Vancouver, Canada - Forbes Medi Tech Inc. (TSE:FMI; NASDAQ:FMTI) today announced its financial results for the three and six-month periods ended June 30, 2003. Comparative periods for these statements are the three months and six months ended June 30, 2002 respectively. All amounts are in Canadian Dollars unless otherwise noted.
Second Quarter 2003 Highlights
-Increased revenues to $3.5 million for the three months ended June 30, 2003 compared to $2.7 million for the three months ended June 30, 2002
-Increased revenues to $6.9 million for the six months ended June 30, 2003 compared to $5.1 million for the six months ended June 30, 2002
-Reported net income of $0.09 per share for the three months ended June 30, 2003 and $0.10 per share for the six months ended June 30, 2003
-Sold AD & ADD technology for US$1.9 million -Increased revenue guidance from US$9 million to US$11 million based on growth in sterol sales
"Our financial results demonstrate Forbes' continued commitment to streamline operations and improve the bottom line", said Charles Butt, President and CEO of Forbes Medi-Tech Inc. "The revenue growth is indicative of growing demand for our cholesterol-lowering ingredients in both the food and dietary supplement market. The increase in revenue and progress in our pharmaceutical research program to date reflects the Company's ability to achieve the targeted milestones", said Butt.
Demand for the Company's products, Reducol(tm) and Phyto-S Sterols (non-branded sterols), has exceeded the 2003 initial target as a result of increased orders from existing customers in both the food manufacturing and dietary supplement businesses; consequently, Forbes increased its projected revenue guidance for fiscal 2003 from US$9 million to US$11 million.
For the three months ended June 30, 2003, revenues totaled $3.5 million, compared with $2.7 million for the quarter ended June 30, 2002. For the six months ended June 30, 2003, total revenues were $6.9 million compared with $5.1 million for the six months ended June 30, 2002.
Phytosterol revenues, including direct sales of phytosterol products and the amortization of license fees, made up the majority of the Company's revenue.
For the three months ended June 30, 2003, the Company reported a net profit of $2.1 million ($0.09 per share) compared with $3.0 million ($0.14 per share) for the quarter ended June 30, 2002. Included in net income for the quarter ended June 30, 2003 is a gain on the divestiture of the AD/ADD technology in the amount of $2.2 million. Included in net income for the three months ended June 30, 2002, is a one-time gain of $6.1 million on settlement of licensing arrangements.
For the six months ended June 30, 2003, the Company reported a net profit of $2.2 million ($0.10 per share) compared with a net profit of $0.9 million ($0.04 per share) for the six months ended June 30, 2002.
The increase in net income for the six months ended June 30, 2003 is due to the Company's share of sales by the Phyto-Source joint venture, cost containment measures in the areas of administrative and non-core R&D expenditures, and the receipt of Quebec provincial investment tax credits in the first quarter in the amount of $0.6 million.
Based on existing sales contracts, and assuming that forecasted supply requirements will be ordered and shipped, the Company maintains its revenue guidance for 2003 of US$11 million. This figure represents a combination of the projected revenue of the Company's sales contracts and the Company's share of the sales from the Phyto-Source joint venture. The Company is currently in discussions with several other companies regarding possible new major sterol contracts and will review its revenue guidance throughout the year if significant supply agreements are signed.
Based on the recent funding through the advance loan payment from the Phyto-Source manufacturing joint venture, supply forecasts provided by customers pursuant to current supply agreements, other receivables, projected expenditure levels, and the divestiture of the Company's AD/ADD technology (see the Company's press release dated April 29, 2003), Forbes believes it will have sufficient capital to operate and fund its core development projects through the end of 2004. The Company is also continuing to look at various financing opportunities to further develop its pipeline of products and to provide alternate sources of funding in the event that expenditures or receivables are not realized as planned.
Forbes' pharmaceutical research program is targeting a $21 billion dollar market opportunity. In pursuing this market, Forbes is dedicated to the development of its novel therapeutic and cholesterol absorption inhibitor, FM-VP4. The safety and efficacy of this cholesterol absorption inhibitor is currently being tested in Phase II human clinical trials at the Academic Medical Center in Amsterdam and is anticipated to complete by the end of 2003. Based on preclinical and Phase I data, Forbes has initiated a strategic plan to secure a multinational pharmaceutical partner for the further development of FM-VP4.
In addition to FM-VP4, Forbes' FM-VPx Library of Compounds may have additional indications including: cholesterol and triglyceride-lowering, HDL (good cholesterol) increasing, anti-obesity, anti-diabetic, and anti-inflammatory. The Company intends to pursue some or all of these indications as soon as appropriate resources are available, including additional financing.
Cost of sales, marketing and development - For the three months ended June 30, 2003, cost of sales, marketing & product development costs ("Cost of Sales") totaled $1.6 million vs. $2.6 million for the quarter ended June 30, 2002. For the six months ended June 30, 2003, Cost of Sales were $3.5 million compared with $4.5 million for the six months ended June 30, 2002. The decrease in Cost of Sales to June 30, 2003 relates primarily to improvements in manufacturing and economies of scale.
Research and development; General and administrative - For the three months ended June 30, 2003, net research and development ("R&D") expenses totaled $0.5 million compared with $0.9 million for the quarter ended June 30, 2002. The Company continues to focus its core research and development on cardiovascular and, specifically, cholesterol-lowering compounds such as FM-VP4. R&D expenditures, through 2003 and into 2004, will primarily be in the areas of pre-clinical and clinical development, including the Phase II trial of FM-VP4. Additional funding will be required in order for Forbes to be able to pursue the discovery and/or development of non-core compounds in 2003 and 2004.
For the six months ended June 30, 2003, R&D expenses were $0.3 million compared to $2.0 million for the six months ended June 30, 2002.
