~ Company Reaffirms 2004 Revenue Estimate and Reports Increase in Working Capital ~
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, 2004. Comparative periods for these statements are the three months and six months ended June 30, 2003, respectively. All amounts are in Canadian Dollars unless otherwise noted.
Second Quarter 2004 Highlights
- Increased revenue guidance from $15.6 million to $16.5 million based on growth in sterol sales
- Reported revenues of $3.2 million for the three months ended June 30,
2004 compared to $3.5 million for the three months ended June 30, 2003
- Reported revenues of $6.4 million for the six months ended June 30,
2004 compared to $6.9 million for the six months ended June 30, 2003
- Reported net loss of $0.08 per share for the three months ended June 30, 2004 and $0.14 per share loss for the six months ended June 30, 2004. Included in the three and six month figures are $1.2 million and
$2.3 million respectively in non-cash expenses
- European Union (EU) issued labeling regulations for phytosterol ingredients completing the second milestone for Reducol(tm) sales in Europe
- Achieved major milestone towards New Zealand & Australian approval of
- Reported over $18.3 million in working capital for the six months ended June 30, 2004 compared with $6.7 million for the year ended December 31, 2003
"Our strong financial position and forecasted growth are testament to the Company's commitment to building revenue while moving closer to
Reducol(tm) sales in Europe", said Charles Butt, President and CEO of Forbes Medi-Tech Inc. "With the development of FM-VA12 and FM-VP24, Forbes continues to build its pipeline of novel pharmaceutical
compounds within the cardiovascular and related markets", said Butt.
Based on existing sales contracts, and assuming that forecasted supply requirements will be ordered and shipped, the Company maintains its revenue guidance for 2004 of $16.5 million. This figure represents a combination of the projected revenue from the Company's sales contracts and share of the sales from the Phyto-Source joint venture. With the pending EU regulatory approvals, plant expansion plans and ongoing discussions regarding possible new contracts, the Company will update its revenue guidance throughout the year.
The Company's estimated revenue projection for 2004 is based on a substantial increase in demand for its phytosterol based products, primarily Reducol(tm), for the second half of the year; consequently, Forbes increased its projected revenue guidance in June 2004 for the year from $15.6 million to $16.5 million.
For the three months ended June 30, 2004, revenues totaled $3.2 million, compared with $3.5 million for the quarter ended June 30, 2003. For the six months ended June 30, 2004, total revenues were $6.4 million compared with $6.9 million for the six months ended June 30, 2003. The slight decrease in revenue for the six months ended June 30,
2004 compared to June 30, 2003 can be attributed to a change in the sales mix of branded versus non-branded sterols.
For the three months ended June 30, 2004, the Company reported a net loss of $2.4 million ($0.08 per share) compared with a net income of $2.0 million ($0.09 per share) for the three months ended June 30, 2003. For the six months ended June 30, 2004, the Company reported a net loss of $4.2 million ($0.14 per share) compared with a net income of $2.0 million ($0.09 per share) for the six months ended June 30, 2003. This change from net income to net loss was primarily due to three factors: in the quarter ended June 30, 2003, the Company recorded a one-time gain from the sale of its AD/ADD technology of $2.2 million; in the three and six month periods ended June 30, 2004, research and development expenditures were $0.8 million and $1.7 million, respectively, versus $0.5 million and $0.3 million respectively, in the same periods ended June 30, 2003; and stock-based compensation expense for the three and six month periods ended June 30,
2004 was $1.2 million and $2.3 million, respectively, versus the same periods ended June 30, 2003 of $0.1 million and $0.3 million, respectively. Contributing to lower R&D expenses for the six months ended June 30, 2003 was the receipt of Quebec provincial investment tax credits in the amount of $0.6 million.
Forbes continues to grow as a biopharmaceutical development company with the completion of the FM-VP4 Phase II European trials, the subsequent announcement of the US Phase II clinical trial program and development of two new exciting compounds, FM-VA12 and FM-VP24.
FM-VA12 is a novel single molecular entity that has been shown in animal studies to inhibit cholesterol absorption with efficacy at least equal to that of FM-VP4. FM-VP24 is a novel analogue which inhibits cholesterol absorption while also exhibiting anti-inflammatory activity. Both FM-VA12 and FM-VP24 should advance towards further development in clinical trials, likely in 2005 and 2006, respectively.
