Vancouver, Canada, Nov. 14 - Forbes Medi-Tech Inc. today announced its financial results for the three and nine-month periods ended September 30, 2007. Comparative periods for these statements are the three months and nine months ended September 30, 2006, respectively. All amounts are in Canadian Dollars unless otherwise noted.
Third Quarter 2007 Highlights
- Reported revenues of $2.4 million for the three months ended September 30, 2007 compared to $1.8 million for the three months ended September 30, 2006, an increase of 33%
- Reported revenues of $6.7 million for the nine months ended September 30, 2007 compared to $4.4 million for the nine months ended September 30, 2006, an increase of 52%
- Announced the launch of a Reducol(tm)-based milk drink with Taiwan's largest drink producer, Uni-President
"We have increased revenue guidance in recent weeks, entered the final stages of compound selection for our pharmaceutical development program and taken steps to reduce excess inventory", said Charles Butt, President and CEO of Forbes Medi-Tech Inc. "For the remainder of 2007, we anticipate more product launches, the completion of compound selection and exploring non-dilutive opportunities that will improve the company's financial position."
Drug Development
Forbes has entered the final stages of compound selection for two of the most rapidly growing therapeutic indications, asthma and type 2 diabetes. Compounds in development are chosen on the basis of selectivity (the ability to home in on one receptor), potency and pharmacokinetics (drug distribution in the body over time). The FM-TP2000 Series targeting type 2 diabetes are based on the neural signal, following a meal, which is known to increase insulin secretion from pancreatic beta cells. The FM-TP3000 Series targeting asthma are inhaled VPAC2 agonists. Other investigational VPAC2 agonists have demonstrated immediate bronchodilatation with the potential for anti-inflammatory effects. The compound differs from long-acting Beta2 adrenoceptor agonists by working through a different receptor and mechanism.
Upon successful completion of current studies underway, it is expected that a compound from the FM-TP3000 Series targeting asthma would be confirmed this quarter and a compound from the FM-TP2000 Series targeting diabetes would be selected early in 2008.
Nutritional Business
Revenue from sales of Forbes cholesterol-lowering ingredient, Reducol(tm), and other cholesterol-lowering ingredients and value added products have grown 33% over the same quarter last year. Where the company has enjoyed several product launches in other parts of the world, the U.S. market penetration remains to be a key focus for Forbes. The company is working with US food manufacturers in various stages of product development. While the timing and completion of the product development stage is unclear at this point, the company will update its shareholders in the event of a successful product launch.
Financial Results
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Summary:
('000's Cdn$ except 3 mth 3 mth 9 mth 9 mthper share values period period period period
and number of shares) ended ended ended ended
(unaudited) Sep 30, Sep 30, Sep 30, Sep 30,
2007 2006 2007 2006
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Revenues $ 2,396 $ 1,802 $ 6,740 $ 4,438
Expenses (5,604) (5,267) (15,895) (17,419)
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Loss from continuing
operations $ (3,208) $ (3,465) $ (9,155) $(12,981)
Provision for income taxes 64 (4) 282 (81)
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Net loss from continuing
operations $ (3,144) $ (3,469) $ (8,873) $(13,062)
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Income from discontinued
operations, net of current
tax expense - - - 305
Gain from disposal of
discontinued operations,
net of taxes - - - 6,627
Net loss for the period $ (3,144) $ (3,469) $ (8,873) $ (6,130)
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Weighted average number
of shares 38,412,100 37,930,860 38,405,800 37,082,462
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Loss per share from
continuing operations
Basic and diluted $ (0.08) $ (0.09) $ (0.23) $ (0.35)
Income per share from
discontinued operations
Basic and diluted - - - 0.01
Gain per share from
disposal of discontinued
operations
Basic and diluted - - - 0.18
Net loss per share
Basic and diluted $ (0.08) $ (0.09) $ (0.23) $ (0.16)
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Results of 'Continuing Operations'
The following table summarizes the company's results of continuing operations for the periods ended September 30, 2007 and September 30, 2006.
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Summary:
('000's Cdn$ except 3 mth 3 mth 9 mth 9 mthper share values period period period period
and number of shares) ended ended ended ended
(unaudited) Sep 30, Sep 30, Sep 30, Sep 30,
2007 2006 2007 2006
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Revenues $ 2,396 $ 1,802 $ 6,740 $ 4,438
Expenses (5,604) (5,267) (15,895) (17,419)
Income taxes recovery 64 (4) 282 (81)
(expense)
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Loss from continuing
operations $ (3,144) $ (3,469) $ (8,873) $(13,062)
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Loss per share from
continuing operations
Basic and diluted $ (0.08) $ (0.09) $ (0.23) $ (0.35)
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Loss from Operations
As the company continues to develop the FM-TP Series of Compounds, and to further widen the distribution of its nutraceutical products, Forbes expects to continue to report future operating losses from continuing operations.
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Revenue: (summary)
('000's Cdn$) 3 mth 3 mth 9 mth 9 mth(unaudited) period period period period
ended ended ended ended
Sep 30, Sep 30, Sep 30, Sep 30,
2007 2006 2007 2006
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Sales-phytosterol products $ 2,064 $ 1,030 $ 5,402 $ 3,032
Sales-finished goods
(Forbes Fayrefield Ltd.) 236 418 884 467
Licensing - 29 57 86
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Phytosterol revenues 2,300 1,477 6,343 3,585
Interest and other 96 325 397 853
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Total revenues $ 2,396 $ 1,802 $ 6,740 $ 4,438
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Total revenues - including interest income, for the three months ended September 30, 2007 were $2.4 million ($1.8 million - three months September 30, 2006) and $6.7 million for the nine months ended September 30, 2007 ($4.4 million - nine months ended September 30, 2006). This increase was due to increases in both sales of Reducol(tm) by Forbes and sales by Forbes-Fayrefield of finished products, such as margarine spread, spoonable yogurt, and yogurt drinks.