Included in R&D is an amount of $0.6 million of Quebec investment tax credits received in the first quarter of 2003 in respect of prior years' research activities conducted in that Province. As the Company no longer has manufacturing facilities or offices in Quebec, further investment tax credits from that Province, if any, are expected to be minimal.
For the three months ended June 30, 2003, general and administrative ("G&A") expenditures totaled $1.1 million compared to $1.6 million for the second quarter 2002. For the six months ended June 30, 2003, G&A totaled $2.0 million compared with $2.7 million for the six months ended June 30, 2002.
Liquidity & Capital Resources
As at June 2003, the Company's net cash and cash equivalents were $1.09 million ($1.07 million at March 31, 2003) compared with $0.4 million as at December 31, 2002. The Company's working capital at June 30, 2003 improved to $0.7 million from a working capital deficit of $2.3 million at March 31, 2003 and a working capital deficit of 3.5 million at December 31, 2002. The working capital position has improved mainly due to increased revenues, a reduction in accounts payable and an increase in short-term receivables under contractual commitments.
During the three months ended June 30, 2003, the Company used $1.3 million of cash in operations compared with $0.3 million in the quarter ended June 30, 2002. Investing activities generated $1.5 million of cash primarily from the sale of the Company's AD/ADD technology compared with $0.1 million of cash used in the second quarter ended June 30, 2002. Financing activities in the quarter ended June 2003 used $0.2 million of cash compared with $0.8 million used in the second quarter ended June 30, 2002. This improvement is due to reduced notes payable and demand loans.
During the six months ended June 30, 2003, $0.4 million of cash was used in operating activities compared with $4.2 million in the six months ended June 30, 2002. This improvement is primarily a result of the increase in phytosterol sales during the period, reduction of expenses, receipt of deferred revenues under the Pharmavite agreement, reduction of inventories and increase in accounts receivable.
Investing activities provided $1.4 million of net cash primarily from proceeds received from the disposal of the pilot plant compared with $0.4 million during the six months ended June 30, 2002 which resulted largely from proceeds of short-term investments. Net cash used in financing activities during the six months ended June 30, 2003 was $0.3 million compared with $1.7 million cash used during the same period in 2002.
Subsequent Events - Phyto-Source Financing Subsequent to quarter-end, Forbes announced it would receive a US$3.0 million advance payment from Phyto-Source LP, its manufacturing joint venture with Chusei (USA) Inc. The payment is made towards a US$4.0 million loan made by Forbes Medi-Tech during the formation of the joint venture. Phyto-Source has secured funding for the advanced payment from the Southwest Bank of Texas by way of a US$3.0 million, three year term loan at a fixed interest rate of 6%. The financial institution has also agreed to set up a US$1.5 million revolving line of credit for the joint venture. Re-payment of the term loan and any funds drawn on the line of credit will be the responsibility of Phyto-Source, secured against the joint venture's assets and will be guaranteed by Phyto-Source's joint venture partners Forbes Medi-Tech and Chusei USA.
In August 2003, Phyto-Source, LP closed its US$3 million term loan facility and US$1.5 million line of credit and made the US$3.0 million advance loan payment to Forbes.
In July 2003, Forbes received a letter from the Nasdaq Stock Market confirming that the Company has regained compliance with the minimum bid price requirement for continued inclusion of its securities on the Nasdaq SmallCap Market.
Second Quarter 2003 Report
This news release includes by reference the Company's unaudited financial statements for the second quarter ended June 30, 2003, 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 biopharmaceutical company dedicated to the research, development and commercialization of innovative prescription pharmaceutical and nutraceutical products for the prevention and treatment of cardiovascular and related diseases. Forbes' scientific platform is based on core sterol technology. By extracting plant sterols from by-products of the forestry industry, Forbes has developed cholesterol-lowering agents for use in pharmaceutical compounds, functional foods and dietary supplements.
For more information, please contact:
Telephone: (604) 681-8976
E-mail: [email protected]
Patricia E. Pracher
Acting Chief Financial Officer
Telephone: (604) 689-5899
E-mail: [email protected]
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, and other information in future periods. Forward-looking statements are frequently, but not always, identified by words such as "revenue guidance", "growing", "forecasted", "projected", "believes", "based", "if", "continuing", "further", "planned", "realized, "targeting", "pursuing", "anticipated", "initiated", "may have", "intends", "as soon as", "future", "outlook", "new", "will", "in the event that", "planned", "opportunity", "developing", "would allow", "would be", "will", "subject to", "due by", "possible", "expects", "intends," "estimates," "potential", and similar expressions or variations thereon, or statements that events, conditions or results "will," "may," "could" or "should" occur or be achieved or refer to a future dates or events. Forward-looking statements are statements about the future and are inherently uncertain and the Company's actual results could differ materially from those anticipated in those forward-looking statements as a result of numerous factors, including without limitation, the risk that buyers will not order their forecasted amounts of the Company's products; uncertainty as to the Company's ability to generate projected sales volumes and product prices, and ship its products to the buyers; uncertainty that the Phyto-Source LP manufacturing facility will function as planned or be able to repay the Southwest loan in a timely manner; the need for performance by buyers of contractual obligations; manufacturing risks; partnership/strategic alliance risks; risks related to shipment of the product; the need for regulatory approval which may be withdrawn, not be obtained in a timely manner, or at all; the need to control costs and the possibility of unanticipated expenses; uncertainty as to whether the plant can be expanded in a cost-effective and timely manner; the risk of technical obsolescence; intellectual property risks; the effect of competition, uncertainty of the size and existence of a market opportunity for the Company's products and the buyer's products; marketing risks; the Company's need for additional future capital, which may not be available in a timely manner or at all; foreign exchange risk; product liability risks; as well as a description of 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 expectations 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.