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ARIUS Announces Third Quarter Fiscal 2007 Financial Results
Date:10/12/2007

TORONTO, Oct. 12 /PRNewswire-FirstCall/ - ARIUS Research Inc., (TSX: ARI), a biotechnology company discovering and developing the next wave of antibody therapeutics, today announced its financial and operational results for the third quarter, ended August 31, 2007.

"Our third quarter of fiscal 2007 was one of preparation as we worked towards moving our lead drug candidate AR001 into human clinical trials in 2008, while also building value in our business and our pipeline through the progression of our other antibody anti-cancer candidates," said Dr. David Young, President and CEO. "Our most important development this quarter and a milestone step for ARIUS, was the initiation of a pre-clinical dose-finding toxicology study for AR001, our CD44 targeting anti-cancer antibody."

Program Updates:

CD44 Cancer Stem Cell Program

ARIUS initiated a pre-clinical dose-finding study, commencing its IND-enabling toxicology program for its lead anti-CD44 antibody. The Company expects to file a Phase I IND application and begin human clinical trials in 2008. The Company engaged a manufacturer for process development and manufacturing of its lead antibody under Current Good Manufacturing Practices ("cGMP").

Trop-2 Signal Transduction Program

ARIUS has successfully humanized its anti-Trop-2 antibody, which continues to retain its binding characteristics and in vivo activity. The Company also selected a manufacturer for the antibody. The Company expects to perform pre-clinical toxicology studies in 2008 in preparation for filing a Phase I IND application in 2008.

CD59 Complement Inhibitor Program

In collaboration with Antitope Limited, ARIUS has successfully humanized its CD59 targeting antibody, retaining its binding characteristics and in vivo activity. The Company expects to perform preclinical toxicology studies in 2008 in preparation for filing a Phase I IND application.

CD63 Antibody Program

The Genentech-partnere (70,169) - (190,429)

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Loss and comprehensive loss

for the period (2,761,874) (1,469,728) (29,581,295)

Deficit, beginning of period (26,819,421) (16,383,139) -

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Deficit, end of period (29,581,295) (17,852,867) (29,581,295)

-------------------------------------------------------------------------

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Loss per share - basic and diluted (0.06) (0.03)

-------------------------------------------------------------------------

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Weighted average common shares

outstanding 44,750,964 44,076,383

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ARIUS RESEARCH INC.

(a Development Stage Company)

INTERIM STATEMENTS OF CASH FLOWS

(Unaudited)

------------------------------------------------------------

Nine-month Nine-month

period ended period ended

August 31, August 31,

2007 2006

$ $

------------------------------------------------------------

Cash provided by (used in):

Operating activities:

Loss for the period (8,104,701) (2,820,462)

Items not involving cash:

Amortization of:

Property and equipment 274,630 171,636

Deferred costs - 40,693

Leasehold inducements (31,114) -

Loss on disposal of equipment - -

Write-off of leasehold

improvements - -

Leasehold inducement - -

Non-cash stock-based

compensation 700,817 102,460

Accretion of convertible

debentures - 224,077

Loss on extinguishment of debt - -

Services received for common

shares - -

Write-off of investment - -

Interest expense paid in

common shares - -

----------------------------------------------------------

(7,160,368) (2,281,596)

Change in non-cash operating

working capital items 1,859,097 369,343

----------------------------------------------------------

(5,301,271) (1,912,253)

Financing activities:

Issue of shares, warrants and

units, net of issuance costs - 24,861,718

Issuance of convertible bridge

loan, net - 2,126,619

Restricted cash - (2,247,623)

Repayment of convertible bridge

loan, including costs - -

Exercise of compensation warrants - -

Draw of bank line of credit - -

Repayment of bank line of credit - (85,000)

Bridge loan - -

Repayment of bridge loan - (300,000)

Repayment of capital lease and

equipment financing obligations (23,478) (68,263)

----------------------------------------------------------

(23,478) 24,287,451

Investing activities:

Purchase of short-term

investments (25,405,198) (14,998,021)

Maturity of short-term

investments 33,578,025 -

Leasehold inducements - -

Long-term investment - -

Acquisition of property

and equipment (723,147) (674,279)

Disposal of equipment - -

----------------------------------------------------------

7,449,680 (15,672,300)

