~Quarterly Revenue Increases 57%, Reaffirms Revenue Outlook, Announces European Regulatory Approval~
Vancouver, Canada - Forbes Medi Tech Inc. (TSE:FMI; NASDAQ:FMTI) today announced its financial results for the three and nine-month periods ended September 30, 2004. Comparative periods for these statements are the three months and nine months ended September 30, 2003, respectively. All amounts are in Canadian Dollars unless otherwise noted.
Third Quarter 2004 Highlights
- Secured a sterols sales agreement for US$24.4 million over a three-year period beginning in January 2005 between Forbes'
manufacturing joint venture, Phyto-Source LP, and a leading multinational ingredient company
- Reported revenues of $5.4 million for the three months ended September 30, 2004 compared to $3.4 million for the three months ended September 30, 2003
- Reported revenues of $11.8 million for the nine months ended September 30, 2004 compared to $10.3 million for the nine months ended September 30, 2003
- Announced plans for a US Phase II clinical study of its lead compound, FM-VP4
- Cleared key regulatory hurdle for Reducol(tm) approval in Europe
- Announced the addition of two novel cholesterol absorption inhibitors to its drug development pipeline
- Reported a net loss of $0.05 per share for the three months ended September 30, 2004 compared to a net loss of $0.07 for the same period last year.
"A major contract, notable increase in revenue and the recent European Union (EU) approval underlie the continued growth of the Company's nutraceutical business ", said Charles Butt, President and CEO of Forbes Medi-Tech Inc. "This improvement in the Company's fundamentals have provided a sound platform from which to further develop our Pharmaceutical compounds, FM-VP4, FM-VA12 and FM-VP24", said Butt.
Based on existing sales contracts, and assuming that forecasted supply requirements will be ordered and shipped, the Company, despite the strengthening value of the Canadian dollar in relation to the United States dollar, 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 EU regulatory approval, the Phyto-Source plant expansion, and ongoing discussions regarding possible new contracts, the Company will update its revenue guidance as required.
For the three months ended September 30, 2004, revenues totaled $5.4 million, compared with $3.4 million for the quarter ended September 30, 2003. For the nine months ended September 30, 2004, total revenues were
$11.8 million compared with $10.3 million for the nine months ended September 30, 2003. The increase in revenue for the three and nine month periods ended September 30, 2004 over the three and nine month periods ended September 30, 2003 can be attributed to a increases in the sales of both branded and non-branded sterols.
In July, Forbes announced the US Phase II clinical trial plans for FM-VP4 and the further development of two new exciting compounds, FM-VA12 and FM-VP24. The US Phase II trial for FM-VP4 is anticipated to begin in 2005. The next step in the development of FM-VP4 is the initiation of an extended, 90 day, preclinical toxicology program. The Company is exploring early stage results for both FM-VA12 and FM-VP24 with the objective of advancing one of them to the clinic in 2005.
A major milestone in our Nutraceutical business has been achieved with the European Commission decision authorizing the use of Forbes' cholesterol-lowering ingredient, Reducol(tm), in milk-based beverages. The approval of Reducol(tm) in milk-based products creates a major opportunity for Forbes Medi-Tech to attract new contracts, drive revenue growth and increase shareholder value.
In general, the Company has benefited from its growth and recognition as a leader in the sterol-technology field. As a result of this success Forbes announced a US$24.4 million sterols supply agreement, on September 8, 2004, between Forbes' manufacturing joint venture, Phyto-Source LP, and a leading multinational ingredient company. Additionally, the U.S. National Cholesterol Education Program (NCEP) has set stringent guidelines which necessitate multiple means to maintain healthy cholesterol levels aside from pharmaceutical therapies. Forbes' cholesterol-lowering ingredient business plays an intricate role in this approach to a healthy lifestyle with both
branded (Reducol(tm)) and non-branded sterols being sold in functional foods and dietary supplements today.
The Phyto-Source phytosterol manufacturing facility near Houston, Texas, is currently undergoing an expansion from 1,000 metric tonnes to 1,500 metric tonnes of annual capacity. The plant expansion, anticipated to be completed by year end, is expected to supply the large sterols supply agreement announced in September 2004 and possible increase in demand generated from the European Commission Decision.
