Dimethaid announces third quarter financial results
TORONTO, April 7 /CNW/ - Pharmaceutical developer, Dimethaid Research
Inc. (TSX: DMX) today reported consolidated fiscal 2004 results for the third
quarter ended February 29, 2004. Unless specified otherwise, all amounts are
in US dollars.
For the third quarter of fiscal 2004, revenue reached $2.6 million-
including $1.2 million in fees for Pennsaid(R) promotional rights in Canada,
Greece and Portugal. Revenue for the nine months ended February 29, 2004
totalled $4.9 million.
Danny Dean, national sales and marketing director, said Pennsaid market
share increased and sales held steady, despite a general decline in Canadian
NSAID demand this quarter.
"There's no question Pennsaid is being increasingly used by physicians as
a first-choice therapy," said Dean, "and with the new Solvay co-promotion
agreement in place, we will only continue to capture larger pieces of the
Canadian market."
Developments during the Quarter
- a co-promotion agreement with Solvay Pharma Inc. covering Canadian
sales and marketing for Pennsaid, the country's first prescription
anti-arthritic lotion. Under the agreement, Solvay has initially
assigned 38 representatives to promote Pennsaid as a first product
detail. Solvay will also match Dimethaid's advertising and marketing
budget, dollar for dollar.
- an exclusive agreement with Jaba Farmacêutica S.A. to distribute
Pennsaid throughout Portugal, Madeira and the Azores. Jaba expects a
mid-summer launch after finalizing packaging and labelling.
- a Pennsaid supply and distribution agreement with Vianex S.A., giving
the Athens-based company exclusive rights to sell Pennsaid in Greece.
Vianex expects to launch the product late in calendar year 2004, after
finalizing packaging and labelling.
- participation in the Canadian Rheumatology Association Annual Meeting
in Lake Louise, Alberta. The February conference was attended by 240
heath care and arthritis professionals, including several leading
Canadian rheumatologists, registered nurses and physiotherapists.
- changes in the makeup of the board of directors. Brian Walsh and Glen
Sather resigned, citing time constraints in meeting their commitments
to the Company. Corporate finance specialist John M. Wiseman joined
the board in February 2004 and will serve on Dimethaid's audit
committee.
Developments subsequent to the Quarter
- Effective April 2004, Dimethaid's specialist sales organization
In2focus will expand the Pennsaid sales force from 20 to 50,
significantly increasing promotion of the Company's anti-arthritic
lotion throughout the United Kingdom.
- In March 2004, the Company began enrolling patients in two
postmarketing clinical trials to confirm the long-term safety of
Pennsaid and investigate the product's advantages in combination with
a conventional analgesic. A 12-week trial will look at the effects of
using the topical drug simultaneously with an oral nonsteriodal anti-
inflammatory drug, and the longer-term study will follow patients for
up to 52 weeks.
- In March 2004, the U.S. Patent and Trademark Office granted an
additional patent covering the use of real-time polymerase chain
reaction technology to evaluate WF10 efficacy when treating patients
with HIV/AIDS, cancer, autoimmune diseases, chronic hepatitis B and C,
chronic obstructive pulmonary disease, inflammatory mucosal disease,
dementia and cardiovascular disease.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This discussion and analysis covers the consolidated interim financial
statements of Dimethaid Research Inc. (the "Company") for the three- and nine-
month periods ended February 29, 2004. This report should be read in
conjunction with the attached financial statements and notes for the third
quarter ended February 29, 2004.
All amounts in this discussion and analysis and financial statements are
expressed in US dollars, unless otherwise noted.
Operating Results
-----------------
For the third quarter of fiscal 2004, revenue reached $2.6 million -
including $1.2 million in revenue for Pennsaid promotional rights in Canada,
Greece and Portugal. Revenue for the nine months ended February 29, 2004
totalled $4.9 million. Total Pennsaid product sales for the third quarter of
fiscal 2004 was $1.2 million. For the nine months ended February 29, 2004,
Pennsaid product sales totalled $3.2 million.
Effective March 1, 2004 Pennsaid will be co-promoted in Canada with
Solvay Pharma Inc. Under the agreement, Solvay will share in the revenue
generated, contribute an equivalent sales force and match Dimethaid's
advertising and marketing budget. Following the end of the quarter, the
Company acquired competitive market data that will enable the Canadian sales
and marketing team to concentrate their marketing efforts on maximizing
returns.