Increase in cash & cash

equivalents 2,124,931 6,702,898

Cash & cash equivalents,

beginning of period 4,077,065 152,967

------------------------------------------------------------

Cash & cash equivalents,

end of period 6,201,996 6,855,865

------------------------------------------------------------

------------------------------------------------------------

-------------------------------------------------------------------------

Cumulative

Three-month Three-month since

period ended period ended inception on

August 31, August 31, August 11,

2007 2006 1999

$ $ $

-------------------------------------------------------------------------

Cash provided by (used in):

Operating activities:

Loss for the period (2,761,874) (1,469,728) (29,581,295)

Items not involving cash:

Amortization of:

Property and equipment 108,151 85,426 1,163,788

Deferred costs - 14,364 55,055

Leasehold inducements (10,371) - (45,781)

Loss on disposal of equipment - - 23,532

Write-off of leasehold

improvements - - 86,349

Leasehold inducement - - 89,148

Non-cash stock-based

compensation 266,197 31,456 1,486,216

Accretion of convertible

debentures - 120,903 429,905

Loss on extinguishment of debt - - 782,143

Services received for common

shares - - 400,024

Write-off of investment - - 20,000

Interest expense paid in

common shares - - 140,032

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(2,397,897) (1,217,579) (24,950,884)

Change in non-cash operating

working capital items 638,007 (110,711) 4,041,306

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(1,759,890) (1,328,290) (20,909,578)

Financing activities:

Issue of shares, warrants and

units, net of issuance costs - - 38,281,778

Issuance of convertible bridge

loan, net - - 2,196,619

Restricted cash - (38,540) -

Repayment of convertible bridge

loan, including costs - - (2,408,886)

Exercise of compensation warrants - - 8,581

Draw of bank line of credit - - 655,000

Repayment of bank line of credit - - (655,000)

Bridge loan - - 300,000

Repayment of bridge loan - - (300,000)

Repayment of capital lease and

equipment financing obligations (6,045) (21,316) (284,279)

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(6,045) (59,856) 37,793,813

Investing activities:

Purchase of short-term

investments (15,164,593) (14,998,021) (41,540,688)

Maturity of short-term

investments 15,917,008 - 33,578,025

Leasehold inducements - - 243,780

Long-term investment - - (20,000)

Acquisition of property

and equipment (205,593) (523,558) (2,952,342)

Disposal of equipment - - 8,986

-----------------------------------------------------------------------

546,822 (15,521,579) (10,682,239)

Increase in cash & cash

equivalents (1,219,113) (16,909,725) 6,201,996

Cash & cash equivalents,

beginning of period 7,421,109 23,765,590 -

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Cash & cash equivalents,

end of period 6,201,996 6,855,865 6,201,996

-------------------------------------------------------------------------

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d CD63 antibody program continues to produce results from further preclinical studies in a variety of cancer indications in its progress towards human clinical trials.

Takeda Collaboration

ARIUS successfully met its year one obligations and received all scheduled research payments from Takeda.

Additional Product Updates

Additionally, ARIUS continues to progress several other antibody candidates and has antibody programs targeting the MCSP antigen, AR005 antigen, and 37LRP in addition to several other undisclosed programs.

Management Change:

As part of its corporate governance review, ARIUS' Board of Directors has decided to nominate Mr. Carl Gordon as non-executive Chair of the Board of Directors. Dr. Young remains as President and Chief Executive Officer of the Company.

During the quarter, ARIUS' Executive Vice President and Chief Business Officer, Helen Findlay, left the Company to pursue other opportunities. In Ms. Findlay's role, she contributed to ARIUS' partnering and financing activities, helping to establish ARIUS on the path to becoming a clinical company.

Financial Results:

All amounts are in Canadian dollars unless otherwise indicated.

For the nine-month period ended August 31, 2007, the Company recorded a net loss of $8,104,701 ($0.18 per share) compared to a net loss of $2,820,462 ($0.09 per share) for the same period in fiscal 2006. The increase in net loss was the result of lower revenue, higher research and development expenses and higher general and administrative costs offset partially by lower interest expense and higher interest income. For the three-month period ended August 31, 2007, the Company recorded a net loss of $2,761,874 ($0.06 per share) compared to a net loss of $1,469,728 ($0.03 per share) for the three-month period ended August 31, 2006. This increase in net loss for the three-month period is primarily the result of higher research and development expenses, higher general and administrative expenses, and lower interest income, offset partially by lower interest expense and higher revenues.

