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EXHIBIT 99.1
TO OUR SHAREHOLDERS:
During the third quarter of 1999, AltaRex entered into an out-of-court
settlement with regard to its intellectual property dispute with Biomira Inc.,
accomplished significant progress in its OvaRex(TM) MAb clinical trial programs
and received preliminary yet encouraging data from its open-label Phase II
Vancouver study. Unfortunately, this good news was overshadowed by the
announcement in mid-October that Purdue Pharma L.P. chose not to exercise its
option to license OvaRex(TM) and BrevaRex(TM) MAbs. As a result of the Purdue
Pharma decision, AltaRex announced plans to focus its resources on bringing its
lead product, OvaRex(TM) MAb, to market.
We were pleased to report in September that AltaRex reached a settlement with
respect to issues that were the subject of litigation with Biomira and
terminated such litigation. The settlement of these disputes now allows us to
pursue the development of OvaRex(TM) MAb for the treatment of ovarian cancer
without the uncertainty brought about by the matters which were the subject of
the litigation. We are also pleased to have clarified with Biomira the terms of
the license agreement so that such matters should not be at issue between the
companies in the future.
On October 14, AltaRex announced that Purdue Pharma L.P. decided not to exercise
its option to license OvaRex(TM) and BrevaRex(TM) MAbs. As the Company had been
in early due diligence or discussions with other pharmaceutical and
biotechnology companies prior to the grant of the option to Purdue Pharma,
AltaRex has reopened those interactions and is rapidly initiating others. We are
pleased with the level of interest expressed by these companies in our
technology and, in particular, OvaRex(TM) MAb.
As a result of the Purdue Pharma decision, and in an effort to reduce current
expenditures, AltaRex announced operational changes designed to focus the
Company's personnel and financial resources on the clinical development and
commercialization of OvaRex(TM) MAb. In line with this strategy, the Company has
suspended its product development activities for products other than OvaRex(TM)
MAb and has reduced staff and facility related costs in the discovery and
development areas. As a result of these changes, management expects that its
current capital will be sufficient to conduct operations including key clinical
trial work through mid-2000.
AltaRex believes the OvaRex(TM) MAb comprehensive clinical program is
progressing as planned. This program was designed to test OvaRex(TM) MAb in
patients who are at various stages in the progression of ovarian cancer. This
program will allow us to determine the most effective use of OvaRex(TM) MAb in
ovarian cancer patients and provides the Company with multiple opportunities to
gain regulatory approval.
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In the Company's ongoing open label Phase II study in Vancouver, treatment with
OvaRex(TM) MAb of late stage ovarian cancer patients with residual disease has
been well tolerated. Immunological responses for the Phase II Vancouver studies
are consistent with a prior retrospective study with OvaRex(TM) MAb reported
earlier this year at the American Society of Clinical Oncology meeting. The
Company believes that the rate of disease stabilization for these patients
receiving chemotherapy and OvaRex(TM) MAb therapy appears to be greater than
would be expected from patients receiving chemotherapy alone. An abstract of
preliminary results of this study will be published as part of the American
Society of Hematology Annual Meeting in early December 1999. Additional
prospective data related to patients from the previous retrospective study will
be presented in poster format at the Society of Gynecological Oncology meeting
in February of next year.
Enrollment in the clinical trials for OvaRex(TM) MAb continues as planned. As of
November 12, enrollment in the lead potentially pivotal Phase IIb trial for
OvaRex(TM) MAb was at 319 patients out of a total expected enrollment of
approximately 380. An interim analysis of this trial is scheduled for early
December 1999. In our second potentially pivotal Phase IIb trial, as of November
12, enrollment was at 43 patients out of a total expected enrollment of 102. Our
Phase II trial in Vancouver is fully enrolled at this date.
Manufacturing development of cell culture product for OvaRex(TM) MAb continues
to progress well at Lonza Biologics. The Company will meet with the FDA at the
end of November regarding comparability of the cell culture product to the
ascites-based material being used in the current clinical trials.
In summary, the Company believes that the current focus of advancing OvaRex(TM)
MAb through development to the market is in the best interests of its
shareholders and ovarian cancer patients. AltaRex continues to make progress
with its OvaRex(TM) MAb clinical trials program and we are encouraged with the
maturing Phase II data from Vancouver and other immunological data from various
programs. We are very appreciative of the contributions that all the Company's
employees have made to help apply the Company's technology platform to the
development of cancer products. Remaining staff and operations are dedicated to
the continuation of the clinical trials for OvaRex(TM) MAb. The Company plans to
take all appropriate actions, including seeking additional financing, to
complete the development of OvaRex(TM) MAb and to obtain the critical answers
necessary for determining whether we have an important new treatment for ovarian
cancer.
FINANCIAL HIGHLIGHTS
Revenues for the three months ended September 30, 1999 were $203,748 compared
with $234,627 for the three months ended September 30, 1998. Revenues for the
nine months
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ended September 30, 1999 were $572,557 compared to $814,000 for the nine months
ended September 30, 1998. The net decrease is mainly a result of a reduction in
interest income due to lower levels of cash and short-term investments in 1999.
