XTL Biopharmaceuticals Ltd
Interim Results for the Six Months Ended 30 June 2003
XTL Biopharmaceuticals Ltd (XTLbio) today announces interim financial results
for the six months ended 30 June 2003.
Summary:
* Completed strategic review of the business which resulted in increasing the
focus on the most advanced clinical development programs for liver
transplant in hepatitis;
* HepeX-C enrolment for the phase 2 study is progressing well with interim
results expected towards the year end - as previously reported Hepex-C
showed encouraging safety and biological activity in a phase 1 study;
* HepeX-B showed encouraging pharmacokinetic results in a dose-ranging study
- phase 2 trials are expected to start later this year;
* HepeX-B was granted Orphan Drug Designation by the US Food and Drug
Administration - an application is being submitted for similar status in
Europe;
* Exercised an option to develop and commercialise compounds developed by
Korea-based B&C Biopharm aimed at inhibiting Hepatitis C virus replication
- lead compounds are being selected and toxicology studies are proceeding;
and
* Cash balance of $28 million as of 30 June 2003 (31 December 2002: $36
million).
Commenting on the results, Dr Martin Becker, Chief Executive Officer, said:
"In the first six months of 2003, we took significant steps to realign our
business to concentrate on those areas offering greatest potential value. We
have focused our resources on niche, hepatitis-related products with near-term
commercial opportunities and we have implemented a Company-wide cost-reduction
programme. With these changes in place and a strong cash position, we believe
that XTLbio is well-placed for future growth and success."
Contacts:
XTLbio Tel: +972-8-930-4440
Dr. Martin Becker, President and CEO
Jonathan Burgin, Chief Financial Officer
Financial Dynamics Tel: +44 (0) 20 7831 3113
David Yates, Sarah MacLeod
Chief Executive Officer's Review
The past six months have presented a number of challenges for XTLbio, resulting
in a strategic review of the business to conserve cash and focus on products
offering near-term commercial potential. Since the Annual General Meeting in
June, we implemented a number of changes at the Company across all aspects of
the business, to further focus and extend the Company's cash resources until
2006.
The most significant change we made was to put on hold all early stage research
activities, which involved a reduction in headcount from 74 to 54. We decided
further to focus the Company's efforts on the development of our most advanced
clinical products in order to optimize the use of cash resources. With product
partnering our priority, we also set up a licensing committee of experienced
Non-Executive Directors to help management progress discussions on the most
advanced programs.
With the renewed focus now in place, we can concentrate on our core objective
of bringing to market revolutionary new treatments for viral hepatitis.
OPERATIONAL REVIEW
Considerable progress has been made in both the HepeX-C and HepeX-B clinical
programs for prevention of reinfection following liver transplant.
HepeX-C
Patient recruitment is proceeding well for the phase 2 HepeX-C trial in liver
transplant patients, with over half the patients (12 out of 19 patients) having
completed enrolment in the original study. Based on our initial observations,
we requested and received permission from the FDA to explore a variety of
different dosing regimens and further extend the study to 24 patients. We
expect to unveil interim results from this trial towards the end of the year.
We anticipate that Hepex C will ultimately be marketed as a combination of two
antibodies. Therefore we intend to add a second antibody to the current
antibody and commence an additional Phase I trial with the combined therapy
next year. Following that, we currently estimate that a Phase II/III trial for
the combined product for HCV LT will be required prior to regulatory approval
and commercialisation.
As there are currently no FDA-approved products for the prevention of recurrent
infection in these patients, we believe that if HepeX-C is capable of
preventing or delaying re-infection in patients undergoing liver transplant, it
could become a standard therapy.
HepeX-B
HepeX-B continues to demonstrate excellent safety data and strong anti-viral
activity in clinical studies. To accelerate the program with liver transplant
patients, we completed a clinical study in healthy volunteers to determine
optimum dosing. Confirming the pre-clinical activity seen in XTLbio's
proprietary Trimera model, it was determined from these studies that as little
as one thousandth of the dose of HepeX-B may be required compared to the
current standard of care. This could mean fewer side effects and simpler modes
of administration. Phase 2 trials with HepeX-B are planned to start later this
year.
