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TEKMIRA PHARMACEUTICALS CORPORATION
Unaudited Interim Condensed Consolidated Financial
Statements (expressed in Canadian dollars)
(Prepared in accordance with generally accepted accounting principles used in the United States of
America (U.S. GAAP))
Three months and nine months ended September 30, 2011
TEKMIRA PHARMACEUTICALS CORPORATION
Condensed Consolidated Balance Sheets
(Expressed in Canadian Dollars)
(Prepared in accordance with U.S. GAAP)
| September 30 2011 (Unaudited) | December 31 2010 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 9,215,249 | $ | 12,346,010 | ||||
| Accounts receivable (note 3) | 1,542,545 | 3,318,729 | ||||||
| Accrued revenue | 750,290 | 817,464 | ||||||
| Deferred expenses | 489,203 | 557,256 | ||||||
| Investment tax credits receivable | 321,208 | 403,580 | ||||||
| Finished goods inventory | 150,731 | |||||||
| Prepaid expenses and other assets | 665,180 | 315,057 | ||||||
| Total current assets | 12,983,675 | 17,908,827 | ||||||
| Property and equipment | 18,725,345 | 18,668,897 | ||||||
| Less accumulated depreciation and impairment | (16,286,214 | ) | (15,555,481 | ) | ||||
| 2,439,131 | 3,113,416 | |||||||
| Total assets | $ | 15,422,806 | $ | 21,022,243 | ||||
| Liabilities and stockholders equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities (note 4) | $ | 3,730,888 | $ | 6,151,923 | ||||
| Deferred revenue current portion (note 2) | 2,603,181 | 1,982,264 | ||||||
| Warrants (note 5(a)) | 313,232 | |||||||
| Total current liabilities | 6,647,301 | 8,134,187 | ||||||
| Deferred revenue, net of current portion (note 2) | 1,873,801 | 2,155,478 | ||||||
| Total liabilities | 8,521,102 | 10,289,665 | ||||||
| Stockholders equity: | ||||||||
| Common shares (note 5) | ||||||||
| Authorized - unlimited number with no par value Issued and outstanding: | ||||||||
| 12,148,474 (December 31, 2010 - 10,338,703) | 233,500,206 | 229,491,529 | ||||||
| Additional paid-in capital | 30,411,331 | 30,151,810 | ||||||
| Deficit | (257,009,833 | ) | (248,910,761 | ) | ||||
| Total stockholders equity | 6,901,704 | 10,732,578 | ||||||
| Total liabilities and stockholders equity | $ | 15,422,806 | $ | 21,022,243 |
Basis of presentation and future operations (note 1)
Contingencies and commitments (note 6)
See accompanying notes to the condensed consolidated financial statements.
TEKMIRA PHARMACEUTICALS CORPORATION
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Expressed in Canadian Dollars)
(Prepared in accordance with U.S. GAAP)
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| Revenue (note 2) | ||||||||||||||||
| Collaborations and contracts | $ | 3,636,309 | $ | 3,949,356 | $ | 12,387,617 | $ | 8,731,454 | ||||||||
| Licensing fees and milestone payments | 524,100 | 514,129 | 524,100 | 514,129 | ||||||||||||
| License amendment payment | 5,916,750 | 5,916,750 | ||||||||||||||
| 4,160,409 | 10,380,235 | 12,911,717 | 15,162,333 | |||||||||||||
| Expenses | ||||||||||||||||
| Research, development, collaborations and contracts | 4,380,947 | 5,222,622 | 16,218,671 | 15,508,339 | ||||||||||||
| General and administrative | 1,207,783 | 1,482,034 | 4,343,809 | 3,558,292 | ||||||||||||
| Depreciation of property and equipment | 253,798 | 245,530 | 730,733 | 801,857 | ||||||||||||
| Loss on purchase and settlement of exchangeable and development notes (note 2(f)) | 5,916,750 | 5,916,750 | ||||||||||||||
| 5,842,528 | 12,866,936 | 21,293,213 | 25,785,238 | |||||||||||||
| Loss from operations | (1,682,119 | ) | (2,486,701 | ) | (8,381,496 | ) | (10,622,905 | ) | ||||||||
| Other income (losses) | ||||||||||||||||
| Interest income | 17,711 | 31,957 | 79,963 | 78,827 | ||||||||||||
| Foreign exchange losses | (82,322 | ) | 25,435 | (147,116 | ) | (6,213 | ) | |||||||||
| Warrant issuance costs (note 5(a)) | (80,000 | ) | ||||||||||||||
| Change in fair value of warrant liability (note 5(a)) | 277,435 | 429,577 | ||||||||||||||
| Net loss and comprehensive loss | $ | (1,469,295 | ) | $ | (2,429,309 | ) | $ | (8,099,072 | ) | $ | (10,550,291 | ) | ||||
| Loss per common share | ||||||||||||||||
| Basic and diluted | $ | (0.12 | ) | $ | (0.24 | ) | $ | (0.73 | ) | $ | (1.02 | ) | ||||
| Weighted average number of common shares | ||||||||||||||||
| Basic and diluted | 12,139,113 | 10,335,057 | 11,039,144 | 10,331,259 |
See accompanying notes to the condensed consolidated financial statements.
