Afexa Life Sciences Inc. (“Afexa”) (TSX:FXA) today announced a 85% revenue increase to $6.2 million in the three months ended June 30, 2009 from $3.4 million in the corresponding period of fiscal 2008. The net loss for the fiscal 2009 third quarter was $1.1 million ($0.01 per basic share), an improvement from the net loss of $2.0 million ($0.02 per basic share) in the same three months last year.
“We believe that we are on track for another profitable year,” said Executive Chairman Jack Moffatt. “A shift in the seasonality of shipments should produce even stronger sales in the fiscal 2009 fourth quarter than last year’s outstanding result for the period. Afexa has built significant inventory levels for the upcoming cold and flu season”.
“COLD-FX® has not been tested on the H1N1 virus but its effectiveness in reducing incidents and severity of flu and colds has been confirmed in numerous clinical trials. The declaration of an H1N1 pandemic by the World Health Organization coincided with a surge in retailer demand for our products, and we will position our advertising consistent with Health Canada and advertising regulations,” Mr. Moffatt added.
In the fourth quarter of fiscal 2009, Afexa will launch a new product, IMMUNITY-FX®, which strengthens the natural defences and improves overall health and wellness by providing daily support for the immune system. IMMUNITY-FX® contains 200 milligrams of CVT-E002, the active ingredient in COLD-FX®, and 50 milligrams of Reishi Extract. IMMUNITY-FX® and COLD-FX® work in a complementary manner to enhance both innate (inborn) and adaptive (acquired over a lifetime) immunity – but target different cell types and molecules. Most existing customers have already committed to listing IMMUNITY-FX®. Consistent with Afexa’s policy, revenue will only be recorded on a sell-through basis, until return allowances can be reasonably estimated.
Sales to consumers of regular and extra strength COLD-FX® rose 10% from last year, according to The Nielsen Company MarketTrack National all channel service for the categories of Cold Remedies and Supplements and Products, 52 weeks ended July 4, 2009, and the products remain Canada’s number one selling cold and flu remedy.
Afexa’s year-over-year third quarter revenue increase was due to restocking by retail customers, following a fiscal 2009 second quarter in which they significantly reduced inventory of many goods in order to retain cash in uncertain economic times. However, in the three months ended June 30, 2009, the Company also experienced higher general and administrative expenses, including legal, professional and settlement costs of $1.1 million associated with an agreement reached with the Alberta Securities Commission. Severance costs of $0.4 million were also incurred in the quarter as the Company continues to structure for the future.
As an Official Supplier to the 2010 Olympic and Paralympic Winter Games in Vancouver, Afexa continues to build product stocks, packaging and promotional material for this major global event, and began related shipments early in the fiscal 2009 fourth quarter.
The Company maintained a strong combined cash, cash equivalents and short-term investments balance of $6.0 million at June 30, 2009, down from $9.4 million at September 30, 2008. Inventory has increased from September 30, 2008 by $4.0 million to $13.6 million at June 30, 2009 in anticipation of shipments for the upcoming cold and flu season. Cash flow prior to working capital changes improved by $1.1 million to negative $0.3 million in the fiscal 2009 third quarter from the same period last year.
During the first nine months of fiscal 2009, revenue decreased to $32.0 million from $35.3 million in the corresponding period of 2008. The net loss was $1.5 million ($0.01 per basic share) in the nine months ended June 30, 2009 compared to net earnings of $4.1 million ($0.04 per basic share) in the same period of fiscal 2008.
A Normal Course Issuer Bid (NCIB) began on October 16, 2008 to purchase up to 5,386,175 (5%) of Afexa’s issued and outstanding common shares. In the three and nine-month periods ended June 30, 2009, the Company bought 50,500 and 2,470,730 common shares, respectively, all at an average cost of $0.39 per share including brokerage fees. The total expenditure was $0.02 million for the latest three months and $0.97 million for the nine-month period. More purchases are expected following the release of Afexa’s fiscal 2009 third quarter results, with the NCIB scheduled to end on October 15, 2009.
A complete set of Company’s third quarter Financial Statements and Management's Discussion and Analysis will be filed on SEDAR (www.sedar.com) and posted on the Company's web site.
Advisory Regarding Forward-Looking Statements
This news release and the associated Management Discussion and Analysis (“MD&A”) contain certain forward-looking statements and information within the meaning of applicable securities laws, which reflect current expectations of the management of Afexa Life Sciences Inc. (the "Company") regarding future events or the Company's future performance, including, without limitation, statements relating to the timing and/or initiation of clinical trials, clinical trial results, the introduction of new products, associated regulatory clearances, economic or financial trends or expectations, financing, acceptance of the Company's products in the marketplace and the hiring or retention of personnel. Forward-looking statements are often, but not always, identified by the use of words such as "expect", "anticipate", "seek", "aim", "continue", "estimate", "objective", "ongoing", "may", "will", "would", "project", "predict", "potential", "could", "should", "might", "believe", "plan", "target", "intend" and similar expressions. All statements other than statements of historical fact contained in this letter may be forward-looking statements. The forward-looking information included in this document does not guarantee future performance and should not be unduly relied upon. Such information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information, including, without limitation, the impact of competition, the incidence of cold and flu, consumer confidence and spending levels, general economic conditions, interest and currency exchange rates, unseasonable weather patterns, the cost and availability of capital and grants/funding, product development uncertainties and labour market challenges. The Company believes that the expectations and assumptions reflected in the forward-looking information contained herein are reasonable but no assurance can be given that these expectations and assumptions are correct or that the results, performance or achievements expressed in, or implied by, forward-looking statements herein will occur, or if they do, that any benefits may be derived from them. The Company can give no assurance that new product development initiatives will lead to new product commercialization, that the emergence of the H1N1 (swine) flu will increase consumer demand for COLD-FX®, or that the involvement of COLD-FX® in the 2010 Winter Olympics or other events will lead to increased demand for the product. The Company assumes no duty to update or revise forward looking information, except as may be required pursuant to applicable laws. All forward-looking information is expressly qualified in its entirety by this cautionary statement. Further information regarding risks and uncertainties relating to the Company and its securities can be found in the disclosure documents filed by the Company with the securities regulatory authorities, available at www.sedar.com. The Company claims exemption under U.S. SEC Rule 12g3-2(b).