Lending credence to this development program, HepeX-B was granted Orphan Drug
Designation from the US Food and Drug Administration (FDA) in July for liver
transplant patients. The grant of Orphan Drug Designation entitles the product
to exclusive marketing rights in the United States for seven years following
marketing approval. Other benefits include the Company being eligible to apply
for certain grants from the FDA to provide funding for development. There is
also a fee waiver when XTLbio submits its Biological License Application (BLA)
to the FDA for approval to market the product. The Company is submitting
documentation for Orphan Drug Designation in Europe through the European
Medicines Evaluation Agency (EMEA).
Pre-clinical Hepatitis C Program
In February, we exercised an option to develop and commercialize a series of
compounds developed by Korea-based B&C Biopharm for treating chronic hepatitis
C patients. Several clinical candidates have been designated and pre-clinical
toxicology studies are proceeding. Assuming continuing success in pre-clinical
development, XTLbio plans to submit an Investigational New Drug (IND) for
clinical testing with one candidate in the second half of 2004.
Partnering Strategy
With our programs with liver transplant patients now well-defined and clinical
trials underway, we are increasing our efforts to seek alliance partners for
our products. With regard to HepeX-B, where proof-of-principle data is now
becoming available, XTLbio is in active licensing discussions with a number of
parties. In addition, XTLbio expects to have data on HepeX-C by the end of the
year, which will be helpful to promote alliances.
FINANCIAL REVIEW
As of 30 June 2003 the Company's cash, short- and long-term investments were
$28 million (31 December 2002: $36 million). R&D expenses remained stable at
$6.6 million compared to $6.5 million for the equivalent period last year. G&A
costs for the period ending 30 June 2003 decreased to $2.2 million from $2.7
million for the first half of 2002. Going forward, in order to ensure that
XTLbio has the cash reserves to accomplish critical goals, the Company has
further reduced its net cash outflow. This further reduction in cash outflow,
which is substantial, is not reflected in these financial statements and the
full impact of all these cash conservation measures taken will be reflected in
the annual report for 2003.
SUMMARY
It is our belief that with our current strategy and strong cash balance, XTLbio
has all the building blocks in place to provide the best chances of success for
our products and to offer considerable upside for shareholders. I would like to
take this opportunity to thank our shareholders for their continued support,
and look forward to updating you on our progress in the coming months.
Martin Becker, PhD
President and Chief Executive Officer
Products in development - update
Product Indication Active ingredient Status
HepeX-B Liver transplant 2 antibodies Start H2 2003 phase II
HepeX-C Liver transplant 1 antibody Phase II ongoing
HepeX-C Liver transplant 2 antibodies Phase I to commence H1
(existing & new) 2004
HepeX-C SM Chronic hepatitis Small molecule Phase I to commence H2
C 2004
About XTLbio
XTL Biopharmaceuticals Ltd. (XTLbio) is a biopharmaceutical company developing
drugs against hepatitis. XTLbio's HepeX(tm) product line - now in clinical trials
- has the potential to introduce revolutionary therapies for viral hepatitis,
including prevention of re-infection in transplanted livers, the Company's
primary focus, and a longer-term cocktail approach in treating chronic illness.
XTLbio believes its primary competitive advantage lies in its patented Trimera(tm)
technology, which enables the development of fully human monoclonal antibodies
and models of human disease for pre-clinical drug validation. Established in
1993, XTLbio became a public company in 2000 with shares traded on the London
Stock Exchange under the symbol XTL.Auditor's Report
The Board of Directors of
XTL Biopharmaceuticals Ltd.