Revenue decreased to $845,974 for the nine-month period ended August 31, 2007, compared to $2,668,010 for the nine-month period ended August 31, 2006. The decrease during the nine-month period ended August 31, 2007, was primarily the result of the recognition of licensing fee revenue from Genentech in the fiscal 2006 period, partially offset by the recognition of revenue from the Takeda collaboration and the recognition of unearned revenue from PDL BioPharma Inc. ("PDL"). For the three-month period ended August 31, 2007, the Company's revenue increased to $716,128 compared to $226,710 for the three-month period ended August 31, 2006. The increase in the three month period relates to the recognition of revenue from the Takeda collaboration and the recognition of unearned revenue from PDL in the fiscal 2007 period.

Interest income increased to $537,128 for the nine-month period ended August 31, 2007, compared to $396,966 for the same period in fiscal 2006. For the three-month period ended August 31, 2007, the Company's interest income decreased to $155,721 compared to $275,529 for the same period in fiscal 2006. The increase for the nine-month period was primarily the result of higher average cash balances due to the completion of a private placement in February and March 2006, payments from the Genentech licensing agreement and the Takeda research collaboration and higher interest rates. The decrease for the three-month period was primarily the result of lower average cash and investment balances.

Research and development costs amounted to $6,461,991 for the nine-month period ended August 31, 2007, compared to $3,175,663 for the same period in fiscal 2006. For the three-month period ended August 31, 2007, the Company's research and development costs amounted to $2,402,060 compared to $1,303,088 for the same period in fiscal 2006. The increases were primarily the result of increased product development activity, including process development and scale-up, as the Company prepares several of its programs for the clinic as well as an increase in staffing levels and stock option remuneration expense.

General and administrative expenses increased to $2,833,070 for the nine-month period ended August 31, 2007, compared to $2,162,020 for the same period in fiscal 2006. For the three-month period ended August 31, 2007, the Company's general and administrative expenses increased to $1,160,827 compared to $470,619 for the same period in fiscal 2006. The increases were primarily the result of increased head count, stock option remuneration, and severance costs, partially offset by decreased consulting and legal costs.

As at August 31, 2007, the Company's cash and cash equivalents, short-term investments and working capital position were $6,201,996, $7,962,663 and $12,035,539 respectively, compared with November 30, 2006 balances of $4,077,065, $16,135,490 and $20,263,807, respectively. The Company believes that it has adequate financial resources for anticipated expenditures until the fourth quarter of fiscal 2008.

As at October 10, 2007, the Company had: 44,750,964 Common Shares outstanding; 34,953,526 Warrants; 2,121,808 Compensation Warrants; and 4,019,705 Stock Options.

About ARIUS

ARIUS is a biotechnology company discovering and developing the next wave of antibody therapeutics. Established in 1999, ARIUS has built a proprietary technology platform, FunctionFIRST(TM), that rapidly identifies and selects antibodies based on their functional ability to affect disease. This antibody generation engine has enabled ARIUS to assemble a portfolio of more than 400 antibody candidates. In addition to the antibodies it is developing in-house, ARIUS has ongoing partnerships with key biotechnology and drug development companies. ARIUS is listed on the TSX under the symbol "ARI". For further information, visit http://www.ariusresearch.com.

Forward-Looking Statements

Certain statements in this news release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, which involve known and unknown risks, uncertainties and other factors that may cause our actual results to be materially different from any future results, performance or achievements expressed or implied by such statements. Forward-looking statements in this release include, but are not limited to, ARIUS successfully advancing its new product programs as well as licensing opportunities. These statements are only predictions and actual events or results may differ materially. Factors that could cause such actual events or results expressed or implied by such forward-looking statements to differ materially from any future results expressed or implied by such statements include, but are not limited to: early stage of development; technology and product development; dependence on and management of current and future corporate collaborations; future capital needs; uncertainty of additional funding; no assurance of market acceptance; dependence on proprietary technology and uncertainty of patent protection; intense competition; manufacturing and market uncertainties; and government regulation. These and other factors are described in detail in ARIUS' Annual Report, forthcoming news releases and other filings with Canadian securities regulatory authorities available at http://www.sedar.com. Forward-looking statements are based on our current expectations and ARIUS is not obligated to update such information to reflect later events or developments.