Effective April 2004, Dimethaid's specialist sales organization In2focus
will expand the Pennsaid sales force from 20 to 50, significantly increasing
promotion of the Company's anti-arthritic lotion throughout the United
Kingdom.
The Company expects to realize the benefits of the expanded sales forces
in Canada and the U.K. beginning in the fourth quarter of fiscal 2004.
Gross profit for the third quarter was $1.2 million or 81 percent of
sales, up from $24,000 or 38 percent of sales, for the same period a year ago.
This improvement is due to Pennsaid sales following regulatory approval and
product launches in Canada (May 2003) and Italy (June 2003). Year-to-date
gross profit was $3.0 million, up from $126,000 for the corresponding period
last year.
Total operating expenses increased to $4.1 million for the third quarter
versus $2.7 million for the same period a year ago. Selling and marketing
expenses increased during the third quarter to $2.6 million, up from $883,000
for the comparable period last year. This increase is due to the Company's
continued investment in Pennsaid marketing activities in Canada and the
relaunch of Pennsaid in the U.K. effective October 2003. Research and
development expenses decreased to $234,000 for the third quarter ended
February 29, 2004, down from $720,000 for the comparable period last year,
consistent with reduced spending on clinical trials. Administrative expenses
decreased to $952,000 for the third quarter, compared with $1.1 million for
the same period last year due to increased overhead absorption on higher
production levels. Foreign currency expense increased to $320,000 for the
third quarter this year compared to $20,000 for the same period last year,
reflecting a decline in the value of the US dollar against the British pound,
impacting accrued liabilities.
For the third quarter of fiscal 2004, the Company incurred a net loss of
$2.4 million, or $0.04 per share, compared to $3.2 million, or $0.08 per
share, for the comparable period last year. For the nine months ended
February 29, 2004, the Company recorded a net loss of $11.0 million, or $0.25
per share, versus $8.4 million, or $0.26 per share, for the same period last
year.
Liquidity and Capital Resources
-------------------------------
Cash and cash equivalents at the end of the third quarter totalled
$3.4 million, compared to $72,000 at the end of the same period last year.
Funds used in operating activities totalled $2.3 million compared to
$1.7 million for the same period last year, reflecting the operating loss for
the period as well as an increase of $510,000 in working capital items. The
increase in working capital is due to additional inventory and prepaid
expenses (including product samples) required to meet higher forecasted demand
resulting from the doubling of sales forces in Canada and the U.K.
Fixed assets increased $517,000 for the quarter, representing the balance
due on production machinery referred to in note 15 of the Fiscal 2003 Notes to
Consolidated Financial Statements.
Accounts payable and accrued liabilities have increased $2.1 million year
to date primarily due to the previously reported arbitration award due to
Provalis Healthcare Limited (note 10). The Company has negotiated a payment
schedule on this obligation. An initial payment of GBP 150,000 (US $280,000)
was made in February 2004 with the balance being paid by monthly instalments
of GBP 110,000 (US $205,000) in principal and interest until March 2005 and a
final instalment of GBP 47,000 (US $88,000) in April 2005.
The Company is exploring various financing alternatives to implement the
international commercialization of Pennsaid and for the continued development
of its two technology platforms.
This release may contain forward-looking statements, subject to risks and
uncertainties beyond management's control. Actual results could differ
materially from those expressed here. Risk factors are discussed in the
Company's annual information form filed with the securities commissions in
each of the provinces of Canada. The Company undertakes no obligation to
revise forward-looking statements in light of future events.
Conference Call Details
Media, members of the financial community and shareholders are invited to
listen to the Company's quarterly earnings conference call Wednesday, April 7,
2004, at 4:15 p.m. (ET) through a live audio webcast available at
www.dimethaid.com and www.newswire.ca/webcast/. Please connect to either Web
site at least 15 minutes before the conference call to ensure adequate time
for any required software downloads. A replay of the webcast will be available
shortly after completion of the call at www.dimethaid.com and
www.newswire.ca/webcast/. Please note this is an analyst call and at the end
of the presentation we will invite questions from analysts only. A replay will
also be available by telephone from approximately 6:15 p.m. Eastern time on
April 7 through to April 14, 2004. To access the telephone replay, dial
1-877-289-8525 and enter reservation number 21046134.
