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FIRST QUARTER REPORT 2000
TO OUR SHAREHOLDERS:
In the first quarter of 2000, AltaRex emerged from a very challenging 1999 with
positive news on a number of fronts. Our clinical development program for
OvaRex(TM) MAb is progressing according to plan with the conclusion of
enrollment in key trials, favorable safety news, the establishment of a
comparability plan with the U.S. Food and Drug Administration and plans to
initiate a new trial in support of our registration strategy. Developments
regarding our Antibody-based ImmunoTherapy, or AIT(R), technology were
highlighted in presentations at several scientific conferences. Importantly our
intellectual property portfolio began to mature into patents, a key factor in
the protection of our technology. We are pleased to highlight our results to you
in this report.
We remain firmly on track with the development of our lead product, OvaRex(TM)
MAb. The Company has completed enrollment of its potentially pivotal
double-blind placebo-controlled lead OvaRex(TM) trial with 345 patients and will
commence primary endpoint analysis in July 2001. Recently the Company concluded
enrollment of 55 patients in a second and supporting double-blind
placebo-controlled trial of OvaRex(TM) MAb and anticipates conducting a primary
endpoint analysis in the second quarter of 2001. These trials, along with
establishing manufacturing comparability between the Company's ascites-based
product and cell culture material, and with other Phase II and retrospective
data, will form the basis of the U.S. Biologics License Application expected to
be filed in late 2001.
Early in the quarter the Company received a positive recommendation from an
independent Data Safety Monitoring Board (DSMB) to continue our lead OvaRex(TM)
trial. This was the fourth and final DSMB analysis, and in all instances the
DSMB was comfortable with safety issues.
In conjunction with the FDA, we established a comparability plan for switching
to a state-of-the art manufacturing process for OvaRex(TM) MAb. A clinical plan
has been established which, if successfully accomplished, would allow for
implementation of this substantially improved manufacturing process without
having to repeat the ongoing trials.
The Company plans to initiate an additional open-label OvaRex(TM) trial in the
second quarter of 2000 in a patient population similar to its lead trial. This
new trial will incorporate recent findings surrounding the importance of human
anti-mouse antibodies (HAMA) and their role in the therapeutic response to
OvaRex(TM) MAb. The trial should serve a number of important purposes. In
addition to supporting the current comprehensive clinical program for the U.S.,
this new trial will provide a platform to bridge current manufactured product to
a state-of-the-art manufacturing process and should help to fulfill European
registration requirements.
Enrollment was also completed in the BrevaRex(TM) Phase I dose comparison study
(17 patients). Treatment was generally well tolerated and there was no limiting
toxicity observed at any of the dose levels tested. As with OvaRex(TM) MAb, HAMA
again appeared to be an effective marker of immune system activity. We
anticipate initiating a Phase II BrevaRex(TM) trial for patients with multiple
myeloma (a deadly blood born cancer) in late 2001 or early 2002.
Additional retrospective data of OvaRex(TM) MAb was presented at the Annual
Meeting of the Society of Gynecologic Oncologists. The findings involved PET
Imaging on a group of 11 relapsed ovarian cancer patients with advanced disease.
Five of the 11 patients demonstrated disease stabilization or regression of
selected lesions. This data provides additional evidence that OvaRex(TM) MAb may
be capable of stabilizing disease and, in some cases, even shrinking tumors.
As part of the Annual Meeting of the American Society of Hematology, AltaRex
presented data from its open label Phase II OvaRex(TM) trial being conducted in
Vancouver. The data from this trial, in a similar
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patient population (relapsed) to that of our retrospective study, continues to
suggest prolongation of both time to disease progression and survival. Notably,
in 11 patients treated, 9 patients showed a significant increase in HAMA.
We were also pleased to announce that OvaRex(TM) MAb induced a tumor specific
cellular immune response in the first Vancouver patient to be tested for this
type of response. It is generally believed that, to have a major impact on solid
tumors like ovarian cancer, not only is a humoral response required but the
other major arm of the immune system, the cellular arm, must also be activated.
