Annual Report 2015
A biopharmaceutical company
Message to Shareholders
Helix BioPharma Corp. (“Helix”or the “Company”) has faced two significant challenges in the past fiscal year, both in
regard to prioritizing its clinical studies in terms of scientific and commercial development and in dealing with the Compa-
ny’s financial health.
Prioritization of L-DOS47 Clinical Studies and the Competitive Cancer Landscape
L-DOS47 is currently under study for the treatment in two non-small cell lung cancer (“NSCLC”) clinical trials. The more
advanced of the two is a Phase I/II monotherapy trial being conducted in Poland and the second is a Phase I clinical trial
in combination with pemetrexed and carboplatin being conducted in the United States.
The Polish monotherapy trial is important because the Phase I portion of this trial is designed to establish L-DOS47’s
safety profile and in turn, the future direction of L-DOS47 into Phase II, either as a standalone monotherapy and/or in
combination with other chemotherapies and immunotherapies. Polish regulators have approved the dosing of patients up
to Cohort 16, which the Company believes, represents the highest dose that can be safely administered to patients.
The U.S. Phase I combination trial has enrolled patients more slowly than anticipated, which the Company believes is a
result of the focus on developments in immunotherapies. The Company is in the process of assessing this trial, given
the possibility that other types of combination trials may be moved into more advanced Phase II status once the Phase I
portion of the monotherapy trial in Poland is completed. Therefore, completion of the Phase I portion of the Polish mono-
therapy trial remains the Company’s primary focus, given the limited resources available to the Company.
The landscape relating to cancer treatment has undergone a major transformation, most notably with respect to immuno-
therapies. However, the Company believes that L-DOS47 remains a relevant and viable drug candidate, particularly as
the Company believes that approximately 40% of the population suffering from cancer may not respond to these new
treatments, leaving a significant portion of the market available for non-immunotherapy drugs, such as L-DOS47.
Financial Situation
The Company’s financial health was again challenged at the beginning of the 2015 fiscal year, as the year started with a cash
position of approximately $7.0 million.
In April 2015, the Company announced the closing of a two-tranche private placement of shares and warrants of approx-
imately $8.3 million in net proceeds. This allowed the Company to complete its 2015 fiscal year with a cash position of
approximately $6.8 million.
Goals for fiscal 2016
Although Helix will continue to require additional funds to finance its operations, Helix’s goals for fiscal 2016 are to:
• Complete the Phase I portion of the Polish clinical trial in order to determine L-DOS47’s safety profile and initiate
the Phase II portion of the trial; and
• Raise additional equity financing, which could include a listing of Helix shares on the Warsaw Stock Exchange, to
permit Helix to advance L-DOS47 to the Phase II portion of the trial.
Helix thanks all of its shareholders and employees for their continuing support.
Sincerely,
Yvon Bastien
Chairman of the Board
This letter contains certain forward-looking statements. By their nature, forward-looking statements require us to make assumptions and are
subject to inherent risks and uncertainties. Please refer to the caution regarding Forward-Looking Statements and Information on page 2 of this
Annual Report for a discussion of such risks and uncertainties and the material factors and assumptions related to these statements.
TABLE OF CONTENTS
MESSAGE TO SHAREHOLDERS………………………………………….…………………………..……. Inside Front Cover
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 2
FORWARD LOOKING STATEMENTS AND INFORMATION……...………………………………………….….… 2
4
OVERVIEW…………………………………………………………………………………......………….…….……….
4
RESEARCH AND DEVELOPMENT ACTIVITIES…….……………………….……………………….…………..…
SELECTED FINANCIAL INFORMATION AND SUMMARY OF QUARTERLY RESULTS ……………….…….