Re: Review of condensed consolidated unaudited interim financial
statements
for the period ended 30 June 2003
At your request, we have reviewed the condensed consolidated balance sheet of
XTL Biopharmaceuticals Ltd. (hereafter - the Company) and its subsidiary at 30
June 2003 and the condensed consolidated statements of operations, changes in
shareholders' equity and cash flows for the six months period then ended. We
have also reviewed the consolidated statements of operations and cash flows for
the period from 9 March 1993 (incorporation date) to 30 June 2003 (the amounts
included therein, which relate to the period through 31 December 2000, are
based on the financial statements for 2000, which were audited by another
accounting firm).
Our review was performed in accordance with auditing standards generally
accepted in Israel and in the United States including those prescribed by the
Institute of Certified Public Accountants in Israel. Inter alia, these
procedures include: reading of the financial statements referred to above,
reading of minutes of meetings of shareholders, the board of directors and its
committees, and making inquiries of Company officers responsible for financial
and accounting matters.
Since our review was limited in scope and did not constitute an audit in
accordance with auditing standards generally accepted in Israel, we do not
express an opinion on the condensed consolidated interim financial statements.
During our review, nothing came to our attention that indicated that
significant adjustments should be made in the said interim condensed
consolidated financial statements in order for them to be considered as having
been prepared in accordance with the accounting principles generally accepted
in the United States.
Sincerely yours,
Kesselman & Kesselman
Certified Public Accountants (Israel)
A member of PriceWaterhouseCoopers International
Tel Aviv, Israel
3 September 2003
XTL BIOPHARMACEUTICALS LTD.
(A Development Stage Company)
BALANCE SHEET
AT 30 JUNE 2003
EXPRESSED IN US DOLLARS
30 June 30 June 31 December
2003 2002 2002
______ ______ ______
(Unaudited) (Unaudited) (Audited)
$000 $000 $000
______ ______ ______
A s s e t s
CURRENT ASSETS:
Cash and cash equivalents 9,854 23,715 2,016
Short-term deposits 17,187 19,071 32,053
Marketable securities 836 1,089 1,637
Accounts receivable 2,167 684 266
______ ______ ______
T o t a l current assets 30,044 44,559 35,972
______ ______ ______
ASSET HELD FOR SALE 354
LONG-TERM DEPOSITS 157 134 139
PROPERTY AND EQUIPMENT, net 1,226 1,495 1,770
______ ______ ______
31,781 46,188 37,881
====== ====== ======
Liabilities and shareholders' equity
CURRENT LIABILITIES -
accounts payable and accruals:
Trade 805 1,429 799
Other 2,028 1,672 1,777
______ ______ ______
T o t a l current liabilities 2,833 3,101 2,576
______ ______ ______
LIABILITY FOR EMPLOYEE RIGHTS UPON 579 303 475
RETIREMENT
______ ______ ______
T o t a l liabilities 3,412 3,404 3,051
______ ______ ______
SHAREHOLDERS' EQUITY:
Share capital 594 590 590
Additional paid in capital 88,966 88,966 88,966
Other capital surplus 337 337 337
Accumulated other comprehensive 29 (130) (48)
income (loss)
Deficit accumulated during the (61,557) (46,979) (55,015)
development stage
______ ______ ______
T o t a l shareholders' equity 28,369 42,784 34,830
______ ______ ______
31,781 46,188 37,881
====== ====== ======
Date of approval of the interim financial statements: 3 September 2003
Geoffrey Vernon - Chairman Martin Becker - CEO
of the Board of Directors and President
The accompanying notes are an integral part of these condensed financial
statements.