TEKMIRA PHARMACEUTICALS CORPORATION
Condensed Consolidated Statements of Stockholders Equity
For the nine months ended
September 30, 2011 (unaudited)
(Expressed in Canadian Dollars)
(Prepared in accordance with U.S. GAAP)
| Number of shares | Share capital | Additional paid-in capital | Deficit | Total stockholders equity | ||||||||||||||||
| Balance, December 31, 2010 | 10,338,703 | $ | 229,491,529 | $ | 30,151,810 | $ | (248,910,761 | ) | $ | 10,732,578 | ||||||||||
| Stock-based compensation | 374,771 | 374,771 | ||||||||||||||||||
| Issuance of common shares pursuant to exercise of options | 19,871 | 125,839 | (115,250 | ) | 10,589 | |||||||||||||||
| Issuance of common shares in conjunction with the public offering, net of issuance costs of $475,568 and net of initial fair value of warrants of $742,809 | 1,789,900 | 3,882,838 | 3,882,838 | |||||||||||||||||
| Net loss | (8,099,072 | ) | (8,099,072 | ) | ||||||||||||||||
| Balance, September 30, 2011 | 12,148,474 | $ | 233,500,206 | $ | 30,411,331 | $ | (257,009,833 | ) | $ | 6,901,704 |
See accompanying notes to the condensed consolidated financial statements.
TEKMIRA PHARMACEUTICALS CORPORATION
Condensed Consolidated Statements of Cash Flow
(Expressed in Canadian Dollars)
accordance with U.S. GAAP)
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| OPERATING ACTIVITIES | ||||||||||||||||
| Loss for the period | $ | (1,469,295 | ) | $ | (2,429,309 | ) | $ | (8,099,072 | ) | $ | (10,550,291 | ) | ||||
| Items not involving cash: | ||||||||||||||||
| Depreciation of property and equipment | 253,798 | 245,530 | 730,733 | 801,857 | ||||||||||||
| Stock-based compensation expense | 202,266 | 102,837 | 374,771 | 523,188 | ||||||||||||
| Foreign exchange losses arising on foreign currency cash balances | (63,446 | ) | (26,692 | ) | (32,544 | ) | 4,956 | |||||||||
| Warrant issuance costs | 80,000 | |||||||||||||||
| Change in fair value of warrant liability | (277,435 | ) | (429,577 | ) | ||||||||||||
| Net change in non-cash operating items: | ||||||||||||||||
| Accounts receivable | 2,609,585 | (1,143,545 | ) | 1,776,184 | (1,067,353 | ) | ||||||||||
| Accrued revenue | (370,852 | ) | (414,892 | ) | 67,174 | (414,892 | ) | |||||||||
| Deferred expenses | 74,479 | (187,101 | ) | 68,053 | (187,101 | ) | ||||||||||
| Investment tax credits receivable | 15,961 | 82,372 | 25,599 | |||||||||||||
| Inventory | 211,047 | 150,731 | ||||||||||||||
| Prepaid expenses and other assets | (243,655 | ) | (38,758 | ) | (350,123 | ) | (8,805 | ) | ||||||||
| Accounts payable and accrued liabilities | (911,618 | ) | 1,200,714 | (2,421,035 | ) | (1,253,499 | ) | |||||||||
| Deferred revenue | (583,844 | ) | 426,053 | 339,240 | 4,422,797 | |||||||||||
| (568,970 | ) | (2,249,202 | ) | (7,663,093 | ) | (7,703,544 | ) | |||||||||
| INVESTING ACTIVITIES | ||||||||||||||||
| Acquisition of property and equipment | (76,636 | ) | (56,448 | ) | (822,504 | ) | ||||||||||
| (76,636 | ) | (56,448 | ) | (822,504 | ) | |||||||||||
| FINANCING ACTIVITIES | ||||||||||||||||
| Proceeds from issuance of common shares and warrants, net of issuance costs | 4,545,647 | |||||||||||||||
| Issuance of common shares pursuant to exercise of options | 9,153 | 11,033 | 10,589 | 32,394 | ||||||||||||
| 9,153 | 11,033 | 4,556,236 | 32,394 | |||||||||||||
| Foreign exchange losses arising on foreign currency cash balances | 63,446 | 26,692 | 32,544 | (4,956 | ) | |||||||||||
| Decrease in cash and cash equivalents | (496,371 | ) | (2,288,113 | ) | (3,130,761 | ) | (8,498,610 | ) | ||||||||
| Cash and cash equivalents, beginning of period | 9,228,665 | 18,187,243 | 12,346,010 | 24,397,740 | ||||||||||||
| Cash and cash equivalents, end of period | $ | 8,732,294 | $ | 15,899,130 | $ | 9,215,249 | $ | 15,899,130 | ||||||||
| Supplemental cash flow information | ||||||||||||||||
| Investment tax credits received | $ | $ | 15,961 | $ | 102,464 | $ | 36,613 | |||||||||
| Fair value of warrants issued in conjunction with public offering | $ | $ | $ | 742,809 | $ |
See accompanying notes to the condensed consolidated financial statements.