ARIUS RESEARCH INC.

(a Development Stage Company)

INTERIM BALANCE SHEETS

(Unaudited)

-------------------------------------------------------------------------

August 31, November 30,

2007 2006

$ $

-------------------------------------------------------------------------

Assets

Current assets:

Cash and cash equivalents 6,201,996 4,077,065

Short-term investments 7,962,663 16,135,490

Receivables 246,191 716,727

Refundable tax credits 600,000 400,000

Prepaid expenses 493,864 340,695

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15,504,714 21,669,977

Property and equipment, net 1,988,053 1,539,536

-------------------------------------------------------------------------

17,492,767 23,209,513

-------------------------------------------------------------------------

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Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable and accrued liabilities 1,917,930 1,211,528

Current portion of capital lease obligation 25,265 29,630

Current portion of unearned revenue and

contract advances 1,525,980 165,012

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3,469,175 1,406,170

Leasehold inducements 287,147 318,261

Capital lease obligation 8,821 27,934

Unearned revenue and contract advances 1,937,451 2,263,091

Shareholders' equity:

Share capital:

Common shares 28,644,454 28,644,454

Warrants 9,603,644 9,603,644

Compensation warrants 912,377 912,377

Contributed surplus 2,210,993 1,510,176

Deficit (29,581,295) (21,476,594)

-----------------------------------------------------------------------

11,790,173 19,194,057

Guarantees

Commitments

-------------------------------------------------------------------------

17,492,767 23,209,513

-------------------------------------------------------------------------

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ARIUS RESEARCH INC.

(a Development Stage Company)

INTERIM STATEMENTS OF OPERATIONS, COMPREHENSIVE LOSS AND DEFICIT

(Unaudited)

------------------------------------------------------------

Nine-month Nine-month

period ended period ended

August 31, August 31,

2007 2006

$ $

------------------------------------------------------------

Revenue:

Research Contract 508,660 -

Product 98,942 -

Licensing fees 165,012 2,592,041

Research grant payments 73,360 75,969

----------------------------------------------------------

845,974 2,668,010

Expenses:

Research and development,

net of tax credits 6,461,991 3,175,663

General and administrative 2,833,070 2,162,020

Interest expense 2,313 547,755

----------------------------------------------------------

9,297,374 5,885,438

----------------------------------------------------------

Loss before the undernoted (8,451,400) (3,217,428)

Interest income 537,128 396,966

Loss on extinguishment of debt - -

------------------------------------------------------------

Loss before income taxes (7,914,272) (2,820,462)

Income taxes:

Current (190,429) -

------------------------------------------------------------

Loss and comprehensive loss

for the period (8,104,701) (2,820,462)

Deficit, beginning of period (21,476,594) (15,032,405)

------------------------------------------------------------

Deficit, end of period (29,581,295) (17,852,867)

------------------------------------------------------------

------------------------------------------------------------

Loss per share - basic and diluted (0.18) (0.09)

------------------------------------------------------------

------------------------------------------------------------

Weighted average common shares

outstanding 44,750,964 32,828,905

------------------------------------------------------------

------------------------------------------------------------

-------------------------------------------------------------------------

Cumulative

Three-month Three-month since

period ended period ended inception on

August 31, August 31, August 11,

2007 2006 1999

$ $ $

-------------------------------------------------------------------------

Revenue:

Research Contract 508,660 - 508,660

Product 42,456 - 98,942

Licensing fees 165,012 208,564 3,284,703

Research grant payments - 18,146 273,663

-----------------------------------------------------------------------

716,128 226,710 4,165,968

Expenses:

Research and development,

net of tax credits 2,402,060 1,303,088 23,254,226

General and administrative 1,160,827 470,619 10,519,592

Interest expense 667 198,260 903,836

-----------------------------------------------------------------------

3,563,554 1,971,967 34,677,654

-----------------------------------------------------------------------

Loss before the undernoted (2,847,426) (1,745,257) (30,511,686)

Interest income 155,721 275,529 1,902,963

Loss on extinguishment of debt - - (782,143)

-------------------------------------------------------------------------

Loss before income taxes (2,691,705) (1,469,728) (29,390,866)

Income taxes:

Current
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SOURCE ARIUS Research Inc.
Copyright©2007 PR Newswire.
All rights reserved

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