XTL BIOPHARMACEUTICALS LTD.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED 30 JUNE 2003
EXPRESSED IN US DOLLARS
Six months Six months Year ended Period from
ended ended 31 December 9 March
30 June 30 June 2002 1993* to
2003 2002 ______ 30 June
2003
______ ______
______
(Unaudited) (Unaudited) (Audited) (Unaudited)
$000 $000 $000 $000
______ ______ ______ ______
RESEARCH AND DEVELOPMENT 6,451 **6,572 **13,096 **56,290
COSTS
LESS - PARTICIPATIONS 1,886 ______ 75 9,607
______ ______ ______
4,565 6,572 13,021 46,683
GENERAL AND ADMINISTRATIVE 2,169 **2,669 **4,716 **21,064
EXPENSES
______ ______ ______ ______
OPERATING LOSS 6,734 9,241 17,737 67,747
FINANCIAL INCOME , net 192 137 597 6,190
______ ______ ______ ______
NET LOSS FOR THE PERIOD 6,542 9,104 17,140 61,557
====== ====== ====== ======
$ $ $
______ ______ ______
BASIC AND DILUTED PER SHARE
DATA:
Loss per ordinary share 0.06 0.08 0.15
====== ====== ======
Weighted average number of 111,212,003 111,132,987 111,149,292
ordinary shares used to
compute loss per ordinary ====== ====== ======
share
* Incorporation date see note 1(a)
** Reclassified
The accompanying notes are an integral part of these condensed financial
statements.
XTL BIOPHARMACEUTICALS LTD.
(A Development Stage Company)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2003
EXPRESSED IN US DOLLARS
Number Share Additional
of shares Capital paid-in
capital
_____ _____
_____
$000 $000
______ ______
BALANCE AT 1 JANUARY 2003 (audited) 111,165,364 590 88,966
CHANGES DURING THE SIX MONTHS ENDED 30
JUNE 2003 (unaudited):
Loss
Net unrealized gain
Comprehensive loss
Exercise of employee stock options 849,550 4 ______
______ ______
BALANCE AT 30 JUNE 2003 (unaudited) 112,014,914 594 88,966
====== ====== ======
BALANCE AT 1 JANUARY 2002 (audited) 111,127,038 590 88,946
CHANGES DURING THE SIX MONTHS ENDED 30
JUNE 2002 (unaudited):
Loss
Net unrealized loss
Comprehensive loss
Exercise of employee stock options 38,326 * 20
______ ______ ______
BALANCE AT 30 JUNE 2002 (unaudited) 111,165,364 590 88,966
====== ====== ======
BALANCE AT 1 JANUARY 2002 (audited) 111,127,038 590 88,946
CHANGES DURING THE YEAR ENDED
31 DECEMBER 2002 (audited):
Loss
Net unrealized loss
Comprehensive loss
Exercise of employee stock options 38,326 * 20
______ ______ ______
BALANCE AT 31 DECEMBER 2002 (audited) 111,165,364 590 88,966
====== ====== ======
* Represents an amount less than $1,000
XTL BIOPHARMACEUTICALS LTD.
(A Development Stage Company)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2003
EXPRESSED IN US DOLLARS
(Continued)
Other Accumulated Deficit Total
Capital other accumulated ______
Surplus comprehensive during the
______ income development
______ stage
______
$000 $000 $000 $000
______ ______ ______ ______
BALANCE AT 1 JANUARY 2003 (audited) 337 (48) (55,015) 34,830
CHANGES DURING THE SIX MONTHS ENDED
30 JUNE 2003 (unaudited):
Loss (6,542) (6,542)
Net unrealized gain 77 77
______
Comprehensive loss (6,465)
Exercise of employee stock options ______ ______ ______ 4
______
BALANCE AT 30 JUNE 2003 (unaudited) 337 29 (61,557) 28,369
====== ====== ====== =====
BALANCE AT 1 JANUARY 2002 (audited) 337 (45) (37,875) 51,953
CHANGES DURING THE SIX MONTHS ENDED
30 JUNE 2002 (unaudited):
Loss (9,104) (9,104)
Net unrealized loss (85) (85)
______
Comprehensive loss (9,189)
Exercise of employee stock options ______ ______ ______ 20
______
BALANCE AT 30 JUNE 2002 (unaudited) 337 (130) (46,979) 42,784
====== ====== ====== =====
BALANCE AT 1 JANUARY 2002 (audited) 337 (45) (37,875) 51,953
CHANGES DURING THE YEAR ENDED 31
DECEMBER 2002 (audited):
Loss (17,140) (17,140)
Net unrealized loss (3) (3)
______
Comprehensive loss (17,143)
______
Exercise of employee stock options ______ ______ ______ 20
______
BALANCE AT 31 DECEMBER 2002 337 (48) (55,015) 34,830
(audited)
====== ====== ====== =====
* Represents an amount less than $1,000
The accompanying notes are an integral part of these condensed financial
statements.