For the three months ended September 30, 2004, the Company reported a net loss of $1.7 million ($0.05 per share) compared with a net loss of $1.8 million ($0.07 per share) for the three months ended September 30, 2003, an improvement of $0.1 million. For the nine months ended September 30, 2004, the Company reported a net loss of $5.8 million ($0.19 per share) compared with a net income of $0.3 million ($0.01 per share) for the nine months ended September 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; a substantial increase in research and development expenditures for the nine months ended September 30, 2004 over the same period in 2003, reflecting the growth of our pharmaceutical program; and an increase in stock-based compensation expense for the three and nine month periods ended September 30, 2004. Contributing to the lower R&D expenses in 2003 was the receipt of Quebec provincial investment tax credits in the amount of $0.6 million. As the Company has discontinued operations in Quebec, no further Quebec tax credits are expected.
Cost of sales, marketing and development for the three months ended September 30, 2004 totaled $2.7 million on phytosterol revenues of $5.3 million, or 51% of phytosterol revenues, versus $2.0 million on phytosterol revenues of $3.4 million for the three months ended September 30, 2003, or 59% of phytosterol revenues. The decrease in cost of sales as a percentage of sales can be attributed to improvements in production efficiencies. Cost of Sales for the nine months ended September 30, 2004 totaled $6.3 million on $11.5 million of phytosterol revenues, or 55% of phytosterol revenues, versus $5.6 million on $10.3 million of phytosterol revenues, or 54% of phytosterol revenues, for the nine months ended September 30, 2003.
Research and development expenses ("R&D") for the third quarter, 2004 totaled $1.3 million compared with $0.8 million for the third 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 September 30, 2004 included increased fees for consulting work pertaining to planning a further US Phase II trial, as announced in the Company's news release dated July 6, 2004 ("Forbes announces FM-VP4 Development Plan").
R&D expenses for the nine months ended September 30, 2004 totaled $3.0 million compared with $1.0 million for the same period in 2003. R&D expenses for the nine months ended September 30, 2003 included $0.6 million of Quebec investment tax credits received. R&D is expected to increase in the last quarter of 2004 as core research projects are progressed, work on FM-VP4 continues in preparation for the next Phase II trial, and the Company's Library of Compounds are further explored.
General and administrative expenditures ("G&A") totaled $2.0 million for the three months ended September 30, 2004 vs. $1.3 million for the third quarter 2003. The increase in G&A in the quarter ended September 30, 2004, was primarily due to unrealized foreign exchange losses of $0.7 million. Increases in G&A for the nine months ended September 30, 2004 as compared with the nine months ended September 30, 2003 was primarily due to the termination of a consulting contract resulting in an early payout of a former director. Increases also included increased expenditures in legal and audit fees related to enhanced financial disclosure requirements, and additional investor relations service costs.
Stock Based Compensation Expense totaled $0.6 million for the third quarter of 2004 compared with $0.6 million in the same period last year. Of the $0.6 million of stock-based compensation expense, $0.55 million relates to employee and $0.05 million to non-employee option grants compared with $0.6 million in the third quarter of 2003, of which $0.43 million related to employee and $0.16 million to non-employee option grants. For the nine-month period ended September 30, 2004 stock-based compensation expense totaled $2.9 million compared with $0.9 million for the nine months ended September 30, 2003. Of the $2.9 million of stock-based compensation expenses, $1.9 million relates to employee and $1.0 million to non-employee option grants.
Depreciation and Amortization for the quarter ended September 30, 2004 totaled $0.4 million compared with $0.5 million for the quarter ended September 30, 2003. Depreciation for the quarter ended September 30, 2003 included depreciation of laboratory equipment, which was sold later in 2003. The third quarter 2004 includes primarily depreciation of the assets at the Company's joint venture manufacturing facility near Houston, Texas and amortization of the Company's technology licenses.
Depreciation and amortization for the nine months ended September 30, 2004 totaled $1.1 million compared with $1.6 million for the nine months ended September 30, 2003. Depreciation for the nine-month period ended September 30, 2003 included depreciation of laboratory equipment, which was sold later in 2003. The nine months ended
September 30, 2004 includes primarily depreciation of the assets at the Company's joint venture manufacturing facility near Houston, Texas and amortization of the Company's technology licenses. The Company's technology is being amortized over ten years.
Third Quarter 2004 Report
This news release includes by reference the Company's unaudited financial statements for the third quarter ended September 30, 2004, and the Company's 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 derived from by-products of the forestry industry and other natural sources for the prevention and treatment of cardiovascular and related diseases. Forbes' scientific platform is based on core sterol technology. 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 "objective", "revenue guidance", "growing", "opportunity", "forecasted", "projected", "further", "anticipated", "future", "outlook", "new", "planned", "possible", "expects", 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; the Company's dependency on a few customers; 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 its manufacturing joint venture partner, Chusei (USA) Inc,; the need for additional regulatory approvals 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 operate as planned or be fully utilized; 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.