Demand for Forbes' cholesterol-lowering ingredients remains strong. The Company's 50-50 joint venture manufacturing facility remains the world's largest wood sterol manufacturer and is nearing completion of its expansion from 1000 to 1500 metric tonnes. With its non-genetically modified (non-GMO), wood-based sterols, Forbes has garnered interest in its products for the European market, where there is a preference for non-GMO ingredients, and a limited supply. Forbes is awaiting the completion of administrative steps including the adoption, translation and publication of the EU Commission Decision, anticipated in the near future, which would allow the Company to sell Reducol(tm) in Europe.
Cost of sales, marketing and development for the three months ended June 30, 2004 totaled $1.6 million on phytosterol revenues of $3.1 million, or 52% of phytosterol revenues, vs $1.6 million on phytosterol
revenues of $3.5 million for the three months ended June 30, 2003, or 46% of phytosterol revenues. Cost of sales for the six months ended June 30, 2004 totaled $3.6 million on $6.3 million of phytosterol
revenues, or 57% of phytosterol revenues, vs $3.5 million on $6.9 million of phytosterol revenues, or 51% of phytosterol revenues, for the six months ended June 30, 2003. The increase in cost of sales can be attributed to increases in product development and marketing costs.
Research and development expenses ("R&D") for the second quarter, 2004 totaled $0.8 million compared with $0.5 million for the second quarter, 2003. The Company's research continues to focus on its core
cardiovascular compounds and specifically its lead cholesterol-lowering compound, FM-VP4. Additional R&D costs in the quarter ended June 30, 2004 included increased fees for consulting work pertaining to the
completion of the recent FM-VP4 clinical trial held in Amsterdam and to planning a further US Phase II trial, as announced in the Company's news release dated July 6, 2004.
R&D expenses for the six months ended June 30, 2004 totaled $1.7 million compared with $0.3 million for the same period in 2003. R&D expenses for the six months ended June 30, 2003 included $0.6 million
of Quebec investment tax credits received. As the Company no longer has manufacturing facilities or offices in Quebec, no further Quebec investment tax credits are expected. R&D expenditures have been on
the increase since the second quarter ended June 30, 2003 as the Company continues to develop FM-VP4, and explores new drug candidates within the VPx Library of Compounds. R&D is expected to increase in
the latter half of 2004 as core research projects are progressed, clinical work on FM-VP4 continues, and the Company's Library of Compounds, including the recently announced compounds, FM-VA12 and FM-VP24, is further explored.
General and administrative expenditures ("G&A") totaled $1.6 million for the three months ended June 30, 2004 vs $1.0 million for the second quarter 2003. The increase in G&A in the quarter ended June 30, 2004
was primarily due to the termination of a consulting contract resulting in resulting in an early payout of $0.6 million, as per the contract terms. Increases in G&A for the six months ended June 30, 2004 as
compared with expenditures for the six months ended June 30, 2003 also included increased expenditures in legal and audit fees related to enhanced financial disclosure requirements, and additional investor
relations service costs. These increases were offset by a foreign exchange gain in the amount of approximately $0.8 million.
Depreciation and Amortization for the quarter ended June 30, 2004 totaled $0.4 million compared with $0.5 million for the quarter ended June 30, 2003. Depreciation for the second quarter 2004 includes primarily depreciation of the assets at the Company's joint venture manufacturing facility in Pasadena, Texas. Depreciation and amortization for the six months ended June 30, 2004 totaled $0.7 million compared with $1.1 million for the six months ended June 30, 2003. Depreciation for the six months ended June 30, 2004 includes primarily depreciation of the assets at the Company's joint venture manufacturing facility in Pasadena, Texas.
Stock Based Compensation Expense for the quarter ended June 30, 2004 totaled $1.2 million compared with $0.1 million in the same period last year. For the six-month period ended June 30, 2004 stock-based
compensation expense totaled $2.3 million compared with $0.3 million for the six months ended June 30, 2003.
Liquidity & Capital Resources
Cash, cash equivalents and Working Capital
As of June 30, 2004, the Company's net cash and cash equivalents were $6.0 million ($1.1 million at June 30, 2003) compared with $4.5 million as at December 31, 2003. The Company's working capital at June 30,
2004 improved to $18.3 million (working capital - $0.7 million at June 30, 2003) from a working capital of $6.7 million at December 31, 2003. The working capital position has improved mainly due to an inflow of
cash from the completion of a US$10.75 million (Cdn$13.8 million) equity financing.