XTL BIOPHARMACEUTICALS LTD.
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2003
EXPRESSED IN US DOLLARS
Six months Six months Year Period from
ended
ended ended 9 March
31
30 June 30 June December 1993* to
2003 2002 2002 30 June
2003
______ ______ ______
______
(Unaudited) (Unaudited) (Audited) (Unaudited)
$000 $000 $000 $000
______ ______ ______ ______
CASH FLOWS FROM OPERATING
ACTIVITIES:
Loss for the period (6,542) (9,104) (17,140) (61,557)
Adjustments to reconcile loss to net
cash used in operating activities:
Depreciation 243 221 470 2,071
Capital (gain) loss on property and (1) (1) 9
equipment
Liability for employee rights upon 177 219 323 1,310
retirement
Loss (gain) on marketable securities (7) 23 41 (403)
Stock based compensation expenses 478
Changes in operating asset and
liability items:
Decrease (increase) in accounts (1,901) 188 606 (2,120)
receivable
Increase (decrease) in accounts 331 388 (20) 2,786
payable and accruals
_______ _______ _______ _______
Net cash used in operating (7,699) (8,066) (15,721) (57,426)
activities (*)
_______ _______ _______ _______
CASH FLOWS FROM INVESTING
ACTIVITIES:
Short-term deposits, net 14,866 14,040 1,058 (17,187)
Long-term deposits (18) 7 2 (157)
Investment in available for sale (11) (337) (1,219) (3,303)
securities
Proceeds from sales of available for 896 318 716 2,899
sale securities
Severance pay funded (147) (39) (88) (731)
Purchase of property and equipment (53) (135) (659) (3,775)
Proceeds from sale of property and _______ 8 8 115
equipment
_______ _______ _______
Net cash provided by (used in) 15,533 13,862 (182) (22,139)
investing activities
_______ _______ _______ _______
CASH FLOWS FROM FINANCING
ACTIVITIES:
Issuance of share capital, net of 4 20 20 89,419
share issue expenses
Proceeds from long-term debt 399
Proceeds from short-term debt 50
Payments relating to long-term debt (399)
Payments relating to short-term debt _______ _______ _______ (50)
_______
Net cash provided by financing 4 20 20 89,419
activities
_______ _______ _______ _______
XTL BIOPHARMACEUTICALS LTD.
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2003
EXPRESSED IN US DOLLARS
(Continued)
Six months Six months Year Period from
ended
ended ended 9 March
31
30 June 30 June December 1993* to
2003 2002 2002 30 June
2003
______ ______ ______
______
(Unaudited) (Unaudited) (Audited) (Unaudited)
$000 $000 $000 $000
______ ______ ______ ______
NET INCREASE IN CASH AND CASH 7,838 5,816 (15,883) 9,854
EQUIVALENTS
BALANCE OF CASH AND CASH EQUIVALENTS 2,016 17,899 17,899 _______
AT BEGINNING OF PERIOD _______ _______ _______
BALANCE OF CASH AND CASH EQUIVALENTS 9,854 23,715 2,016 9,854
AT END OF PERIOD ====== ====== ====== ======
Supplementary information on 1,700
financing activities not
======
involving cash flows -
conversion of convertible
subordinated debenture into shares
Supplemental disclosures:
Income taxes paid 109 85 79 57
====== ====== ====== ======
Interest paid 350
======
(*) Including effect of changes in (749) (709) 1,811
the exchange rate on cash
_______ _______ _______
(**) Incorporation date see note 1(a).
The accompanying notes are an integral part of these condensed financial
statements.
XTL BIOPHARMACEUTICALS LTD.