9
RESULTS FROM OPERATIONS ………………………………………………………………………….…….……. 10
SIGNIFICANT ACCOUNTING POLICIES……………………………………………………………………….….… 11
NEW ACCOUNTING STANDARDS AND PRONOUNCEMENTS NOT YET ADOPTED …………………….… 13
LIQUIDITY AND CAPITAL RESOURCES…………………………………………………………………..……...… 13
PROPERTY, PLANT AND EQUIPMENT EXPENDITURES……………………………………………………...… 14
RELATED PARTY TRANSACTIONS ……………………………………………………………………………….… 14
FINANCIAL INSTRUMENTS ……………………………………………………………………………..………….… 15
INTELLECTUAL PROPERTY…...…………………………………………………………………………………….. 15
OFF BALANCE SHEET ARRANGEMENTS ……………………………………………………………………….… 16
TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS………………………………………..……….… 16
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS………………………….….… 16
OUTSTANDING SHARE DATA …………………………………………………………………………….……….… 18
DISCLOSURE CONTROLS AND PROCEDURES AND
INTERNAL CONTROL OVER FINANCIAL REPORTING …………………………………….…………….… 18
RISKS AND UNCERTAINTIES …………………………………………………………...…………….….……….… 18
RISK FACTORS IN OTHER PUBLIC FILINGS………………………………………...…………….….……..….… 24
ADDITIONAL INFORMATION ………………………………………...…………….….……..…………………….... 24
CONSOLIDATED FINANCIAL STATEMENTS OF HELIX BIOPHARMA CORP
25
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL INFORMATION ……...…………………………..…..… 26
INDEPENDENT AUDITORS’ REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM ……...……….….… 27
CONSOLIDATED STATEMENT OF FINANCIAL POSITION ……...……………………………….…………....… 28
CONSOLIDATED STATEMENT OF NET LOSS AND COMPREHENSIVE LOSS ……...……………….…....… 29
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY ……...…………………..…… 30
CONSOLIDATED STATEMENT OF CASH FLOWS ……...…………………………………………………...….… 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ……...…………………………………..……....….… 32
CORPORATE INFORMATION……………………………………………………………...……………....… Inside Back Cover
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated financial statements of Helix BioPharma Corp. (the
“Company” or “Helix”) for the years ended July 31, 2015, and 2014 and the accompanying notes thereto, which have been
prepared in accordance with International Financial Reporting Standards (“IFRS”) and depict values that are in Canadian currency
unless otherwise noted.
Additional information relating to the Company can be found in the Company’s Annual Information Form for the fiscal year ended
July 31, 2015, which is available on SEDAR at www.sedar.com.
FORWARD-LOOKING STATEMENTS AND INFORMATION
This Annual Report contains forward-looking statements and information (collectively, “forward-looking statements”) within the
meaning of applicable Canadian securities laws. Forward-looking information means disclosure regarding possible events,
conditions or financial performance that is based on assumptions about future economic conditions and courses of action and
includes financial projections and estimates; statements regarding plans, goals, objectives, intentions and expectations with
respect to the Company’s future business, operations, research and development, including the focus of the Company on L-
DOS47 which is the Company’s primary drug candidate, Topical Interferon Alpha-2b and other information relating to future
periods. Forward-looking information includes, without limitation, statements concerning (i) the Company’s ability to operate on a
going concern being dependent mainly on obtaining additional financing; (ii) the Company’s growth and future prospects being
dependent on the success of L-DOS47; (iii) the Company’s priority continuing to be L-DOS47; (iv) the Company’s development
programs, including but not limited to, extension of the current drug candidate(s) to other indications and the identification and
development of further tumor-targeting antibodies for DOS47; (v) the anticipated timeline for completion of enrolment and other
matters relating to the Company’s European Phase I/II clinical study for L-DOS47 in Poland, including the number of cohorts
required to reach Maximum Tolerable Dose (“MTD”) and the Company’s U.S. Phase I clinical study for L-DOS47, (vi) seeking
strategic partner support and therapeutic and market opportunities; (vii) the nature, design and timing of future clinical trials
(including the Company’s anticipated reassessment of the re-design of the LDOS003 study to focus on advanced stage lung
cancer patients by combining L-DOS47 with Vinorelbine/Cisplatin (“VIN/CIS”) and commercialization plans; (viii) future
expenditures, insufficiency of the Company’s current cash resources and the need for financing and the Company’s possible
response for such matters; (ix) future financing requirements, the seeking of additional funding (including the possible receipt of
grants or listings on the Warsaw Stock Exchange) and anticipated future operating losses; (x) changes in the application of
accounting standards and interpretations; and (xi) industry performance, competition (including potential developments relating to
immunotherapies and the Company’s possible response to such developments), prospects, and general prevailing business and
economic conditions. Forward-looking information can further be identified by the use of forward-looking terminology such as
“expects”, “plans”, “designed to”, “potential”, “believe”, “intended”, “continues”, “opportunities”, “anticipated”, “2016”, “2017”,
“2020”, “next”, “ongoing”, “seek”, “objective”, “estimate”, “future”, or the negative thereof or any other variations thereon or
comparable terminology referring to future events or results, or that events or conditions “will”, “may”, “could”, “would”, or “should”
occur or be achieved, or comparable terminology referring to future events or results.
