Results Of Operations
As of March 31, 2009, there was substantial doubt as to the company’s ability to continue as a going concern without having access to additional financial resources.
Quarter ended March 31, 2009 compared with the Quarter ended March 31, 2008
Research and development expenses amounted to $2,101,611 in the first quarter of 2009, against $3,098,438 in the same quarter last year. The decrease of $996,827 resulted primarily from reduced expenditures on the non-core technologies, as well as on goserelin and peptide research, partially offset by higher expenditures on C2L octreotide. Research and development tax credits declined to $48,000 in the current quarter from $293,823 in the corresponding quarter last year. The decrease in the current quarter reflects the lower level of spending in Canada and the closure of the company’s operations in France.
General and administrative expenses amounted to $1,156,875 in the first quarter of 2009, a decline of $549,694 over the total of $1,706,569 for the same quarter last year. The reduction was primarily due to lower compensation costs, professional fees and occupancy costs, partially offset by higher legal fees.
Business development expenses amounted to $62,584 in the first quarter of 2009, against $286,944 for the same quarter last year. The decrease of $224,360 was primarily due to lower compensation costs and consulting fees in the current quarter. The business development expenses incurred in the first quarter of 2008 were included with research and development and general and administrative expenses and have been reclassified for comparative purposes in the financial statements for the first quarter of 2009.
Amortization expense decreased to $1,416,010 in the current quarter from $2,299,318 in the same quarter last year. The decrease resulted primarily from the reduced amortization on intellectual property following the write-down of the carrying value in September and December 2008.
Accretion expense on long-term debt amounted to $125,895 in the first quarter of 2009 against $113,607 in the same quarter of 2008. This ongoing non-cash accounting charge for imputed interest will increase the carrying value of long-term debt to face value by the maturity date of each item.
Interest on long-term debt was $197,119 in the first quarter of 2009, against $257,362 in the same quarter last year. The decrease was due to the reduction in interest expense on the Biolevier loan as a result of the lower Canadian prime rate in the current quarter compared to the first quarter of 2008.
Restructuring charges in the first quarter of 2009 amounted to $378,406, against $608,901 in the same quarter last year. The amount in the current quarter represented the completion of the restructuring process resulting from the decision taken by the company to close its operations in France. The restructuring charges incurred in the first quarter of 2008 reflected a decision by the company to streamline its operations, resulting in the departure of the Executive Vice-President, Business Development, Licensing and IP.
As a consequence of the intellectual property arising on the acquisition of Ambrilia France, a future income tax liability of $9,787,526 was recorded in 2006, with additional amounts of $315,275 and $604,356 added in 2008 and 2007, respectively, primarily through the exercise of acquisition warrants to acquire additional shares of Ambrilia France. This future income tax liability is being drawn down over a term of up to the 7-year period during which the intellectual property is being amortized. This resulted in a future income tax recovery on the consolidated statement of operations of $439,292 for the first quarter of 2008, together with a foreign exchange gain on the future income tax liability of $189,851. Drawdown of the future income tax liability was completed in the fourth quarter of 2008. Consequently, there is no future income tax recovery in the current quarter.
Liquidity And Capital Resources
Cash and cash equivalents totalled $3,240,477 at March 31, 2009, against $8,335,164 at December 31, 2008. The decrease of $5,094,687 resulted from the utilization of $5,101,303 to finance operating activities for the first quarter of 2009, including an increase of $1,255,697 in non-cash working capital. In addition, an amount of $6,616 was generated in the period from the sale of surplus equipment.
Excluding changes in working capital, operating activities utilized $3.8 million of cash in the current quarter. The average burn rate in the quarter was $1.3 million per month, compared with $1.8 million in the first quarter last year.