(A Development Stage Company)
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2003
1. General:
a. XTL Biopharmaceutical Ltd. ("the Company") was incorporated under the Israel
Companies Ordinance on March 9, 1993. The Company is a development stage
company in accordance with Financial Accounting Standard 7 ("FAS") "Accounting
and Reporting by Development Stage Enterprises".
The principal activity of the Company is the development of therapeutic
pipeline for the treatment of infectious diseases.
The Company has a wholly-owned subsidiary in the United States - XTL
biopharmaceuticals Inc. ("Subsidiary"), which was incorporated in 1999 under
the law of the state of Delaware. The subsidiary is primarily engaged in
business development and clinical activities.
b. Through June 30, 2003, the Company has incurred losses in an aggregate
amount of US$ 62,260,000. Such losses have resulted primarily from the
Company's activities as a development stage company. The Company does not
foresee any cash limitations to finance its operations for the coming year.
c. The interim financial statements at June 30, 2003 ("the interim statements")
were drawn up in condensed form, in accordance with accounting principles
generally accepted applicable to interim statements. Thus, the accounting
principles applied in preparation of the interim statements are consistent with
those applied in the preparation of annual financial statements. Nevertheless,
the interim statements do not include all the information and explanations
required for annual financial statements.
2. Functional currency
The currency of the primary economic environment in which the operations of the
Company are conducted is the U.S. dollar ("$" or "dollar"). Most of the
Company's research and development expenses are incurred in dollars.
Significant part of the Company's capital expenditures and substantially all of
its financing is in dollars. Thus, the functional currency of the Company is
dollar.
Transactions and balances originally denominated in dollars are presented at
their original amounts. Balances in non-dollar currencies are translated into
dollars using historical and current exchange rates for non-monetary and
monetary balances, respectively. For non-dollar transactions and other items
reflected in the statements of operations, the following exchange rates are
used: (i) for transactions - exchange rates at transaction dates or average
rates and (ii) for other items (derived from non-monetary balance sheet items)
- historical exchange rates. The resulting currency transaction gains or losses
are carried to financial income or expenses, as appropriate.
XTL BIOPHARMACEUTICALS LTD.
(A Development Stage Company)
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2003
2. Functional currency (continued):
Following are the changes in the exchange rate of the dollar and in the Israeli
Consumer Price Index ("CPI"):
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2002
2003 2002
___________
___________ _________
% % %
Rate of change of the Israeli currency
against the dollar (8.9) 8.0 7.3
Changes in the Israeli CPI (0.5) 6.3 6.5
Exchange rate of one dollar (at end of NIS 4.312 NIS 4.769 NIS 4.737
period)
3. Employee Stock Based Compensation
The Company accounts for employee stock based compensation in accordance with
Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to
Employees" ("APB 25") and related interpretations. In accordance with FAS 123 -
"Accounting for Stock-Based Compensation" the Company discloses pro-forma data
assuming the Company had accounted for employee stock options grants using the
fair value-based method defined in FAS 123.
XTL BIOPHARMACEUTICALS LTD.
(A Development Stage Company)
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2003
3. Employee Stock Based Compensation (continued):
The following table illustrates the effect on net income and earning per share
assuming the Company had applied the fair value recognition provisions of FAS
123 to its stock-based employee compensation:
Six months Six months Year ended Period from
ended ended 31 December 9 March
30 June 30 June 2002 1993*
2003 2002
____________ to 30 June
2003
__________
(Unaudited) (Unaudited) (Audited) (Unaudited)
$000 $000 $000 $000
Loss for the period, as 6,542 9,104 17,140 61,557
reported
Deduct: stock based employee
compensation expense, included
in reported statement of
operations,
net of related tax effect (482)
Add: stock based employee
compensation expense
determined under fair value
method for all awards 514 817 1,297 5,809
________ ________ ________ ________
Pro forma- loss 7,056 9,921 18,437 66,884
======= ======= ======= =======
Basic and diluted loss per
share:
As reported $ 0.06 $ 0.08 $0.15
======= ======= =======
Pro-forma $ 0.06 $ 0.09 $0.17
======= ======= =======
(*) Incorporation date see note 1(a).
14
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