Forward-looking information includes statements about the future and are inherently uncertain, and are necessarily based upon a
number of estimates and assumptions that are also uncertain. Although the Company believes that the expectations reflected in
such forward-looking information are reasonable, such statements involve risks and uncertainties, and undue reliance should not
be placed on such statements. Forward-looking information, including financial outlooks, are intended to provide information about
management’s current plans and expectations regarding future operations, including without limitation, future financing
requirements, and may not be appropriate for other purposes. The Company’s actual results could differ materially from those
anticipated in the forward-looking information contained in this Management’s Discussion and Analysis of Financial Condition and
Results of Operations (this “MD&A”) as a result of numerous known and unknown risks and uncertainties, including, but not limited
to:
the Company’s need for additional capital which may not be available in a timely manner or at all (whether from additional
issuances of the Company’s securities, grant applications or otherwise) and which, if not obtained, will have a material
adverse impact on the Company and its ability to continue as a going concern;
the risk that the Company may have to suspend or terminate one or more of its clinical trials for lack of funding, as the
Company does not have sufficient funds to complete them and will need to raise additional funding, which is not assured;
uncertainty as to whether the Company’s drug product candidate(s), especially L-DOS47, will be successfully developed
and marketed;
developments in immunotherapies may result in significant changes in the treatment of cancer and may result in a
reduction, which may be significant, in the potential patient population and/or treatment protocols available to
chemotherapies and other treatments currently in development, such as the Company’s primary drug product L-DOS47;
the possibility of dilution of current shareholders from future equity financings;
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the possibility of a change of control of the Company, which could impact the Company’s plans and result in existing key
personnel leaving the Company;
the impact of the ongoing volatility in the economic environment which has negatively affected the availability and terms
of debt and equity financings and may have a negative effect on the Company’s ability to raise further financing and its
research and development initiatives;
intellectual property risks, including the possibility that patent applications may not result in issued patents, that issued
patents may be circumvented or challenged and ultimately struck down, that any expiry of an issued patent, may
negatively impact the further development or commercialization of the underlying technology, and that the Company may
not be able to protect its trade secrets or other confidential proprietary information;
research and development risks, including without limitation, the fact that the Company’s drug product candidate(s) are
complex compounds and the Company faces difficult challenges in connection with the manufacture of clinical batches,
and the risk of obtaining negative findings or factors that may become apparent during the course of research or
development, any of which may result in the delay or discontinuation of the research or development projects;
partnership/strategic alliance risks and the need to secure new strategic relationships, which are both not assured;
the Company’s dependence on its contractors, consultants, clinical trial investigators, advisors and licensees, including
without limitation, contract research organizations, contract manufacturing organizations, clinical trial consultants,
collaborative research consultants, regulatory affairs advisors, and others, whose performance and interdependence can
critically affect the Company’s performance and the achievement of its milestones;
the Company’s dependence on assurances from third parties regarding licensing of proprietary technology owned by
others, including the Company’s dependence on its license of the L-DOS47 antibody;
the need for future clinical trials, the occurrence and success of which cannot be assured, and the fact that results seen
in earlier clinical trials may not be repeated in later trials;
manufacturing risks, the need to manufacture to regulatory standards, uncertainty whether the manufacturing process
