Fiscal 2009 results announced by Helix BioPharma

Helix BioPharma Corp.Oct 30 2009

Helix BioPharma Corp. (TSX, FSE: HBP / OTCQX: HXBPF) today announced financial results for the year ended July 31, 2009.

During the 2009 fiscal year, the Company continued to make progress with its development initiatives for its lead drug candidates, L-DOS47 and Topical Interferon Alpha-2b. The following are selected highlights during the 2009 fiscal year and subsequent to year-end.

FISCAL 2009 HIGHLIGHTS

DOS47/L-DOS47

• A pre-IND meeting with the U.S. Food and Drug Administration ("FDA") was held for L-DOS47 in which the FDA generally agreed with Helix's proposed remaining non-clinical pharmacology and toxicology studies as well as its remaining GMP manufacturing program initiatives prior to IND filing.
• Helix announced plans to conduct a Phase I/II clinical study of non-small cell lung cancer ("NSCLC") patients in Poland. Helix has been finalizing these plans with key opinion leader clinicians and contract research organizations in Poland. The study is expected to run concurrently with the U.S. Phase I trial in refractory solid tumor patients. The timing of both studies will be contingent on the timing of regulatory approvals of the trials as well as obtaining additional capital.

Topical Interferon Alpha-2b

• A pre-IND meeting with the FDA was held in which the FDA confirmed the acceptability of a Phase II/III, randomized, vehicle-controlled clinical trial as the next step in the compound's clinical development plan for patients with cervical dysplasia. The FDA also confirmed Helix's expectation that an additional well-controlled, Phase III confirmatory clinical trial will be required to establish efficacy and safety of the product for marketing authorization purposes. Helix intends to continue to make preparations to conduct a European Phase III trial for this purpose.
• The Phase II pharmacokinetic study is expected to complete the minimum 12 patients by the end of the third quarter of fiscal 2010.
• Enrollment in the ongoing Phase II clinical trial of Topical Interferon Alpha-2b in patients with anogenital warts ("AGW") in Sweden and Germany is progressing on track. The Company expects the last patient to be enrolled on or around the end of the first quarter of fiscal 2010. The study has now enrolled over 93% of the required 120 patients.

Financing

• Completed a private placement financing on October 2, 2008 for gross proceeds of $11,424,000.
• Completed a private placement financing on September 8, 2009 for gross proceeds of $13,581,250.

• Prof. Majewski, stepped down from the Board of Directors to assume the advisory role of European medical director, effective August 11, 2009.
• Prof. Kazimierz Roszkowski-Sliz was appointed to the Board of Directors on August 17, 2009.

FINANCIAL REVIEW

For fiscal 2009, the Company recorded a net loss of $14,102,000, which represents an increase of $7,138,000 when compared to fiscal 2008. The net loss per common share for fiscal 2009 was $0.27 and represents an increase of $0.11 in loss per common share when compared to fiscal 2008. Product revenue contributed to the increase in revenue in fiscal 2009 and overall expenses were higher when compared to fiscal 2008 which mainly reflect higher research and development expenditures, stock-based compensation expense associated with stock options granted in the second quarter, lower interest income and a foreign exchange loss.

Total revenues in fiscal 2009 were $3,841,000 and represent an increase of $250,000 or 7.0% when compared to total revenues in fiscal 2008 of $3,591,000. Product revenue contributed to the increase in revenue in fiscal 2009 when compared to fiscal 2008 and was offset slightly by a decrease in license fees and royalties.

Product revenue in fiscal 2009 totalled $3,244,000 and represents an increase of $292,000 or 9.9% when compared to product revenue in fiscal 2008 of $2,952,000. Product sales of Orthovisc® grew in fiscal 2009 while Klean-Prep(TM) revenue remained relatively stable. License fees and royalties in fiscal 2009 totalled $597,000 and represent a decrease of $42,000 or 6.6% when compared to fiscal 2008. The decrease reflects lower Klean-Prep(TM) royalty revenue from Helsinn-Birex which was offset by the final payment from Lumera Corporation of US$75,000 when it provided the Company with notice of termination of its sub-license agreement.

Cost of sales in fiscal 2009 and 2008 totalled $1,516,000 and $1,239,000, respectively. As a percentage of product revenues, cost of sales in fiscal 2009 and 2008 were 46.7% and 42.0%, respectively. In addition to some foreign exchange impact, cost of sales was also impacted by higher distribution costs. The increase in cost of sales, on a percentage, basis was mainly the result of lower average selling price per units sold of Orthovisc®. Lower pricing was offered on Orthovisc® to assist in customer retention for a scheduled launch of a new, single injection product in the first quarter of fiscal 2010.

Research and development expenditures in fiscal 2009 totalled $10,322,000 and represent an increase of $5,258,000 or 103.8% when compared to fiscal 2008. L-DOS47 and Topical Interferon Alpha-2b reflect an increase of 52.6% and 171.2%, respectively. The increase in research and development expenditures associated with L-DOS47, are primarily related to the scale-up manufacturing program and ongoing collaborative research initiatives in anticipation of furnishing product for future clinical testing. The increase in research and development expenditures associated with Topical Interferon Alpha-2b reflect the ongoing costs for the AGW Phase II clinical trial in Sweden and Germany in addition to scale-up manufacturing costs, preparatory work and start-up of the European Phase II pharmacokinetic study in patients with low-grade cervical lesions.

