~4th Quarter Revenue Increases 47%; FY2004 Revenue up 23%; Increased R&D Activity ~
Vancouver, Canada - Forbes Medi-Tech Inc. (TSX:FMI; NASDAQ:FMTI) today announced its financial results for the fourth quarter and year ended December 31, 2004 versus the fourth quarter and year ended December 31, 2003. All amounts are in Canadian dollars unless otherwise noted.
Fourth Quarter and Fiscal Year 2004 Highlights
* Reported total revenue of $5.76 million for the fourth quarter ended December 31, 2004 versus $3.93 million for the fourth quarter ended December 31, 2003
* Reported total revenue of $17.6 million for year ended December 31,
2004 versus $14.3 million for year ended December 31, 2003
* Reported net loss of $0.06 per share for the quarter ended December 31, 2004 compared to a net loss of $0.09 per share for the quarter ended December 31, 2003
* Increased R&D activity to support the clinical development and the Company's lead compound, FM-VP4
* Reported net loss of $0.25 per share for the year ended December 31,
2004 compared to a net loss of $0.09 per share for the year ended December 31, 2003
* Contributing to the net loss is: a significant increase in R&D activity; an increase in the non-cash stock-based compensation expense; and greater G&A expenses reflecting the growth of the Company's operations
* Manufacturing facility expanded to 1,500 metric tonnes per annum
* Completed equity financing of US$10.75 million, Great Point Partners & BioAsia acting as lead investors
* Appointed leading North American cardiologists to the Medical & Scientific Advisory Board
* Received final approval for Reducol(tm) sales in the European Union in certain food groups
* Announced US$24.4 million in sterols sales agreement between Forbes'
manufacturing joint venture, Phyto-Source LP, and a leading multinational ingredient company
* Completed European Phase II trial of the Company's lead pharmaceutical compound, FM-VP4
* Improved net cash and investments position to $15.2 million at the end of December 31, 2004 versus $5.8 million at December 31, 2003
"As a result of our growing nutraceutical business, the Company continues to show excellent revenue growth helping us offset a significant portion of our 2004 pharmaceutical R&D expenses", says Charles Butt, President and CEO of Forbes Medi-Tech Inc. "We have achieved previously stated 2004 objectives including: obtained regulatory approvals for Reducol(tm); expanded our joint venture manufacturing facility; and made progress towards the US Phase II trial of our cholesterol-lowering compound, FM-VP4, scheduled for later this year."
Based on existing sales contracts, and assuming that forecasted supply requirements will be ordered and shipped, the Company anticipates total revenue of $21-22 million for fiscal 2005. This figure represents the Company's projected revenue from its own sales and from its share of the Phyto-Source joint venture revenue.
Forbes remains committed to the further clinical development of its lead cholesterol-lowering compound, FM-VP4. Taking into account the results of the European trial completed last year, the Company plans to undertake a U.S. Phase II clinical study of FM-VP4 involving an expanded number of participants, a longer trial duration and a narrower dosage range. The U.S. Phase II clinical trial design will focus on identifying the reduction in LDL-cholesterol produced by FM-VP4 with a target reduction of 15% of LDL in comparison to baseline. To support this planned trial, the Company has recently commenced a 90 day preclinical toxicology study, and currently anticipates filing of an investigational new drug application with the U.S. FDA and commencing the U.S. Phase II trial later this year.
In November 2004 and more recently, in March 2005, the Company received approval from regulatory authorities in the European Union to market
Reducol(tm) in a number of foods. Currently, Reducol(tm) has been approved for use in milk-based drinks, yellow fat spreads (margarine), fermented milk type products, soy drinks, low-fat cheese type products, yoghurt type products, spicy sauces, and salad dressings. The Company and its strategic partners are preparing for Reducol(tm)-based product launches scheduled for the coming months. In support of the expanded business opportunities in Europe, the Company's 50-50 manufacturing joint-venture facility, Phyto-Source, was expanded from 1,000 to 1,500 metric tonnes per annum in December 2004.
Net loss - Contributing to the net loss for the year ended December 31,
2004 of $8.0 million is an increase in R&D activity to support the Company's clinical development plan; the increase in non-cash stock-based compensation expense, which is based on the fair value method of valuing options, is attributable to the granting of additional options to existing employees, options to new employees and non-employees, and the recognition of the expense from options granted in prior years; and an increase in G&A reflecting the growth of the Company's operations.
Revenues - Revenue for the Company's ingredient products, Reducol(tm) and Phyto-S sterols remains strong. In June 2004, the Company announced the renewal of a major phytosterol agreement between Phyto-Source LP and a large multinational company. The renewed contract is effective through the end of 2005. In September 2004, Forbes announced that it had secured an additional phytosterol supply agreement between Phyto-Source LP and another leading multinational ingredient company.
This agreement is for US$24.4 million over a three year period, commencing January 2005. Accordingly, revenues from this latter agreement will be reflected in future periods. Additionally, the Company and its strategic partners have scheduled Reducol(tm)-based product launches in Europe which may have an impact on future sales.
Liquidity & Capital Resources
Cash, cash equivalents and working capital - As at December 31, 2004, the net cash and short-term investments totaled $15.2 million, compared with $5.8 million as at December 31, 2003. The Company had working capital of $15.1 million at December 31, 2004 (2003 - working capital
$6.7 million). The increase in cash and working capital in 2004 was mainly due to increased sales revenues and the proceeds of a US$10.7 (Cdn $ 12.9) million financing.