TEKMIRA PHARMACEUTICALS CORPORATION
Notes to interim condensed consolidated financial statements (unaudited)
(Expressed in Canadian
Three months and nine months ended September 30, 2011
Nature of business and future operations
Tekmira Pharmaceuticals Corporation (the Company ) is a Canadian biopharmaceutical business focused on advancing novel RNA interference therapeutics and providing its leading lipid nanoparticle
delivery technology to pharmaceutical partners.
The success of the Company is dependent on obtaining the necessary regulatory approvals to
bring its products to market and achieve profitable operations. The continuation of the research and development activities and the commercialization of its products are dependent on the Company s ability to successfully complete these
activities and to obtain adequate financing through a combination of financing activities and operations. It is not possible to predict either the outcome of future research and development programs or the Company s ability to fund these
programs in the future.
Basis of presentation and significant accounting policies
These unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles of the
United States of America ( U.S. GAAP ) for interim financial statements and accordingly, do not include all disclosures required for annual financial statements.
These statements should be read in conjunction with the Company s audited consolidated financial statements and notes thereto for the year ended December 31, 2010 and included in the 2010 Annual
The unaudited interim condensed consolidated financial statements reflect, in the opinion of management, all adjustments and
reclassifications necessary to present fairly the financial position, results of operations and cash flows at September 30, 2011 and for all periods presented.
The results of operations for the three months and nine months ended September 30, 2011 and September 30, 2010 are not necessarily indicative of the results for the full year.
These interim financial statements follow the same significant accounting policies as those described in the notes to the audited consolidated financial
statements of Tekmira Pharmaceuticals Corporation ( the Company ) for the year ended December 31, 2010.
financial statements include the accounts of the Company and its two wholly-owned subsidiaries, Protiva Biotherapeutics Inc. ( Protiva ) and Protiva Biotherapeutics (USA), Inc.. All intercompany transactions and balances have been
eliminated on consolidation.
Income or loss per share
Income or loss per share is calculated based on the weighted average number of common shares outstanding. Diluted loss per share does not differ from basic loss per share since the effect of the
Company s stock options and warrants are anti-dilutive. Diluted income per share is calculated using the treasury stock method which uses the weighted average number of common shares outstanding during the period and also includes the dilutive
effect of potentially issuable common shares from outstanding stock options and warrants. At September 30, 2011, potential common shares (prior to consideration of the treasury stock method) of 2,776,252 were excluded from the calculation of
net loss per common share because their inclusion would be anti-dilutive.
Fair value of financial instruments
The Company s financial instruments consist of cash and cash equivalents, accounts receivable, investment tax credits receivable, accounts payable
and accrued liabilities, warrants and promissory notes.
The carrying values of cash and cash equivalents are recorded at fair value based on
quoted prices in active markets. The carrying values of accounts receivable, investment tax credits receivable and accounts payable and accrued liabilities approximate their fair values due to the immediate or short-term maturity of these financial
instruments. As quoted prices for the warrants are not readily available, the Company has used a Black-Scholes pricing model, as described in Note 5, to estimate fair value. These are level 3 inputs as defined in the Company s accounting policy
for the fair value of financial instruments as described in the annual financial statements for the year ended December 31, 2010.