Operating, general and administration expenses in fiscal 2009 totalled $3,917,000 and represent a decrease of $31,000 or 0.8% when compared to fiscal 2008. The operating, general and administration expenditures include one time costs associated with the filing of a Form 20-F registration statement with the U.S. Securities and Exchange Commission, which became effective during the third quarter of fiscal 2009. Other expenditures included in operating, general and administration expenditures are costs associated with the implementation of a new financial reporting system and expenditures associated with capital raising initiatives. Offsetting some of the aforementioned increases in expenditures are lower wages and benefits from the foregoing of accrued vacation days by management during the current fiscal year and lower wages and benefits due to a one-time charge relating to the resignation of the Company's previous Chairman, and executive bonuses paid, in fiscal 2008.

Sales and marketing expenses in fiscal 2009 totalled $969,000 and represent an increase of $160,000 or 19.8% when compared to fiscal 2008. The increase mainly reflects higher sale agent commission resulting form higher product revenues along with increased advertising and promotional expenditures.

Amortization of capital assets in fiscal 2009 totalled $274,000 and represents an increase of $20,000 when compared to fiscal 2008. The higher amortization expense of capital assets in fiscal 2009 is the result of higher capital acquisitions in the current fiscal year.

Amortization of intangible assets in fiscal 2009 totalled $12,000 and represents a decrease of $4,000 when compared to fiscal 2008. The lower amortization expense of intangible assets was the result of the write-down of in tangible assets in the fourth quarter of fiscal 2009.

Stock-based compensation expenses in fiscal 2009 totalled $1,023,000 and represent an increase of $979,000 when compared to fiscal 2008. The stock-based compensation expense in fiscal 2009 relates to the ongoing amortization of compensation costs of 2,070,000 stock options granted on December 17, 2008 over their vesting period. The stock options vested 25% on the date of grant and 25% at each anniversary date thereafter. The Company did not issue any stock options in fiscal 2008. The stock-based compensation expense for fiscal 2008 represents the ongoing amortization of compensation costs of stock options granted on June 30, 2005, over their vesting period.

Interest income totalled $339,000 in 2009 and $645,000 in fiscal 2008. The decrease in interest income in fiscal 2009 reflects lower interest rates earned on deposits resulting from the global financial crisis.

The Company recorded a foreign exchange loss of $133,000 in fiscal 2009 and a foreign exchange gain of $327,000 in fiscal 2008. Foreign exchange losses mainly reflect the lower Canadian dollar exchange rate relative to the US dollar with the largest impact related to the second and third quarters of fiscal 2009. Also impacting the foreign exchange loss in the year is the foreign currency translation of the Company's integrated foreign operation in Ireland. The net assets in Ireland consist mainly of cash and cash equivalents, denominated in Euro dollars, which are used to fund clinical trials of Topical Interferon Alpha-2b in Europe.

Impairment of intangible assets totaled $98,000 in fiscal 2009 and $nil in fiscal 2008. During the fourth quarter of fiscal 2009, the Company reviewed its capitalized intangible assets and determined that expected future cash flows may not exceed their carrying values. As a result, the carrying value of the related intellectual property became impaired and was written down.

Income tax expenses totalled $18,000 in fiscal 2009 and $153,000 in fiscal 2008. Income taxes are attributable to the Company's operations in Ireland.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, the Company has financed its operations from public and private sales of equity, the exercise of warrants and stock options, and, to a lesser extent, on interest income from funds available for investment, investment tax credits, and revenues from distribution, licensing and contract services. Since the Company does not have net earnings from its operations, the Company's long-term liquidity depends on its ability to access the capital markets, which depends substantially on the success of the Company's ongoing research and development programs.

At July 31, 2009 and 2008, the Company had cash and cash equivalents totaling $14,494,000 and $19,057,000, respectively. The $4,563,000 decrease in cash and cash equivalents reflects a use of cash in operating activities of $13,157,000 which includes a net loss for the year of $14,102,000. Operating activities were financed from a private placement which closed on October 2, 2008 for net proceeds of $9,659,000. Cash used in investing activities in the 2009 fiscal year total $932,000 which predominately reflects purchases of research and development equipment. Effect of exchange rate changes on cash and cash equivalents in fiscal 2009 represent a foreign exchange loss of $133,000.

At July 31, 2009 and 2008, the Company's working capital was $15,296,000 and $19,166,000, respectively.

On September 8, 2009, subsequent to Company's fiscal year ended July 31, 2009, the Company completed an additional private placement, issuing 6,625,000 units at $2.05 per unit, for gross proceeds of $13,581,250. Each unit consists of one common share and one common share purchase warrant, with each common share purchase warrant entitling the holder to purchase, subject to adjustment, one common share at a price of $2.87.

Based on the Company's currently planned expenditures and assuming no unanticipated expenses, the Company estimates its cash reserves will be sufficient to meet anticipated cash needs for working capital and capital expenditures for the next twelve months. The Company has no external sources of liquidity such as bank lines of credit. The Company will require future additional financing to carry out its business plan. The market for both debt and equity financings for companies such as Helix has always been challenging, and the global economic downturn and credit crisis have added further challenges. There can be no assurance that a financing, whether debt or equity, will be available on acceptable terms or at all.