ALTACHEM PHARMA LTD. REPORTS FINANCIAL RESULTS
FOR THE FISCAL YEAR ENDED JANUARY 31, 2002
News Release
June 18, 2002
For Immediate Release
EDMONTON, ALBERTA - Mr. Warren Cabral, Chief Financial Officer of Altachem Pharma Ltd., is pleased to announce the financial results for the fiscal year ended January 31, 2002.
Highlights for the fiscal year include:
Acquisition of SonoLight Pharmaceuticals Corp.;
Acquisition of Bionex™;
Contract signed for a proposed joint venture with Erdos Cashmere Group Corporation;
Increased revenues from the manufacturing facility in Edmonton;
Movement of the Shanghai Hua Gao venture into production and sales; and
Closing a $10 million private placement.
During the year, Altachem Pharma strengthened its product portfolio by acquiring:
100% of SonoLight Pharmaceuticals Corp. ("SonoLight") an Alberta based company focused on the application of next-generation technologies to manage neoplastic diseases with currently unmet treatment needs, such as breast cancer, prostate cancer and gastro-intestinal cancer.
Bionex™, a revolutionary blood decontamination technology which, due to the vastness of its potential impact on the safety of the world's blood supply, has been described as the 'holy grail if blood banking'.
Altachem Pharma Ltd. has significantly strengthened its financial ability to further advance the development of these new and the existing proprietary technologies by:
Signing a contract to establish a proposed joint venture in Beijing, China to expedite the development of Altachem Pharma's blood treatment technologies; and
Closing a private placement of 8,540,242 units at a price of $1.20 per unit, for aggregate gross proceeds of $10,248,290.40 subsequent to year end.
Warren Jackson, President and CEO of Altachem Pharma Ltd. states, "With further successful development of our technologies for treatment of HIV/AIDS and various cancers, the February 28, 2002 closing of the $10 million private placement, the successful close of the Beijing Erdos Altachem Pharma Ltd. joint venture to expedite the development of our blood treatment technologies and an increase in revenue from both our manufacturing division and Accu-MAb™ sales, the Corporation should have a tremendous year."
Financial Highlights
Net consolidated loss for the year ended January 31, 2002 was $2,360,175 or $0.11 per share as compared to a consolidated loss of $934,216 or $0.05 per share for the year ended January 31, 2001. The increase in net consolidated loss is primarily from: additional research and development expenditures associated with moving the Corporation's drug development products towards human clinical trials; an increase in amortization expense from the acquisition of additional intangible assets during the fiscal period and the corresponding amortization relating to these intangible assets; and charges relating to write-downs of marketable securities, proprietary rights and recording Altachem's portion of the loss in the pellet core venture in China.
Altachem generates revenue from contract manufacturing of diagnostic test kits and from sales of the Corporation's new product Accu-MAb™, a whooping cough diagnostic test kit. Manufacturing revenue for the year ended January 31, 2002 increased to $478,482 as compared to $199,241 for the year ended January 31, 2001.
The Corporation's revenue from contract manufacturing increased to $333,659 in 2002 as compared to $199,241 in 2001. This increase in revenue reflects additional orders received per the Corporation's exclusive manufacturing contract with Isodiagnostika. All revenue for the year ended January 31, 2001 was from orders placed per this exclusive manufacturing contract. The direct costs associated with contract manufacturing are classified as materials, supplies and subcontracts expense. Materials, supplies and subcontracts expenses for the year ended January 31, 2002 were $200,505 as compared to $163,633 for the year ended January 31, 2001. The increase in this expense is directly related to the increase in contract manufacturing revenue.
On February 27, 2001 Altachem acquired the inventory and associated rights to produce and distribute Accu-MAb™. The Corporation began sales of Accu-MAb™ in April 2001 and for the year ended January 31, 2002 had 53 customers and total revenue of $144,823. The Accu-MAb™ acquisition agreement requires an annual royalty payment which amounted to $5,654 for the year ended January 31, 2002.
General and administrative expenses for the year ended January 31, 2002 were $1,045,646 as compared to $859,726 for the year ended January 31, 2001. The increase in general and administrative expenses is primarily from the fees associated with the Anticort™ law suit.
Research and development expenses for the year ended January 31, 2002 were $784,012 as compared to $191,513 for the year ended January 31, 2001. The increase in research and development expenses is primarily from additional costs associated with the preparation of a clinical trial application for ACP-HIP and advancing preclinical studies of HB.
Amortization expense for the year ended January 31, 2002 was $630,990 as compared to $169,138 for the year ended January 31, 2001. The increase in amortization is primarily from the acquisition of additional intangible assets during the fiscal period and the corresponding amortization relating to these intangible assets. It is the Corporation's accounting policy to amortize intangible assets over a period not to exceed five years. For the year ended January 31, 2002, intangible assets were acquired as part of the Sonolight and Accu-MAb™ transactions. These acquired intangible assets resulted in an additional $430,468 of amortization for the year ended January 31, 2002.
Marketable securities include the Corporation's investment in common shares of publicly traded companies. As at January 31, 2002, the cost of these investments exceeded their market value. As a result, a provision of $128,720 to write-down the investment has been recorded.
The Corporation owns a 25% interest in SHGP. Until October 31, 2001, SHGP was in a pre-operating stage and commencing October 31, 2001, SHGP began operations. SHGP has recorded provisions for impairment of capital assets and the write-off of pre-operating expenses in its audited financial statements for the year ended December 31, 2001. Altachem's portion of the total loss recorded in SHGP is $128,159 which has been recorded as a reduction in the value of Altachem's investment in SHGP. During the year ended January 31, 2002, the Corporation reached an agreement with the SHGP venture partner to substitute a second U.S. $125,000 cash payment in place of the process technologies as required by the original agreement. Altachem made the second payment, which is being held in trust subject to certain approvals from the relevant Chinese authorities.
The Corporation holds patent right to two molecules that inhibit AIDS-KS (the "Retnoids"). During the year ended January 31, 2002, the Corporation evaluated the recoverability of these patent rights. The Corporation does not anticipate further development of these patent rights in the future and determined that a provision of $107,337 was required to write-down the carrying value of the Retnoids to nil.
At January 31, 2002, cash and cash equivalents was $536,679 as compared to $1,212,378 at January 31, 2001. During the year the Corporation generated an additional $1,097,133 from the issuance of share capital via the exercise of stock options and warrants and private placements.
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