchases of capital assets amounted to $23,000 during 2006
compared with $117,000 in 2005. Amortization of deferred financing
fees related to the convertible debentures amounted to $33,000 in
Q3 2006 ($98,000 for the nine months ended September 30, 2006)
compared with $13,000 in Q3 2005. The financing fees are being
amortized over the life of the convertible debentures. The loss on
foreign exchange for the three months ended September 30, 2006
amounted to $5,000 compared with a gain of $22,000 for the
corresponding period in 2005. Included in the loss for Q3 2006 is
$8,000 resulting from the effects of foreign exchange on the
convertible debentures which are repayable in U.S. dollars. It is
partially offset during the quarter by a gain on the revaluation of
investments held in U.S. dollars, amounting to $3,000. For the nine
months ended September 30, 2006 and 2005, the gain on foreign
exchange amounted to $211,000 and $35,000, respectively. Refundable
scientific investment tax credits ("ITCs") accrued for Q3 2006
amounted to $45,000 versus $70,000 for Q3 2005. The difference
arose from the relative timing of eligible expenditures. For the
nine months ended September 30, 2006 and 2005, the ITC revenue
amounted to $175,000 and $168,000, respectively. Interest income
amounted to $56,000 for Q3 2006 compared with $36,000 for Q3 2005
as a result of higher cash balances resulting from the proceeds of
the convertible debentures. For the nine months ended September 30,
2006 and 2005, interest income amounted to $213,000 and $87,000,
respectively. As at September 30, 2006, PreMD had cash, cash
equivalents and short-term investments totaling $4,287,000
($8,679,000 as at December 31, 2005). The Company invests its funds
in short-term financial instruments and marketable securities. Cash
used to fund operating activities during Q3 2006 amounted to
$1,608,000 compared with $1,180,000 in Q3 2005, the increase
resulting from the reduction in accounts payable from Q2 2006. To
date, the Company has financed its activities through product
sales, license revenues, the issuance of shares and convertible
debentures and the recovery of ITCs. Management believes that
clinical trial expenses will be reduced dramatically for the
balance of 2006 and for 2007 and that, based on historic cash
expenditures and the current expectation of further revenues from
product sales, its existing cash resources together with the ITC
receivable of $375,000 will be sufficient to meet its current
operating and capital requirements. As a result of the pending
termination of the agreement with McNeil, the Company is currently
developing a new business plan for the distribution of the PREVU(x)
Skin Sterol Tests.
-------------------------------------------------------------------------
Conference Call and Webcast PreMD will hold a conference call and
webcast tomorrow, November 9, 2006, at 9:00 a.m. ET. To access the
conference call, please dial 1-800-732-1073. A live audio webcast
will be available at http://www.premdinc.com/, and will be
subsequently archived for three months. To access the replay via
telephone, which will be available until November 16, 2006, please
dial 416-640-1917 or 1-877-289-8525 and enter the passcode 21209075
followed by the number sign.
-------------------------------------------------------------------------
About PreMD PreMD Inc. is a world leader in predictive medicine,
dedicated to developing rapid, non-invasive tests for the early
detection of life-threatening diseases. PreMD's cardiovascular
products are branded as PREVU(x) Skin Sterol Test. The company's
cancer tests include ColorectAlert(TM), LungAlert(TM) and a breast
cancer test. PreMD's head office is located in Toronto, and its
research and product development facility is at McMaster University
in Hamilton, Ontario. For further information, please visit
http://www.premdinc.com/. This press release contains
forward-looking statements. These statements involve known and
unknown risks and uncertainties, which could cause the Company's
actual results to differ materially from those in the
forward-looking statements. Such risks and uncertainties include,
among others, the successful development or marketing of the
Company's products, the competitiveness of the Company's products
if successfully commercialized, the lack of operating profit and
availability of funds and resources to pursue R&D projects, the
successful and timely completion of clinical studies, product
liability, reliance on third-party manufacturers, the ability of
the Company to take advantage of business opportunities,
uncertainties related to the regulatory process, and general
changes in economic conditions. In addition, while the Company
routinely obtains patents for its products and technology, the
protection offered by the Company's patents and patent applications
may be challenged, invalidated or circumvented by our competitors
and there can be no guarantee of our ability to obtain or maintain
patent protection for our products or product candidates. Investors
should consult the Company's quarterly and annual filings with the
Canadian and U.S. securities commissions for additional information
on risks and uncertainties relating to the forward-looking
statements. Investors are cautioned not to rely on these
forward-looking statements. PreMD is providing this information as
of the date of this press release and does not undertake any
obligation to update any forward-looking statements contained in
this press release as a result of new information, future events or
otherwise. (x)Trademark PreMD Inc. Incorporated under the laws of
Canada CONSOLIDATED BALANCE SHEETS (In Canadian dollars) As at
September 30, 2006 and December 31, 2005 Unaudited September 30,
December 31, 2006 2005 $ $
-------------------------------------------------------------------------
ASSETS Current Cash and cash equivalents 68,641 773,199 Short-term
investments 4,218,743 7,905,883 Accounts receivable 501,464 881,891
Inventory 34,498 36,306 Prepaid expenses and other receivables
104,164 317,264 Investment tax credits receivable 375,000 200,000
-------------------------------------------------------------------------
Total current assets 5,302,510 10,114,543
-------------------------------------------------------------------------
Deferred financing fees, net of accumulated amortization of
$140,706 (2005 - $43,059) 380,078 477,725 Capital assets, net of
accumulated amortization of $813,187 (2005 - $721,784) 341,891
410,636 Acquired technology, net of accumulated amortization of
$900,514 (2005 - $856,970) 246,742 290,286