The net loss for the three months ended September 30, 1999 was $9.5 million or
$0.17 per share compared to a net loss of $3.8 million or $0.23 per share for
the three months ended September 30, 1998. For the first nine months of 1999,
the net loss was $19.6 million or $0.54 per share compared to a net loss of $8.9
million or $0.54 per share for the first nine months of 1998. The net loss
includes the impact of the Company's previously announced settlement of pending
litigation with Biomira Inc. related to the ownership of an AltaRex patent
application and disputes surrounding a license agreement between the companies.
Settlement costs including related expenses totaled $4.5 million and $5.0
million, in the three-month and nine-month periods ended September 30, 1999,
respectively.
Operating expenses of the Company for the three months ended September 30, 1999
totaled $5.2 million compared to $4.1 million for the three months ended
September 30, 1998. For the nine months ended September 30, 1999, operating
expenses totaled $15.2 million compared to $9.8 million for the nine months
ended September 30, 1998. The increases in operating expenses reflect the
Company's increased investment in clinical and product development activities
and supporting activities in product commercialization. The majority of the
clinical trial, product development and commercialization costs are attributable
to the Company's most advanced product, OvaRex(TM) MAb, which is in two
potentially pivotal Phase IIb clinical trials.
Cash and short-term investments as at September 30, 1999 totaled $11.4 million
compared with $16.8 million at September 30, 1998 and $12.8 million at December
31, 1998. In the first nine months of 1999, a total of $15.2 million has been
used to fund development and supporting costs of operations noted above,
excluding the cost of the Biomira settlement. Also the Company issued 39.1
million common shares in a public offering in the second quarter of 1999, for
gross proceeds of $19.6 million, or $17.7 million net of related costs. These
funds continue to be used to fund clinical trial and antibody costs related to
OvaRex(TM) MAb.
Regarding the Year 2000 issue, the Company has completed its assessment and
testing of its internal systems and equipment and is completing its evaluation
of the Year 2000 readiness of its vendors and suppliers and its development of
contingency plans for all mission critical systems and risks. Certain systems
and equipment of the Company have been successfully upgraded to be Year 2000
compliant. Based on the results of our review and assessment to date, the
Company believes that it has no significant vulnerability to the Year 2000
readiness of third parties.
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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, 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.
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,
-------------------------------- --------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
Revenue........................... $ 203,748 $ 234,627 $ 572,557 $ 814,000
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Expenses
Research and development........ 3,159,905 2,874,071 9,956,488 6,632,736
General and administration...... 2,028,784 1,199,064 5,215,503 3,120,175
Settlement costs................ 4,496,666 -- 5,015,712 --
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9,685,355 4,073,135 20,187,703 9,752,911
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Net loss for the period........... $ (9,481,607) $ (3,838,508) $(19,615,146) $ (8,938,911)
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Net loss per common share......... $ (0.17) $ (0.23) $ (0.54) $ (0.54)
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Weighted average number of
common shares outstanding....... 55,612,613 16,511,091 36,596,679 16,500,781
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CONDENSED CONSOLIDATED BALANCE SHEET
(In Canadian dollars, Unaudited)
As at September 30,
-----------------------------
1999 1998
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ASSETS
Cash and short-term investments.................. $11,436,244 $16,811,530
Other current assets............................. 183,811 215,661
Capital assets, net.............................. 1,060,128 1,724,806
Other assets..................................... 267,335 329,142
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$12,947,518 $19,081,139
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities.............................. $ 2,128,587 $ 1,754,633
Deferred lease credit and other liabilities...... 197,954 502,648
Shareholders' equity............................. 10,620,977 16,823,858
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$12,947,518 $19,081,139
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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In Canadian dollars, Unaudited)
Three Months Ended NIne Months Ended
September 30, September 30,
-------------------------------- --------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
CASH USED IN OPERATING ACTIVITIES
Net loss..................................... $ (9,481,607) $ (3,838,508) (19,615,146) $ (8,938,911)
Add items not affecting cash:
Depreciation and amortization.............. 133,043 144,304 431,259 403,798
Amortization of deferred lease credit...... (7,232) (34,983) (71,728) (99,669)
Net change in non-cash working capital
balances................................... (206,199) 90,554 231,457 889,402
------------ ------------ ------------ ------------
(9,561,995) (3,638,633) (19,024,158) (7,745,380)
------------ ------------ ------------ ------------
CASH USED IN INVESTING ACTIVITIES
Purchase of capital assets................... (97,742) (68,197) (145,301) (545,837)
------------ ------------ ------------ ------------
(97,742) (68,197) (145,301) (545,837)
------------ ------------ ------------ ------------
CASH PROVIDED BY FINANCING ACTIVITIES
Issue of common shares, net.................. (60,492) 18,000 17,707,760 54,000
Other........................................ 67,965 2,099 74,523 46,641
------------ ------------ ------------ ------------
7,473 20,099 17,782,283 100,641
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NET INCREASE (DECREASE) IN CASH
AND SHORT-TERM INVESTMENTS................. (9,652,264) (3,686,731) (1,387,176) (8,190,576)
CASH AND SHORT-TERM INVESTMENTS,
BEGINNING OF PERIOD........................ 21,088,508 20,498,261 12,823,420 25,002,106
------------ ------------ ------------ ------------
CASH AND SHORT-TERM INVESTMENTS,
END OF PERIOD.............................. $ 11,436,244 $ 16,811,530 $ 11,436,244 $ 16,811,530
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