Operations - In the fiscal year 2004, cash used in operating activities was $4.5 million in fiscal 2004, compared to $4.7 million in fiscal 2003. Net changes in non-cash working capital items used cash of $0.9 million in 2004 compared with $3.8 million of cash used in the year 2003. The changes in non-cash working capital items each year mainly reflect the changes in accounts receivable and changes in inventory levels and accounts payable and accrued liabilities and taxes payable.
Investing Activities - In the fiscal year 2004, investing activities utilized net cash of $4.9 million, compared with net cash provided of
$1.9 million in 2003. Cash used in 2004 was primarily used in the acquisition of capital assets at the Phyto-Source manufacturing facility near Houston, Texas, and the acquisition of short-term-investments, offset by the final proceeds from the divestiture of the AD/ADD technology.
Financing Activities - In the year ended December 31, 2004, financing activities provided $14.1 million of cash compared with $6.9 million in 2003. This increase was primarily the result of a private placement financing completed in January of 2004 in the amount of US$10.7 million (Cdn $ 12.9 million)
Cost of sales, marketing and product development - For the year ended December 31, 2004, cost of sales totaled $9.4 million on phytosterol revenues of $17.2 million, or 55% of phytosterol revenues, versus $8.2 million on phytosterol revenues of $14.1 million for the year ended December 31, 2003, or 58% of phytosterol revenues. The decrease in cost of sales as a percentage of sales can be attributed to improvements in production efficiencies and product mix. While Cost of Sales as a percentage of phytosterol revenue has decreased in 2004 resulting primarily from improvements in production efficiencies, such percentage may continue to fluctuate over time due both to variations in the phytosterol product mix and to increases in marketing efforts.
Research and development- For the year ended December 31, 2004, the Company's net research and development ("R&D") expenses totaled $4.7 million compared with $2.1 million for the year ended December 31, 2003. The increase in R&D expenditures in fiscal 2004 over 2003 is mainly a result of Forbes' decision to focus its core research and development on cardiovascular and, specifically, cholesterol-lowering compounds such as FM-VP4. A major part of R&D expenditures in 2004 was in the area of pre-clinical and clinical development, including the European Phase II trial of FM-VP4.
General and administrative Expenditures ("G&A")-For the year ended December 31, 2004 G&A totaled $6.2 million, compared with $4.9 million in fiscal year 2003. The increases in administrative expenses are primarily attributable to increased business activity and professional services including legal and consulting in 2004.
Fiscal Year Ended December 31, 2004 Report This news release includes by reference the Company's audited financial statements for the fiscal year ended December 31, 2004, including the full Management Discussion & Analysis (MD&A). The MD&A and financial statements are being filed with applicable Canadian and U.S. regulatory authorities.
About Forbes Medi-Tech Inc.
We are a life sciences company dedicated to the research, development and commercialization of innovative products for the prevention and treatment of cardiovascular disease. Our vision is to develop and market products along a treatment continuum that cardiovascular disease consumers, healthcare professionals and specialized cardiovascular disease research and healthcare institutions will identify, recommend and seek. Our proposed business strategy is to develop and commercialize proprietary compounds to address the unmet needs of patients within the cardiovascular disease market.
NASDAQ and the Toronto Stock Exchange have not reviewed and do not accept responsibility for the adequacy or accuracy of the content of this News Release. This News Release contains forward-looking statements concerning anticipated developments in the Company's business and projected sales volumes, revenues, capital, research and development, manufacturing, and other information in future periods.
Forward-looking statements can be identified by words such as, "anticipates," "future", "planned", "scheduled", "outlook", "forecasted", "projected", "further", "continues", and similar expressions or variations thereon, or statements that events, conditions or results "will,"or "may," occur or be achieved.
Forward-looking statements are statements about the future and are inherently uncertain, and actual achievements of the Company and other results and occurrences may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties and other factors, including, without limitation, the need to secure new sales contracts; the need for performance by buyers of products and by the Company's strategic partners; the need to secure raw materials at competitive prices; uncertainty as to whether future clinical trials will be undertaken or completed as planned, and if undertaken or completed, the risk that such trials may not achieve expected results; uncertainty as to whether the Company's anticipated sales volumes, revenues, and expenditure levels will be achieved as currently anticipated or at all; the risk of technical obsolescence; the need for regulatory approvals, which may be withdrawn or not be obtained in a timely manner or at all; intellectual property risks; marketing/manufacturing risks; partnership/strategic alliance risks and in particular, the Company's dependency on its joint venture partner, Chusei (U.S.A.) Inc.; product liability risk; the effect of competition; the uncertainty of the size and existence of a market opportunity for the Company's products; the Company's need for additional future capital, which may not be available in a timely manner or at all; exchange rate fluctuations; the need to attract and retain key personnel; risks inherent in the development of pharmaceutical and nutraceutical research and the development of new products; the ability of buyers to fulfill health claims of their products; and other risks and uncertainties affecting the Company and its business, as contained in news releases and filings with the United States Securities and Exchange Commission and Canadian Securities Regulatory Authorities, any of which could cause actual results to vary materially from current results or the Company's anticipated future results. Forward-looking statements are based on the beliefs, opinions and expectation of the Company's management at the time they are made, and the Company does not assume any obligation to update its forward-looking statement if those beliefs, opinions or expectations or other circumstances should change.