Information presented at the Annual Meeting of the American Association for
Cancer Research provided evidence that OvaRex(TM), BrevaRex(TM), ProstaRex(TM)
and GivaRex(TM) MAbs were all able to trigger significant anti-tumor responses
in mouse models and other experimental systems. This data also lends support to
the use of murine (foreign) antibodies to produce effective anti-tumor
responses. For example, in one of the experiments OvaRex(TM) MAb was able to
completely eliminate tumor burden in 70% of mice carrying a human immune system
while the remaining 30% evidenced significant tumor shrinkage.
A presentation at the Annual Meeting of the Society of Gynecologic Oncologists
supported the use of AR54, a murine-based antibody in-licensed by the Company.
An open-label study with 25 ovarian cancer patients demonstrated that the eleven
patients (44%) who developed a HAMA response had an overall trend toward
prolonged survival. This information strongly supports the importance of HAMA
and the use of a foreign antibody to trigger a specific immune response. The
data should help us move AR54 into advanced trials in 2001.
Laboratory experiments during the quarter have confirmed the presence of a
cellular immune response for GivaRex(TM) and ProstaRex(TM) MAbs, two preclinical
antibodies for the treatment of gastrointestinal and prostate cancers. Dr. Dean
Mann of University of Maryland observed that ProstaRex(TM) MAb may be capable of
invoking cellular immune responses crucial to anti-tumor activity. This
important data is from an in-vitro assay system that was developed in
collaboration with Dr. Mann. This system may become a vital tool for identifying
future AIT(R) antibodies that are able to produce a cellular immune response
capable of killing cancer cells.
The clinical and preclinical data that we have recently presented and announced
regarding OvaRex(TM) and our other antibodies strongly supports the novel
mechanisms and potential of our AIT(R) technology platform. Our ability to
identify monoclonal antibodies that exhibit both cellular and humoral immune
responses adds considerable strength and depth to our technology. Our patents
are designed to protect the intellectual property position surrounding this
technology.
The Company has been issued its first patent and a notice of allowance for
another, which broadly cover the AIT(R) technology platform and associated
products including OvaRex(TM) MAb. An Australian patent that addresses the
reconforming of multi-epitopic antigens to initiate an immune response was
issued during the quarter. The notice of allowance for a U.S. patent covers
photoactivation, an innovative technique using ultraviolet light to modify
antibodies and to enhance certain beneficial immune responses. Both patents form
the basis for a strong proprietary position for OvaRex(TM) MAb and the AIT(R)
technology platform. AltaRex has filed a total of seven U.S. and six
international patent applications.
AltaRex could be in a position next year of having a completed Phase II/III
study (primary analysis) of OvaRex(TM) MAb involving 345 patients as well as
having two additional products, BrevaRex(TM) MAb
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and AR54, in clinical testing. We anticipate that the next eighteen months will
prove to be extremely active and productive for AltaRex and our activities
should enhance the value of AltaRex's technology.
FINANCIAL HIGHLIGHTS (in Canadian dollars)
On February 29, 2000, the Company raised net proceeds of $5.5 million through
the sale of Special Warrants. These Special Warrants were exercised on April 20,
2000 into 5,687,546 Common Shares upon the filing of a final prospectus with
various securities commissions. Also during the first quarter of 2000, National
Bank Financial Inc. and HSBC James Capital Canada Inc. purchased 1,955,000
Common Shares through the exercise of compensation options granted to them in
connection with services rendered in the Company's oversubscribed $19.5 million
Common Share offering completed in June 1999. Net proceeds to the Company from
this and other option exercises in this quarter amounted to $1.0 million.
The Company recorded a net loss for the three months ended March 31, 2000 of
$3.9 million or $0.07 per share compared to $4.7 million or $0.28 per share for
the same period in 1999. The decreased net loss reflects primarily a decrease in
spending in research and development activities as a result of operational
changes made in the fourth quarter of 1999 to focus our research on the
development of OvaRex(TM) MAb and conserve capital. The decreased net loss per
share also reflects the impact of an increase in the weighted average number of
Common Shares outstanding from 16,512,613 shares in the first quarter of 1999 to
56,151,143 shares in the first quarter of 2000. This increase is due primarily
to the issuance of 39,100,000 Common Shares in our Common Share offering in May
and June 1999.
