Isotechnika fourth quarter consolidated net loss increases to $2.42 million

Mar 25 2011

Isotechnika Pharma Inc. has released its financial results for the fourth quarter and year ended December 31, 2010 and provided a review of the Company's operational and financial progress for 2010 and to the current date:

Financial and Operating Review

• On January 28, 2011, the Company finalized a Development, Distribution and License Agreement ("DDL") with ILJIN Life Science Co., Ltd. ("ILJIN"). Under the DDL, the Company granted to ILJIN an exclusive license to voclosporin for transplant and autoimmune indications for the US and other regions outside of Canada, Israel, South Africa, Europe, China, Taiwan and Hong Kong.  Under this license, the Company will conduct a single Phase 3 clinical trial in kidney transplantation.  Pursuant to this DDL, the Company has already received US$6.9 million with a further US$18 million to be provided by ILJIN over the next 2 years.
• On August 23, 2010, the Company and 3SBio, Inc. ("3SBio"), a China-based biotechnology company, completed a DDL for voclosporin.  The Company granted 3SBio exclusive rights to all transplant and autoimmune indications of voclosporin in China, including Hong Kong and Taiwan.  3SBio will be responsible for the clinical development, registration and commercialization of voclosporin in China. The transaction consisted of a non-refundable licensing fee of $1.58 million (US$1.5 million) and a convertible debenture of $4.73 million (US$4.5 million). The Company will provide commercial supply to 3SBio on a cost-plus basis and receive ongoing royalties based on sales of voclosporin by 3SBio. 3SBio subsequently converted the debenture into common shares in 2010.
• In August, 2010, the Company's partner for the ocular indications of voclosporin, Lux Biosciences, Inc. received a Complete Response Letter from the United States Food and Drug Administration regarding their New Drug Application for voclosporin.  The FDA requested additional information and recommended that an additional clinical trial in patients with non-infectious uveitis be conducted in order to consider a future approval of voclosporin for this indication. In February, 2011, Lux commenced the required additional pivotal Phase 3 trial.
• In February, 2010, the Company amended its agreement with Paladin Labs Inc. ("Paladin") concerning its remaining stake in the revenue stream from the Isodiagnostika business. The Company recorded a gain on sale of diagnostic royalty stream of $1.90 million.
• In February, 2010, the Company signed an agreement with the National Research Council of Canada under the Industrial Research Assistance Program whereby the Company will receive a funding contribution of $237,000 for its early stage non-immunosuppressive cyclosporine analogue molecule ("NICAM") program until August 2011.

Financial results

For the fourth quarter ended December 31, 2010, the Company reported a consolidated net loss of $2.42 million or $0.02 per common share, as compared to a consolidated net loss of $1.55 million or $0.01 per common share for the same period in 2009. For the year ended December 31, 2010, the Company reduced its net consolidated loss to $3.66 million or $0.03 per common share, as compared to a consolidated net loss of $7.96 million or $0.07 per common share in 2009.

The reduction in the loss for the year ended December 31, 2010 when compared to 2009 was primarily due to a reduction of $4.01 million in research and development expenses, reduced corporate, administration and marketing expenses of $451,000, no interest and pre-payment costs on long term debt compared to $1.08 million in 2009 which was offset in part by the net gain from the plan of arrangement with Paladin of $2.35 million in 2009. The Company also had net income from discontinued operation  of $1.90 million in 2010 compared to $986,000 in 2009.

The Company reported income from discontinued operation of $Nil or $Nil per common share for the fourth quarter of 2010 compared to $238,000 or $0.002 per common share for the fourth quarter of 2009.  For the year ended December 31, 2010, the income from discontinued operation was $1.9 million or $0.01 per common share compared to $986,000 or $0.01 per common share for the comparable period in 2009. The Company reflected the diagnostic segment as discontinued operations when the Company amended its agreement with Paladin concerning its remaining stake in the revenue stream from the Isodiagnostika business.

The Company reported a net loss from continuing operations of $2.42 million or $0.02 per common share for the fourth quarter ended December 31, 2010, compared to $1.79 million or $0.01 per common share for the fourth quarter ended December 31, 2009. For year ended December 31, 2010, the net loss from continuing operations was $5.56 million or $0.04 per common share compared to a net loss from continuing operations of $8.94 million or $0.08 per common share for the comparable period in 2009.

Revenue from continuing operations decreased to $199,000 for the fourth quarter of 2010, compared to $1.44 million for the same period in 2009.  The Company recorded revenue from continuing operations of $3.42 million for the year ended December 31, 2010, as compared to $2.66 million for the same period in 2009. The increase in revenue for the year ended December 31, 2010 reflected higher research and development revenue amortized from the payments received by the Company pursuant to the research and development agreement with Paladin which were initially recorded as deferred revenue.

Net research and development expenses decreased to $873,000 for the fourth quarter of 2010 compared to $2.26 million in the same period in 2009. Net research and development expenses were $3.99 million for the year ended December 31, 2010, compared to $8.00 million for the year ended December 31, 2009. The decreased research and development expenses reflect decreased clinical trial activity as the voclosporin Phase 2b kidney transplant and Phase 3 European/Canadian psoriasis trials and special population trials were completed in 2009.

Corporate, administration and marketing expenses increased to $1.08 million for the fourth quarter of 2010, compared to $705,000 for the same period in 2009. The Company incurred higher professional, legal and consulting fees in the fourth quarter 2010 as a result of the 3SBio and ILJIN transactions.

Corporate, administration and marketing expenses decreased to $3.27 million for the year ended December 31, 2010, compared to $3.72 million for the year ended December 31, 2009. The decrease primarily reflected a reduction in infrastructure, corporate and administration expenses resulting from reduced personnel numbers, reduced executive and director compensation and reduced insurance costs.

The Company, as at December 31, 2010, had $6.35 million in cash and cash equivalents. The Company, on January 28, 2011, received the intial injection of cash from ILJIN consisting of a license fee of US$4.5 million plus proceeds of US$2.38 million from the issuance of the first tranche of common shares from treasury.

The audited financial statements and the Management's Discussion and Analysis for the year ended December 31, 2010, are accessible on Isotechnika's Web site at www.isotechnika.com or on SEDAR at www.sedar.com.