During the three months ended June 30, 2004, the Company used $1.5 million of cash in operations compared with $1.3 million of cash used in the three months ended June 30, 2003. Cash used in the second
quarter of 2004 was primarily a result of a decrease in accounts payable and increased inventory compared with cash used in the second quarter of 2003 which resulted from reductions in receivables and
increases in accounts payable. During the six months ended June 30, 2004, the Company used $2.6 million of cash in operations compared with $0.4 million used in operations during the six months ended June 30,
2003, primarily due to increased R&D and product development expenditures in 2004, increased inventories in the first half of 2004 which are anticipated to be shipped in the second half of 2004, and a one-time license fee payment received in 2003.
Investing activities in the second quarter of 2004 used $1.6 million of cash compared with $1.5 million of cash provided in the second quarter ended June 30, 2003. The Company transferred $1.1 million into
short-term investments during the second quarter of 2004. In addition, an amount of $0.4 million was added to capital equipment at the Phyto-Source plant during the second quarter of 2004. The $1.5 million of cash provided in the comparative quarter ended June 30, 2003 was largely a result of proceeds of $1.2 million and $0.4 million on the divestiture of the AD/ADD technology and the Amqui plant, respectively. During the six months ended June 30, 2004 $10.4 million of cash was used in investing activities compared with $1.4 million of cash provided in the six- month-period ended June 30, 2004. In the six-month period ended June 30, 2004, $1.0 million of cash was used primarily in the acquisition of capital assets at the Phyto-Source
manufacturing plant near Houston, Texas, compared with $0.3 million of cash used for similar purposes in 2003. In addition, for the six-month period ended June 30, 2004, $10.7 million was transferred into
Cash used in financing activities in the quarters ended June 30, 2004 and June 30, 2003 were insignificant and related primarily to the repayment of existing demand loans. For the six-month period ended
June 30, 2004 $14.5 million of cash was provided compared with $0.3 million of cash used in the six-month period ended June 30, 2003. This significant improvement is due mainly to the issuance of Series A
convertible preferred shares under the Company's January 2004 equity financing which provided a net amount of $12.9 million of cash, stock option and warrant exercises that provided approximately $1.3 million
of cash. US$1 million (Company's 50% joint venture interest - Cdn$0.7 million) was provided in the first quarter of 2004 by Phyto-Source utilizing its revolving line of credit.
VP Finance Change
Patricia Pracher, the Company's VP of Finance has decided to pursue other interests in the private company sector. The Company wishes to thank Patricia for her assistance in building Forbes Medi-Tech since 1999. The Company is actively looking for a suitable replacement.
Second Quarter 2004 Report
This news release includes by reference the Company's unaudited financial statements for the second quarter ended June 30, 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.
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.
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, expenditures, research and development, and other information in future periods. Forward-looking statements can be identified by words such as "revenue guidance", "growing", "forecasted", "projected", "further", "anticipated", "future", "outlook", "new", "planned", "possible", "expects", "estimates," and similar expressions or variations thereon, or statements that events, conditions or results "will," "may," "could" or "should" occur or be achieved, or other references 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 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; the need for performance by buyers of contractual obligations; manufacturing risks, the need to manufacture to regulatory standards, and the need for the Phyto-Source manufacturing facility to function as planned; partnership/strategic alliance risks and the Company's dependency on Chusei (USA) Inc,; 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 expansion will be completed as scheduled; uncertainty as to whether FM-VP4, FM-VA12 or FM-VP24 will be further developed and marketed successfully as a drug or at all; the fact that results from preclinical studies may not be predictive of results obtained in clinical trials; the fact that the Company will be required to undertake additional pre-clinical studies before it will be able to proceed to clinical trials and there can be no assurance regarding the timing or outcome of such studies; general research and development risks; the risk of technical obsolescence; product liability and insurance risks; the effect of competition; the risk of adverse side effects; intellectual property risks; the need for additional capital,
the availability of which is not assured; changes in business strategy or development plans; the dependency of the Company on key personnel; uncertainty as to future market size and market acceptance of the
Company's products; 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 statements.