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EXHIBIT 99.1
ALTAREX CORP.
1998 THIRD QUARTER REPORT
To our Shareholders:
During the quarter, the Company continued to advance its efforts on the
corporate partnering front, added a key individual to strengthen its senior
management team, and with its Clinical Advisory Board, made significant progress
with its clinical programs. The focus of the Company continues to be its AIT(TM)
product portfolio and advancing products towards commercialization.
As a result of significant work done during the quarter, the Company has
achieved important milestones with its OvaRex(TM) MAb and BrevaRex(TM) MAb
clinical programs as outlined here. Regarding OvaRexTM MAb, the Company's lead
product for late stage ovarian cancer, patient accrual in the Company's 280
patient Phase IIb trial is on target with 40 clinical sites in North America
participating and 134 of 280 patients enrolled as of the end of October. This
trial is for women who have completed first line therapy and have had a complete
clinical response to treatment.
With significant input from its Clinical Advisory Board, the Company submitted
two IND amendments for OvaRex(TM) MAb that would allow it to conduct both a
second potentially pivotal Phase IIb clinical trial and an open label Phase II
immunology study.
The Company's second U.S. Phase IIb OvaRex(TM) study complements its ongoing
Phase IIb North American trial and is part of the clinical approach of
identifying the most appropriate patient population(s). The new Phase IIb
OvaRex(TM) study differs from the ongoing Phase IIb trial as the study
population will consist of later stage ovarian cancer patients who have an
elevated CA 125 level, generally a marker of more imminent disease progression.
As a consequence, study enrollment (102 patients) is smaller and can be
accomplished more quickly, resulting in completion in the same time frame as our
ongoing Phase IIb trial. Dr. Michael A. Bookman of the Fox Chase Cancer Center
in Philadelphia, Pennsylvania has agreed to act as Principal Investigator. Both
Phase IIb trials are potentially pivotal and are expected to be completed by the
first half of 2001.
The open label North American Phase II immunology study of OvaRex(TM) MAb is
inpatients with recurrent ovarian cancer, an even more advanced stage of
disease. This multi-center, 12 patient trial, is designed to determine the
extent to which OvaRex(TM) MAb induces humoral and cellular immunological
responses and to generate safety and efficacy data from relapsed ovarian cancer
patients who are receiving both standard chemotherapy and OvaRex(TM) MAb.
Clinical investigators include Dr. Thomas Ehlen of the Vancouver Cancer Centre
and Dr. James Orr of the Patty Berg Cancer Center in Fort Myers, Florida.
The Company anticipates the OvaRex(TM) MAb Phase II and IIb data will be
satisfactory to explore the clinical utility of the drug, alone and in
combination with standard chemotherapy, and will form the basis of a
comprehensive data package for product registration. The Company also
anticipates that the OvaRex(TM) MAb Phase II trial will establish baseline
immunological parameters with ascites fluid-derived antibody for comparison with
new cell culture-derived material to be tested in an identically designed study
expected to begin in mid-1999. In addition, the Company anticipates that
BrevaRex(TM) MAb Phase I study and the OvaRex(TM) MAb Phase II study will
provide the Company with prospective clinical evidence of our proprietary
AIT(TM) technology platform by mid-1999.
In September, AltaRex submitted an Investigational New Drug (IND) application
with the U.S. Food and Drug Administration (FDA) to begin Phase I clinical
testing of its second antibody-based cancer product, BrevaRex(TM) MAb. This
product is a modified murine monoclonal antibody that is developed from, and
specifically binds to, the MUC1 tumor associated antigen. The majority of
breast, prostate, pancreatic, renal, lung and colorectal cancer tumors are known
to express the MUC1 antigen. The submission of the BrevaRex(TM) IND indicates
our confidence in AIT(TM) as a platform technology and represents a major
milestone for the Company. The appointment of Dr. Anthony Tolcher of the Cancer
Therapy and Research Center in Texas, as principal investigator, is further
evidence of the Company's U.S. focus.
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The Company has also received a positive International Preliminary Examination
Report from the European Patent Office with respect to the claims contained in
the Patent Cooperation Treaty (PCT) application filed by the Company covering
its fundamental antibody technology platform (AIT(TM)). In the Report, all of
the claims filed were found to possess novelty and an inventive step. The PCT
allows for a simplified multiple filing of patent applications in various
countries. Industrial applicability of the claims will be assessed on a
country-by-country basis with our national stage filings.
In September, the Company announced the appointment of Edward M. Fitzgerald as
Chief Financial Officer and Senior Vice President, Investor Relations. Mr.
Fitzgerald has held senior management positions at BankBoston Corporation, was a
Partner at Arthur Andersen & Co. and, most recently, was operating his own
consulting practice. Mr. Fitzgerald brings to AltaRex a solid background in
financial management and strategic business development. Blaine Schamber, who
has acted as CFO for the Company since January 1996, will continue to serve as
Controller, reporting to Mr. Fitzgerald.