for the Company’s drug candidates can be further scaled-up successfully or at all and the risk that clinical batches of the
Company’s drug candidate may not be able to be produced in a timely manner or at all, which would have a negative
effect on the timing and/or occurrence of planned clinical trials and the potential commercialization of the drug candidates;
uncertainty as to the size and existence of a market opportunity for, and market acceptance of, the Company’s drug
product candidate(s) including as a result of possible changes in the market for the Company’s drug candidates resulting
from development in immunotherapies;
uncertainty as to the availability of raw materials that the Company utilizes to manufacture its products, and in particular,
Good Manufacturing Practice (“GMP”) grade materials, on acceptable terms or at all, and that the Company may not be
able to timely obtain alternative suppliers upon commercially viable terms or at all, which could have a material adverse
effect on the further development and commercialization of any or all of the Company’s drug product candidate(s);
product liability and insurance risks;
government regulation, including drug price regulation, and the need for regulatory approvals for both the development
the risk of lawsuits and other legal proceedings against the Company;
the effect of competition, especially from the new immunotherapy treatments for non-small cell lung cancer (“NSCLC”);
the risk of unknown side effects arising from the development, manufacture or use of the Company’s products;
the need to attract and retain key personnel;
that the Company has no sales, marketing and distribution experience;
and profitable commercialization of products, which are not assured;
risks associated with the fact that the U.S. Food and Drug Administration (the “FDA”) and any other regulatory agency
that the Company has consulted are not bound by their scientific advice, nor are any approvals given by one regulatory
body binding on another;
rapid technological change and competition from pharmaceutical companies, biotechnology companies and universities,
which may make the Company’s technology or products obsolete or uncompetitive;
risks associated with claims, or potential claims, of infringement of third party intellectual property and other proprietary
rights;
the risk of unanticipated expenses;
the impact on the Company’s finances resulting from shifts in foreign exchange rates, credit risk and interest rate risk,
and other risk factors that are discussed above and elsewhere in this MD&A or identified in the Company’s other public filings
under the Company’s profile on SEDAR at www.sedar.com, including under the headings “Forward-Looking Statements” and
“Risk Factors” in the Company’s most recent Annual Information Form (together the “Helix Risk Factors”), any of which could
cause actual results to vary materially from current results or the Company’s anticipated future results. Certain material factors,
estimates or assumptions have been applied in making forward-looking information in this MD&A, including, but not limited to, the
safety and efficacy of the Company’s drug product candidate(s); the Company’s cost and timing in connection with the Phase I
U.S. clinical trial for L-DOS47; the cost and timing for achieving MTD in the Company’s European Phase I/II clinical trial for L-
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DOS47 in Poland; that sufficient financing will be obtained in a timely manner to allow the Company to continue operations; the
timely provision of services and supplies or other performance of contracts by third parties; future costs; the absence of any
material changes in business strategy or plans, the timely receipt of required regulatory approvals, strategic partner support; and
that the Helix Risk Factors will not cause the Company’s actual results or events to differ materially from the forward-looking
information.
For all of the reasons set forth above, which do not represent an exhaustive list of factors that may affect the forward looking
information, investors should not place undue reliance on forward looking information. The forward-looking information is based
on the beliefs, assumptions, opinions and expectations of the Company’s management at the time they are made, and the
Company does not assume any obligation to update any forward-looking statement should those beliefs, assumptions, opinions
or expectations, or other circumstances change, except as required by law.
