Vancouver, Canada - Forbes Medi-Tech Inc. (TSX:FMI; NASDAQ:FMTI) today announced its financial results for the three months ended March 31, 2006. Comparative period for these statements is the three months ended March 31, 2005. All amounts are in Canadian Dollars unless otherwise noted.
First Quarter 2006 Highlights
- Reported total revenue of $0.9 million for the quarter ended March 31, 2006 compared with $1.0 million for same period last year*
- Reported net income of $0.09 per share for the quarter ended March 31, 2006 compared with a net loss per share of $0.07 for same period last year**
- Agreed to sell sterol manufacturing interest for US$25 million to Chusei Oil Co., Ltd and signed a 5 year supply agreement for
- Announced revenue guidance of CDN$7 to $7.5 million for fiscal 2006
- Announced the launch of a range of cholesterol-lowering dairy products including a margarine spread, yogurt, yogurt drink and milk drink incorporating Reducol(tm) at UK's largest retailer, Tesco Stores Ltd (Tesco)
- Announced the extension of its supply and licensing contract with Pharmavite LLC until mid 2007 for the continued sale of Reducol(tm) in one of Pharmavite's leading dietary supplements, Nature Made(r) Cholest-Off(r).
* On March 14, 2006, the Company completed the sale of its interest in the Phyto-Source joint venture to Chusei Oil Co., Ltd. Accordingly, all revenues, expenses, assets and liabilities related to the Phyto-Source joint venture have been classified as discontinued operations for 2006 and 2005.
** Net income for the period ended March 31, 2006 totaled $3.3 million, primarily resulting from the gain of $6.6 million on the disposal of the discontinued operations.
"The successful launches of Reducol(tm)-based products in Europe combined with the continuing progress in our pharmaceutical development program illustrate our drive and determination to achieve previously established goals," says Charles Butt, President and CEO of Forbes Medi-Tech Inc. "Building on functional food development efforts in 2005, the first quarter of 2006 was highlighted with several product launches with the UK's largest retailer, Tesco. Furthermore, the sale of our interest in Phyto-Source has provided a sound financial foundation to further the development of our cholesterol-lowering pharmaceutical compound, FM-VP4."
Marketing & Sales
As a result of the strategic decision to sell the Company's interest in Phyto-Source, Forbes is able to focus its sales and marketing efforts on the value-added ingredient business. Initial response from customers and product consumers has illustrated the increasing demand for not just a heart healthy product but a clinically proven, non-genetically modified solution such as Reducol(tm). Sales of Tesco's range of Reducol(tm)-based products have doubled since January as Forbes anticipates additional product launches in the European marketplace.
Forbes will continue to expand its marketing and sales efforts with a goal to launch an additional range of Reducol(tm)-based products with a major international retailer this year.
Based on existing sales contracts, and assuming that forecasted supply requirements will be ordered and shipped, the Company maintains its revenue guidance for 2006 for total revenue of $7 to 7.5 million. The Company will review its revenue guidance throughout the year as product launches and discussions with companies regarding possible new contracts continue.
2006 is a pivotal year for Forbes Medi-Tech and its lead cholesterol-lowering compound, FM-VP4. A US Phase II clinical study of FM-VP4 is in progress at fifteen centers across the US with enrollment and dosing underway. The primary efficacy objective of this trial is to investigate the effect on LDL-cholesterol of two doses of FM-VP4, 450mg and 900mg, given daily for 12 weeks, compared to placebo in subjects with mild to moderate primary hypercholesterolemia. The clinical trial will focus on identifying the reduction in low density lipoprotein (LDL or bad)-cholesterol produced by FM-VP4 with a target reduction of 15% of LDL in comparison to baseline at week 12. The trial is expected to be completed by the end of the third quarter of 2006 with topline results anticipated to be released by year-end.
During the quarter ended March 31, 2006, the Company announced the decision to dispose of its interest in the Phyto-Source joint venture.
In accordance with CICA Handbook Section 3475, the activities relating to the Phyto-Source joint venture operations, assets and liabilities then to be disposed of have been presented as discontinued operations in the March 31, 2006 consolidated financial statements. Results for the prior year have also been reclassified to reflect this treatment.
Net Income - For the quarter ended March 31, 2006, totaled $3.3 million, primarily resulting from the gain of $6.6 million on the disposal of the discontinued operations, income from discontinued operations of $0.3 million offset by the loss of $3.6 million from continuing operations. As illustrated in the table above, however, and excluding the one-time gain from the sale of the interest in Phyto-Source, the Company recorded a loss of $3.6 million for the three months ended March 31, 2006 compared to a loss of $3.2 million for the same period last year. As Forbes continues to develop FM-VP4 and to conduct further research and development of the FM-VPx library of compounds, the Company expects to continue to report future operating losses from continuing operations.
Revenues - For the quarter ended March 31, 2006, totaled $0.9 million compared with $1 million for the same quarter in the prior year.