The Company has now set its agenda for the coming 12-18 months, a period during
which its activity level and cash burn rate are expected to significantly
increase. The Board has put in place strategies for capital formation that
include traditional financing activities as well as corporate partnering
initiatives. The Company will continue to report on its progress.
FINANCIAL HIGHLIGHTS
Revenues for the three months ended September 30, 1998 were $234,627 compared
with $466,059 for the same period in 1997. Revenues were $814,000 for the first
nine months in 1998 compared to $1,187,888 for the same period last year. The
net decrease in both periods is mainly a result of a reduction in research
contract revenue in 1998.
The net loss for the three months ended September 30, 1998 was $3.8 million or
$0.23 per share compared to a net loss of $1.0 million or $0.06 per share for
the same period in 1997. For the first nine months of 1998, the net loss was
$8.9 million or $0.54 per share compared to a net loss of $2.6 million or $0.17
per share for the same period last year. The increased net loss in both periods
represents the Company's increased investment in clinical and product
development activities and supporting efforts in product commercialization. The
majority of these costs are attributable to the Company's lead product, OvaRexTM
MAb, which is currently undergoing phase II clinical trials.
Cash and short-term investments as at September 30, 1998 was $16.8 million
compared with $27.0 million at September 30, 1997 and $20.5 million at June 30,
1998.
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
forward-looking statements. Such factors include, but are not limited to
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, 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.
/s/ Richard E. Bagley
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Richard E. Bagley
President & CEO
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CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In Canadian dollars, Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 234,627 $ 466,059 $ 814,000 $ 1,187,888
Research and development . . . . . . . . . . . . . . . . . . . .2,874,071 1,028,043 6,632,736 2,803,755
General and administration . . . . . . . . . . . . . . . . . . 1,199,064 438,908 3,120,175 979,297
4,073,135 1,466,951 9,752,911 3,783,052
Net loss for the period . . . . . . . . . . . . . . . . . . $ (3,838,508) $ (1,000,892) $ (8,938,911) $ (2,595,164)
Net loss per common share . . . . . . . . . . . . . . . . . . . $ (0.23) $ (0.06) $ (0.54) $ (0.17)
Weighted average number of
common shares outstanding . . . . . . . . . . . . . . . . . 16,511,091 16,250,270 16,500,781 15,699,870
CONDENSED CONSOLIDATED BALANCE SHEET
(In Canadian dollars, Unaudited)
As at September 30,
1998 1997
ASSETS
Cash and short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,811,530 $ 27,066,432
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215,661 384,677
Capital assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,724,806. 1,330,766
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329,142 . -
$ 19,081,139 $ 28,781,875
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$.1,754,633. . . $ 463,900
Deferred lease credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .502,648. 586,673
Shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16,823,858 27,731,302
$ 19,081,139 $ 28,781,875
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CONSOLIDATED STATEMENT OF CASH FLOWS
(In Canadian dollars, Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
CASH USED IN OPERATING ACTIVITIES
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . .$.(3,838,508). $ (1,000,892) (8,938,911) $ (2,595,164)
Add items not affecting cash:
Depreciation and amortization . . . . . . . . . . . . . . . . . . 144,304 . . . . 97,206. . . 403,798 206,710
Amortization of deferred lease credit . . . . . . . . . . . . . . (34,983). . . .(22,660) . . . . .(99,669) (33,327)
Net change in non-cash working capital
balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .76,031 . . 32,696 1,218,544 (85,803)
(3,653,156) (893,650) (7,416,238) (2,507,584)
CASH USED IN INVESTING ACTIVITIES
Purchase of capital assets . . . . . . . . . . . . . . . . . . (68,197) (636,169) (545,837) (1,062,266)
Increase in other assets. . . . . . . . . . . . . . . . . . . . . 14,523 - (329,142) -
(53,674) (636,169) (874,979) (1,062,266)
CASH PROVIDED BY FINANCING ACTIVITIES
Issue of common shares, net . . . . . . . . . . . . . . . . . . . . 18,000 2,331,230 54,000 2,800,333
Deferred lease credit . . . . . . . . . . . . . . . . . . . . . . . . .2,099 500,000 46,641 620,000
20,099 2,831,230 100,641 3,420,333
Net increase (decrease) in cash
and short-term investments . . . . . . . . . . . . . . . . . . (3,686,731) . . 1,301,411 . (8,190,576) (149,517)
Cash and short-term investments,
beginning of period . . . . . . . . . . . . . . . . . . . . . . 20,498,261. . .25,765,021 25,002,106 27,215,949
Cash and short-term investments,
end of period . . . . . . . . . . . . . . . . . . . . . . . . $ 16,811,530. $ 27,066,432 $16,811,530 $ 27,066,432