Data relevant to estimated market sizes in connection with Company’s lead products under development are presented in this
MD&A. These data have been obtained from a variety of published resources, including published scientific literature, websites
and information generally available through publicized means. The Company attempts to source reference data from multiple
sources whenever possible for confirmatory purposes. Although the Company believes the foregoing data is reliable, the Company
has not independently verified the accuracy and completeness of this data.
OVERVIEW
Helix is a biopharmaceutical company mainly focused in the field of cancer therapy.
The Company is developing products for the treatment and prevention of cancer based on its proprietary technologies.
The Company’s product development initiatives are focused primarily on its DOS47 new drug candidate. L-DOS47 is currently
under study for the treatment of NSCLC. The Company currently believes that its growth and future prospects are mainly
dependent on the success of its DOS47 drug product candidate.
L-DOS47 has completed extensive preclinical testing and manufacturing development, following which, regulatory approvals were
obtained in Poland and the U.S. to conduct Phase I/II and Phase I clinical studies, respectively. The LDOS002 European Phase
I/II clinical study in Poland continues to enroll patients and three sites have been initiated in the U.S. Phase I study in NSCLC
involving L-DOS47 in combination with pemetrexed/carboplatin.
Due to a lack of funding, a decision was made by the Company in fiscal 2013 to downsize and eventually close the Saskatoon
laboratory which supported the Topical Interferon Alpha-2b drug development program and to focus any ongoing activities
associated with this program to sourcing and qualifying alternative interferon alpha-2b raw material samples and finding suitable
strategic partner(s) who would be willing to license or acquire the product and support the remaining development costs through
to commercial launch. The Company has since ceased all activities related to Topical Interferon Alpha-2b, other than maintaining
existing intellectual property associated with Topical Interferon Alpha-2b.
On January 25, 2013, the Company completed the sale of its distribution business and as a result will no longer have any revenue
from product distribution activities (nor will it incur the associated expenses).
The Company expects to incur additional losses for the foreseeable future and will require additional financial resources to fund
the Company’s ongoing research and development activities. The Company finances its research and development programs
primarily from the issuance of its securities.
The Company continues to have insufficient cash reserves to meet anticipated cash needs for working capital and capital
expenditures through the next twelve months. Since the Company’s cash reserves as at July 31, 2015 of $6,792,000 are not
sufficient to see the current research and development initiatives through to completion, the Company will require additional
financing in the near term. Securing additional financing continues to be of utmost importance to the Company.
The Company is considering alternative sources of securing additional financing. First, the Company is actively seeking grant
money from European authorities for research and development activities in Poland. Second is a possible listing of the Company’s
common shares on the Warsaw Stock Exchange. There can be no assurance that the Company will be successful will be
successful on receiving any grants or that it will ultimately pursue a listing on the Warsaw Stock Exchange.
The Company continues to explore any and all options to its disposal in securing additional financing.
RESEARCH AND DEVELOPMENT ACTIVITIES
DOS47 – A broad anti-cancer therapeutic platform
DOS47 is based upon a naturally occurring enzyme called urease which breaks down urea into ammonia. DOS47 candidates are
produced by conjugating urease with a targeting antibody or antibody fragment that can specifically direct the urease to the surface
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of a cancer cell. Once docked to the cell, the urease produces ammonia enzymatically through the conversion of urea found
throughout the body. These conjugates of antibodies to urease are called DOS47 candidates. By selecting antibodies that are
selective to different tumour cell surface receptors, the Company believes that DOS47 candidates can be used in several types
of solid tumours.
The Company believes that its DOS47 candidates may have potential anti-cancer activity because it stimulates an increase in the
pH of the microenvironment surrounding the cancerous cells. The local production of ammonia at the site of cancerous tissues is
thought to readily diffuse into the cancer cells and may exert a potent cytotoxic effect by interfering with their critical metabolic
functions. In addition, the Company believes that the use of DOS47 candidates may also have a synergistic effect on the efficacy
of other marketed chemotherapeutics, such as vinka alkyloid analogues, where low pH can inhibit the cellular uptake of these
agents. The Company believes the enzymatic action of urease to increase the pH at the site of cancerous cells is repetitive and
sustainable due to the plentiful supply of urea that is furnished by the body.