Revenues for the three months ended March 31, 2000 totaled $91,841, a decrease
of $102,304 from the three-month period ended March 31, 1999. The decrease is
due to the completion of a grant in 1999 and to lower interest income as a
result of lower levels of cash and short-term investments in the first quarter
of 2000.
Operating expenses for the three months ended March 31, 2000 totaled $4.0
million, a decrease of $0.9 million from the three-month period ended March 31,
1999. Research and development expenses decreased by $0.7 million.
At March 31, 2000 cash and short-term investments totaled $10.0 million compared
with $8.4 million at March 31, 1999 and $7.2 million at December 31, 1999,
reflecting the impact of capital raising initiatives, as noted above, and the
Company's net cash burn during these periods.
/s/ Richard E. Bagley
Richard E. Bagley
President & Chief Executive Officer
This quarterly report contains forward-looking statements that involve risks and
uncertainties, which may cause actual results to differ materially from the
statements made. For this purpose, any statements that are contained herein that
are not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, the words "believes", "anticipates",
"plans", "intends", "expects" and similar expressions are intended to identify
forwardlooking statements. Such factors include, but are not limited to, the
need for capital, changing market conditions, completion of clinical trials,
patient enrollment rates, uncertainty of preclinical trial results, the
establishment of new corporate alliances, the timely development, regulatory
approval and market acceptance of the Company's products, proprietary rights,
patent protection and other risks detailed from time-to-time in the Company's
filings with the United States Securities and Exchange Commission and Canadian
securities authorities.
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CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(In Canadian dollars, Unaudited)
Three Months Ended
March 31,
2000 1999
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Revenue ................................................... $ 91,841 $ 194,145
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Expenses
Research and development ................................. 2,434,951 3,155,586
General and administration ............................... 1,544,041 1,489,463
Settlement costs ......................................... -- 228,181
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3,978,992 4,873,230
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Net loss for the period ................................... $ (3,887,151) $ (4,679,085)
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Net loss per common share ................................. $ (0.07) $ (0.28)
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Weighted average number of common shares outstanding....... 56,151,143 16,512,613
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CONDENSED CONSOLIDATED BALANCE SHEETS
(In Canadian dollars, Unaudited)
As at March 31,
2000 1999
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ASSETS
Cash and short-term investments ........................ $ 9,982,518 $ 8,408,752
Other current assets ................................... 124,716 479,310
Capital assets, net .................................... 819,299 1,531,159
Other assets ........................................... 351,208 573,966
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$11,277,741 $10,993,187
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities .................................... $ 2,399,660 $ 2,623,966
Deferred lease credit .................................. 39,371 401,466
Shareholders' equity ................................... 8,838,710 7,967,755
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$11,277,741 $10,993,187
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Canadian dollars, Unaudited)
Three Months Ended
March 31,
2000 1999
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CASH USED IN OPERATING ACTIVITIES
Net loss ................................................ $ (3,887,151) $ (4,679,085)
Add items not affecting cash:
Depreciation and amortization ........................ 120,329 148,649
Amortization of deferred lease credit ................ (7,142) (32,300)
Net change in non-cash working capital balances.......... 105,296 287,090
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(3,668,668) (4,275,646)
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CASH USED IN INVESTING ACTIVITIES
Purchase of capital assets .............................. (4,734) (25,389)
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(4,734) (25,389)
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CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Issue of common shares, net ............................. 6,507,905 --
Other ................................................... (58,665) (113,633)
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6,449,240 (113,633)
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Net increase (decrease) in cash
and short-term investments ........................... 2,775,838 (4,414,668)
Cash and short-term investments,
beginning of period .................................. 7,206,680 12,823,420
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Cash and short-term investments,
end of period ........................................ $ 9,982,518 $ 8,408,752
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