About Dimethaid Research Inc.
Dimethaid Research Inc. is a publicly traded, Canadian, pharmaceutical
company headquartered in Markham, Ontario, with manufacturing facilities in
Varennes, Québec and Wanzleben, Germany. The Company develops and
commercializes targeted therapeutic drugs designed to produce minimal side
effects. Dimethaid's two technology platforms focus on immune system
regulation and transcellular drug delivery. Products are aimed at expanding
treatment options in oncology, immunology, rheumatology and the therapeutic
management of chronic viral infections. For more information, please visit
www.dimethaid.com.
<<
DIMETHAID RESEARCH INC.
CONSOLIDATED BALANCE SHEET
As at As at
(thousands of US dollars) Feb 29, 2004 May 31, 2003
-------------------------------------------------------------------------
(UNAUDITED) (AUDITED)
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ASSETS
CURRENT
Cash and cash equivalents $ 3,406 $ 1,524
Accounts receivable 891 459
Inventories (note 3) 1,029 1,433
Prepaid expenses and other (note 3) 1,649 395
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TOTAL CURRENT ASSETS 6,975 3,811
LONG-TERM ASSETS
Property, plant and equipment 7,538 7,173
Intangibles 15,328 16,353
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TOTAL ASSETS $ 29,841 $ 27,337
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities $ 7,410 $ 5,310
Short-term loan (note 4) 1,427 -
Current portion of long-term debt (note 5) 524 42
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TOTAL CURRENT LIABILITIES 9,361 5,352
LONG-TERM LIABILITIES
Long-term debt (note 5) 1,691 2,358
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TOTAL LIABILITIES 11,052 7,710
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SHAREHOLDERS' EQUITY
Capital stock (note 2) 90,372 75,913
Contributed surplus 161 161
Acquisition commitments (note 6) 14,306 13,797
Cumulative translation adjustment 321 343
Deficit (86,371) (70,587)
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TOTAL SHAREHOLDERS' EQUITY 18,789 19,627
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 29,841 $ 27,337
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DIMETHAID RESEARCH INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
THREE MONTHS ENDED NINE MONTHS ENDED
UNAUDITED Feb 29 Feb 28 Feb 29 Feb 28
(thousands of US dollars, 2004 2003 2004 2003
except per share data)
-------------------------------------------------------------------------
REVENUE $ 1,426 $ 64 $ 3,646 $ 292
Cost of sales 272 40 664 166
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GROSS PROFIT 1,154 24 2,982 126
Other revenue (note 9) 1,223 - 1,223 -
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2,377 24 4,205 126
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EXPENSES
Research and development 234 720 1,010 2,310
Administrative 952 1,098 2,674 2,746
Selling and marketing 2,584 883 6,646 1,827
Foreign currency loss 320 20 214 145
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4,090 2,721 10,544 7,028
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LOSS BEFORE INTEREST,
AMORTIZATION AND UNUSUAL ITEM (1,713) (2,697) (6,339) (6,902)
Arbitration ruling (note 10) - - (3,032) -
Amortization of property, plant
and equipment (145) (94) (343) (273)
Amortization of intangibles (341) (341) (1,024) (1,024)
Interest and other income
(expense) (153) (90) (296) (212)
-------------------------------------------------------------------------
NET LOSS FOR THE PERIOD (2,352) (3,222) (11,034) (8,411)
Deficit, beginning of period (82,718) (62,119) (70,587) (53,831)
Accretion on acquisition
commitments (note 5) (1,301) (1,150) (4,750) (4,249)
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DEFICIT, END OF PERIOD $ (86,371) $ (66,491) $ (86,371) $ (66,491)
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NET LOSS PER COMMON SHARE $ (0.04) $ (0.08) $ (0.25) $ (0.26)
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CONSOLIDATED STATEMENT OF CONTRIBUTED SURPLUS
THREE MONTHS ENDED NINE MONTHS ENDED
UNAUDITED Feb 29 Feb 28 Feb 29 Feb 28
(thousands of US dollars) 2004 2003 2004 2003
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Opening balance $ 161 $ - $ 161 $ -
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Closing Balance $ 161 $ - $ 161 $ - |