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Expenses: (summary)
('000's Cdn$) 3 mth 3 mth 9 mth 9 mth(unaudited) period period period period
ended ended ended ended
Sep 30, Sep 30, Sep 30, Sep 30,
2007 2006 2007 2006
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Cost of sales $ 2,826 $ 1,305 $ 6,439 $ 3,099
General & administrative 1,159 1,263 3,900 4,184
Research & development 793 1,997 2,841 7,122
Marketing, sales & product
development 352 686 1,244 1,812
Foreign Exchange loss (gain) 419 (20) 1,308 1,094
Depreciation & amortization 55 36 163 108
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Total expenses $ 5,604 $ 5,267 $ 15,895 $ 17,419
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Cost of sales for the three months ended September 30, 2007 totaled $2,826 thousand on phytosterol revenues of $2,300 thousand, or 123% of phytosterol revenues, versus $1,305 thousand on phytosterol revenues of $1,477 thousand for the three months ended September 30, 2006, or 88% of phytosterol revenues. In the three months ended September 30, 2007, Forbes recognized $491 thousand (September 30, 2006 - $nil) of inventory reserves on excess inventories and $437 thousand (September 30, 2006 - $nil) relating to losses on 2008 purchase commitments, which are included in Cost of Sales. Prior to the impact of these allowances in the three months ended September 30, 2007, Cost of Sales as a percentage of phytosterol revenues was 83% compared to 88% for the three months ended September 30, 2006.
Cost of Sales for the nine months ended September 30, 2007 totaled $6,439 thousand on phytosterol revenues of $6,343 thousand, or 102% of phytosterol revenues, versus $3,099 thousand on phytosterol revenues of $3,585 thousand for the nine months ended September 30, 2006, or 86% of phytosterol revenues. In the nine months ended September 30, 2007 the company recognized $961 thousand (September 30, 2006 - $nil) of inventory reserves on excess inventories, and $437 thousand (September 30, 2006 - $nil) relating to losses on 2008 purchase commitments, which are included in Cost of Sales. Prior to the impact of these allowances in the nine months ended September 30, 2007, Cost of Sales as a percentage of phytosterol revenues was 79% compared to 86% for the nine months ended September 30, 2006.
Fluctuations in Cost of Sales as a percentage of phytosterol revenue are attributable to a number of factors including the mix of products sold in a period, varying contractual sales terms, lower margins realized on the sales of finished goods sold through Forbes-Fayrefield and inventory valuation adjustments. In the past quarter Forbes has recognized inventory valuation and purchase commitment provisions which have resulted in an adverse impact on the Q3-07 margins. The company is working to improve its overall margins.
Research and development expenses ("R&D") for the three months ended September 30, 2007 totaled $0.8 million compared with $2.0 million for the same period in 2006. R&D expenses for the nine months September 30, 2007 totaled $2.8 million compared with $7.1 million for the same period in 2006. R&D expenditures in the first three quarters of 2007 were primarily spent on the FM-TP series of compounds and the finalization of work on the US FM-VP4 clinical trial. R&D expenses are expected to increase as work progresses on the FM-TP Series of Compounds.
Liquidity & Capital Resources
Cash, cash equivalents and working capital
As at September 30, 2007, the company's net cash and cash equivalents were $5.9 million compared with $15.3 million as at December 31, 2006. The company's working capital at September 30, 2007 was $11.6 million compared with $19.4 million at December 31, 2006. The decrease in cash and working capital in the quarter was mainly attributable to funding the loss from continuing operations.
After taking into account our planned research and development expenditures, our anticipated revenue, and assuming no unanticipated costs or expenses, we consider that our capital resources will be sufficient to finance operations into the beginning of the second quarter of 2008. The Company is diligently working to obtain additional funding, as well as to enhance its portfolio of products through potential strategic partnership and M&A activities.
Operations
During the three months ended September 30, 2007, the company used $2.5 million of cash for continuing operations compared with $5.4 million of cash used in the three months ended September 30, 2006. Net cash used in continuing operations for the third quarter of 2007 was primarily a result of the net loss for the period adjusted for non-cash expenses. During the nine months ended September 30, 2007, Forbes used $9.4 million of cash for continuing operations, primarily due to the operating loss offset by non-cash expenses, and decreases in non-cash operating liabilities, compared with $19.4 million used for continuing operations during the nine months ended September 30, 2006, primarily resulting from the net loss adjusted for non cash expenses, increases in non-cash operating assets, primarily inventories, and decreases in non cash operating liabilities, primarily the current tax liability.
Third Quarter 2007 Report
This news release includes by reference the Company's unaudited financial statements for the third quarter ended September 30, 2007, 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 life sciences company dedicated to the research, development and commercialization of innovative products for the prevention and treatment of life-threatening disease. Our strategy and vision is to develop and market a portfolio of products for the benefit of all consumers, from the healthy person desiring consumer lifestyle products that can help reduce the risk of future disease, to medical patients needing therapeutic prescription products for the treatment of an established ailment.