-------------------------------------------------------------------------
6,271,221 11,293,190
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY) Current Accounts
payable 212,312 291,125 Accrued liabilities 770,171 655,113 Current
portion of deferred revenue 2,374,125 311,915
-------------------------------------------------------------------------
Total current liabilities 3,356,608 1,258,153
-------------------------------------------------------------------------
Convertible debentures (note 3) 5,763,542 5,893,340
-------------------------------------------------------------------------
Deferred revenue - 2,297,400
-------------------------------------------------------------------------
Total liabilities 9,120,150 9,448,893
-------------------------------------------------------------------------
Shareholders' equity (deficiency) Capital stock (note 5) 25,087,715
24,449,826 Contributed surplus (note 5) 2,233,370 1,840,979 Equity
component of convertible debentures (note 3) 2,279,008 2,393,145
Warrants 1,373,718 1,373,718 Deficit (33,822,740) (28,213,371)
-------------------------------------------------------------------------
Total shareholders' equity (deficiency) (2,848,929) 1,844,297
-------------------------------------------------------------------------
6,271,221 11,293,190
-------------------------------------------------------------------------
-------------------------------------------------------------------------
PreMD Inc. CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT (In Canadian
dollars) Unaudited Three months ended Nine months ended September
30 September 30 ------------------- -------------------- 2006 2005
2006 2005 $ $ $ $
-------------------------------------------------------------------------
REVENUE Product sales 1,381 39,902 6,513 384,962 License revenue
576,995 79,698 733,670 234,504
-------------------------------------------------------------------------
578,376 119,600 740,183 619,466 Cost of product sales 1,140 57,523
5,523 388,074
-------------------------------------------------------------------------
Gross Profit 577,236 62,077 734,660 231,392
-------------------------------------------------------------------------
EXPENSES Research and development 840,505 861,488 3,826,029
2,309,062 General and administration 499,098 590,038 1,764,963
2,124,950 Interest on convertible debentures 172,243 54,921 510,380
54,921 Imputed interest on convertible debentures 204,445 62,873
608,577 62,873 Amortization 77,662 64,611 232,594 170,622 Loss
(gain) on foreign exchange 4,505 (21,837) (210,538) (34,884)
-------------------------------------------------------------------------
1,798,458 1,612,094 6,732,005 4,687,544
-------------------------------------------------------------------------
RECOVERIES AND OTHER INCOME Investment tax credits 45,000 70,000
175,000 167,923 Interest 56,047 36,076 212,976 87,349
-------------------------------------------------------------------------
101,047 106,076 387,976 255,272
-------------------------------------------------------------------------
Net loss for the period (1,120,175) (1,443,941) (5,609,369)
(4,200,880) Deficit, beginning of period (32,702,565) (25,980,605)
(28,213,371) (23,223,666)
-------------------------------------------------------------------------
Deficit, end of period (33,822,740) (27,424,546) (33,822,740)
(27,424,546)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic and diluted loss per share $(0.05) $(0.07) $(0.26) $(0.20)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted average number of common shares outstanding 21,685,656
21,534,414 21,601,763 21,467,882
-------------------------------------------------------------------------
-------------------------------------------------------------------------
PreMD Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (In Canadian
dollars) Unaudited Three months ended Nine months ended September
30 September 30 ------------------- -------------------- 2006 2005
2006 2005 $ $ $ $
-------------------------------------------------------------------------
OPERATING ACTIVITIES Net loss for the period (1,120,175)
(1,443,941) (5,609,369) (4,200,880) Add items not involving cash
Amortization 77,662 66,791 232,594 172,802 Stock compensation costs
included in: Research and development expense 27,510 30,821 122,229
119,264 General and administration expense 43,881 82,453 287,093
364,480 Imputed interest on convertible debentures 204,445 62,873
608,577 62,873 Interest on convertible debentures paid in stock
64,815 - 144,517 - Add (deduct) gain on foreign exchange 4,505
(21,837) (210,538) (34,884) Net change in non-cash working capital
balances related to operations (note 6) (834,448) 109,414 462,085
(335,325) Decrease in deferred revenue (76,598) (66,694) (235,190)
(220,144)
-------------------------------------------------------------------------
Cash used in operating activities (1,608,403) (1,180,120)
(4,198,002) (4,071,814)
-------------------------------------------------------------------------
INVESTING ACTIVITIES Short-term investments 1,582,645 (6,556,846)
3,464,549 (3,911,229) Purchase of capital assets (1,743) (951)
(22,658) (116,727)
-------------------------------------------------------------------------
Cash provided by (used in) investing activities 1,580,902
(6,557,797) 3,441,891 (4,027,956)
-------------------------------------------------------------------------
FINANCING ACTIVITIES Issuance of convertible debentures - 9,827,616
- 9,827,616 Financing fees - (852,825) - (852,825) Issuance of
capital stock, net of issue costs - - - 198,400
-------------------------------------------------------------------------
Cash provided by financing activities - 8,974,791 - 9,173,191
-------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents 5,341
(35,510) 51,553 (36,354)
-------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents during the
period (22,160) 1,201,364 (704,558) 1,037,067 Cash and cash
equivalents - Beginning of period 90,801 75,161 773,199 239,458
-------------------------------------------------------------------------
- End of period 68,641 1,276,525 68,641 1,276,525
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Represented by Cash 68,641 1,276,525 68,641 1,276,525
-------------------------------------------------------------------------
68,641 1,276,525 68,641 1,276,525
-------------------------------------------------------------------------
-------------------------------------------------------------------------
DATASOURCE: PreMD Inc. CONTACT: Ron Hosking, Vice President Finance
& CFO, T : (416) 222-3449,
Copyright