TEKMIRA PHARMACEUTICALS CORPORATION
Notes to interim condensed consolidated financial statements (unaudited)
(Expressed in Canadian
Three months and nine months ended September 30, 2011
Recent accounting pronouncements
In October 2009, the Financial Accounting Standards Board (FASB) issued EITF 08-01, Revenue Arrangements with Multiple Deliverables (currently within the scope of FASB Accounting Standards
Codification (ASC) Subtopic 605-25). This statement provides principles for allocation of consideration among its multiple-elements, allowing more flexibility in identifying and accounting for separate deliverables under an arrangement. The EITF
introduces an estimated selling price method for valuing the elements of a bundled arrangement if vendor-specific objective evidence or third-party evidence of selling price is not available, and significantly expands related disclosure
requirements. This standard is effective on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Alternatively, adoption may be on a retrospective basis, and early
application is permitted. The Company adopted this pronouncement on January 1, 2011. Adoption of the pronouncement did not have a material impact on the Company s financial statements.
In March 2010, the FASB ratified the EITF final consensus on Issue ASC 2010-17, Milestone Method of Revenue Recognition. The guidance in this
consensus allows the milestone method as an acceptable revenue recognition methodology when an arrangement includes substantive milestones. The guidance provides a definition of a substantive milestone and should be applied regardless of whether the
arrangement includes single or multiple deliverables or units of accounting. The scope of this consensus is limited to transactions involving milestones relating to research and development deliverables. The guidance includes enhanced disclosure
requirements about each arrangement, individual milestones and related contingent consideration, information about substantive milestones and factors considered in the determination. The consensus is effective prospectively to milestones achieved in
fiscal years, and interim periods within those years, after June 15, 2010. Early application and retrospective application are permitted. The Company adopted this pronouncement on January 1, 2011. Adoption of the pronouncement did not have
a material impact on the Company s financial statements.
The following tables set forth revenue recognized under collaborations, contracts and licensing agreements:
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| Collaborations and contracts | ||||||||||||||||
| Alnylam (a) | $ | 1,435,657 | $ | 1,849,658 | $ | 3,396,530 | $ | 4,134,708 | ||||||||
| U.S. Government (b) | 1,956,920 | 1,178,342 | 8,645,515 | 1,178,342 | ||||||||||||
| Roche (c) | 651,356 | 3,520 | 2,813,479 | |||||||||||||
| BMS (d) | 217,527 | 286,912 | 227,995 | |||||||||||||
| Other RNAi collaborators (e) | 26,205 | 270,000 | 55,140 | 376,930 | ||||||||||||
| 3,636,309 | 3,949,356 | 12,387,617 | 8,731,454 | |||||||||||||
| Alnylam licensing fees and milestone payments (a) | 524,100 | 514,129 | 524,100 | 514,129 | ||||||||||||
| Talon license amendment payment (f) | 5,916,750 | 5,916,750 | ||||||||||||||
| Total revenue | $ | 4,160,409 | $ | 10,380,235 | $ | 12,911,717 | $ | 15,162,333 |
TEKMIRA PHARMACEUTICALS CORPORATION
Notes to interim condensed consolidated financial statements (unaudited)
(Expressed in Canadian
Three months and nine months ended September 30, 2011
The following table sets forth deferred collaborations and contracts revenue:
| September 30, 2011 | December 31, 2010 | |||||||
| Alnylam (a) | $ | 16,903 | $ | |||||
| U.S. Government (b) | 1,373,693 | 760,924 | ||||||
| Roche (c) | 36,712 | 40,232 | ||||||
| BMS current portion (d) | 1,175,873 | 1,181,108 | ||||||
| Deferred revenue, current portion | 2,603,181 | 1,982,264 | ||||||
| BMS long-term portion (d) | 1,873,801 | 2,155,478 | ||||||
| Total deferred revenue | $ | 4,476,982 | $ | 4,137,742 |
License and Collaboration Agreement with Alnylam through Tekmira
2007, the Company entered into a licensing and collaboration agreement with Alnylam ( Alnylam License and Collaboration ) giving them an exclusive license to certain of the Company s historical lipid nanoparticle intellectual property
for the discovery, development, and commercialization of ribonucleic acid interference ( RNAi ) therapeutics.
with Alnylam acquired through Protiva
As a result of the acquisition of Protiva on May 30, 2008, the Company acquired a
Cross-License Agreement between Protiva and Alnylam dated August 14, 2007 (the Alnylam Cross-License ). Alnylam was granted a non-exclusive license to the Protiva intellectual property.
Manufacturing agreement with Alnylam
Under a manufacturing agreement with Alnylam (the Alnylam Manufacturing Agreement ) effective January 1, 2009 the Company is the exclusive manufacturer of any products required by Alnylam