Phytosterol revenues, representing direct sales of phytosterol products, primarily Reducol(tm), and the amortization of license fees, made up the majority of the Company's revenue.
Liquidity & Capital Resources
Cash, cash equivalents and working capital - For the quarter ended March 31, 2006, net cash and cash equivalents were $34.4 million compared with $9.3 million as at December 31, 2005. Forbes' working capital at March 31, 2006 was $31.6 million compared with $12.8 million at December 31, 2005. The increase in cash and working capital in the quarter was mainly attributable to the receipt of the proceeds of US$25 million (Cdn$28.9 million, based on then current exchange rates) on the sale of the Company's interest in Phyto-Source.
Operations - For the quarter ended March 31, 2006, the Company used
$5.4 million of cash for continuing operations compared with $2.9 million of cash used in the quarter ended March 31, 2005. Net changes in non-cash operating items used cash of $2.3 million in the quarter ended March 31, 2006 compared with a $0.2 million change in non-cash operating items in the quarter ended March 31, 2005.
Investing activities - For the quarter ended March 31, 2006, realized
$28.9 million, relating to the proceeds on disposal of Forbes' interest in Phyto-Source. Cash provided by investing activities in the first quarter ended March 31, 2005, resulted primarily from $6.0 million transferred from short-term investments.
Research and development expenses (R&D) - For the quarter ended March 31, 2006 totaled $2.1 million compared with $2.2 million for the same
period in 2005. R&D expenditures in the first quarter of 2006 were
similar to the first quarter of 2005, and were incurred as core research projects are progressed, US based Phase II clinical work on
FM-VP4 continues, and work on the Company's Library of Compounds is continued.
General and administrative (G&A) - For the quarter ended March 31, 2006, totaled $1.4 million vs. $1.1 million for the first quarter 2005.
Increases in G&A are primarily related to the accretion interest expense of $0.1 (March 31, 2005 $nil) and in the period ended March 31, 2006, a foreign exchange loss of $0.1 million was recognized compared with an insignificant gain in the first quarter of 2005. Allocation of stock based compensation to G&A was $0.1 million in the quarter ended March 31, 2006 (March 31, 2005 - $0.2 million).
Cost of sales- For the quarter ended March 31, 2006, totaled $0.6 million on phytosterol revenues of $0.8 million, or 83% of phytosterol revenues, versus $0.5 million on phytosterol revenues of $0.9 million for the three months ended March 31, 2005, or 56% of phytosterol revenues. The increase in percentage is attributable to selling higher cost product acquired in the prior year, and the timing of customer sales. Having recently entered into a long-term supply agreement for the supply of Reducol(tm) and other wood sterols, the Company expects to achieve improved cost of sales over time.
Marketing, sales and product development - For the quarter ended March 31, 2006 totaled $0.4 million compared with $0.3 million in the same period last year. The increase is attributable to an increase in staffing levels, and additional expenditures associated with the European product launches.
Stock based compensation expense - For the quarter ended March 31, 2006 totaled $0.3 million for the first quarter of 2006 compared with $0.5 million in the same period last year. Of the $0.3 million of stock-based compensation expense, $0.3 million relates to employee and $nil million to non-employee option grants, compared to $0.5 million relating to employee and $nil million to non-employee option grants in the first quarter 2005. For the three months period ended March 31,
2006 this compensation expense was allocated to R&D expenses of $0.1 million (March 31, 2005-$0.2 million), G&A expenses of $0.1 million (March 31, 2005-$0.2 million), and Marketing expenses of $0.1 million (March 31, 2005-$0.1 million) on the same basis as for the allocations of cash compensation.
First Quarter Ended March 31, 2006 Report This news release includes by reference the Company's unaudited financial statements for the first quarter ended March 31, 2006, 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.
Forbes Medi-Tech Inc. is a life sciences company dedicated to the research, development and commercialization of innovative products for the prevention and treatment of cardiovascular disease (CVD). Our vision is to develop and market products along a treatment continuum that CVD savvy consumers, healthcare professionals and specialized CVD research and healthcare institutions will identify, recommend and seek.
Our 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, products, and other information in future periods.
Forward-looking statements can be identified by forward-looking words such as "anticipates", "goal", "revenue guidance", "possible", "new", "objective", "expected", "will", and similar expressions or variations thereon. 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 Company's need for additional customers; the Company's reliance on its customers, and in particular, on Fayrefield Foods, for the launch of additional Reducol-based products and other performance; the need to secure new sales contracts; uncertainty as to whether the FM-VP4 clinical trial will be completed as planned or will be successful; the need for further clinical trials the occurrence and success of which is not assured; uncertainty as to market acceptance of the Company's and its customer's products; liability, intellectual property and insurance risks; the Company's need for additional future capital, which may not be available in a timely manner or at all; exchange rate fluctuations; risks inherent in research and development; 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.