L-DOS47 is the Company’s first targeted therapeutic immunoconjugate under development based on the DOS47 technology.
L-DOS47 is an antibody protein conjugate where the urease component enzymatically converts naturally occurring urea to
ammonia. The L-DOS47 drug molecule includes a highly specialized camelid-derived single domain antibody, designed to identify
a unique CEACAM6 antigenic site associated with NSCLC cells. By delivering the conjugate in a targeted manner, the Company
believes L-DOS47 stimulates an increase in the pH of the microenvironment surrounding the NSCLC cells, reversing the acidic
extra-cellular conditions that are shown to be favourable for cancer cell survival.
L-DOS47 is intended to offer an innovative approach to the first-line treatment of inoperable, locally advanced, recurrent or
metastatic NSCLC. However, other emerging therapies, including immunotherapy, may alter the treatment paradigm in
NSCLC. Therefore, the eventual approval for L-DOS47 as a first-line treatment for NSCLC will depend on both successful clinical
trials and on the treatment landscape shaped by these new therapies. The Company continues to monitor developments in this
area and to consider their effect on its L-DOS47 program, including its focus on L-DOS47 as a first-line treatment for NSCLC.
In 2005, the Company entered into a worldwide exclusive license with the National Research Council of Canada (“NRC”), through
which it obtained the rights to combine this highly specialized camelid-derived single domain antibody with Helix’s DOS47
technology. As a result, the Company has certain royalty and milestone payment obligations pursuant to the license agreement.
The license agreement with the NRC has been filed under the Company’s profile on SEDAR at www.sedar.com. The NRC filed
patent applications in respect of the antibody in Canada, the United States and other countries. On March 2, 2011, the NRC was
issued a U.S. patent in respect of the antibody.
The Company had prioritized the LDOS002 European Phase I/II clinical study with L-DOS47 in Poland and had previously deferred
the commencement of the previously-approved U.S. Phase I clinical study with L-DOS47. The Company has since received
approval for a new LDOS001 U.S. Phase I study for L-DOS47 from the FDA and has initiated three sites in connection with their
study. However, as of the date of this MD&A, the Company continues to have insufficient cash resources to see either the
LDOS002 European Phase I/II clinical study or the LDOS001 U.S. Phase I clinical study through to completion.
U.S. Phase I clinical study (“LDOS001”)
On February 7, 2011 the Company announced it received approval by the FDA to conduct a U.S. Phase I clinical study with L-
DOS47. The Company originally planned to commence the L-DOS47 U.S. Phase I study during fiscal 2012 but, given the
Company’s limited cash resources, the Company has prioritized the LDOS002 European Phase I/II clinical study with L-DOS47
in Poland while deferring the previously planned commencement of the U.S. Phase I clinical study with L-DOS47.
On April 22, 2014, the Company announced an IND approval by the FDA to commence a study for an L-DOS47 Phase I, open
label, dose escalation study in combination with standard doublet therapy of pemetrexed/carboplatin in patients with Stage IV
recurrent or metastatic non-squamous NSCLC. The Company has initiated three U.S. sites: Dr. Sarina Piha-Paul at the MD
Anderson Cancer Center, Dr. Chandra Belani at Penn State University and the Milton S., Hershey Medical Center, and Dr. Afshin
Dowlati at University Hospitals Case Medical Center. The first patient was dosed in the US Phase I clinical study on April 20,
2015 at the MD Anderson Cancer Center. Two patients have been dosed at the first L-DOS47 dose level 0.59 µg/kg and a third
patient is currently being screened.
The Company continues to have insufficient cash resources to see the entire LDOS001 U.S. Phase I clinical study through to
completion. Given the Company’s limited current cash resources and the possibility of not being able to obtain additional financing
on a timely basis, the Company may be required to reduce, delay or cancel one or more of its planned research and development
programs, including clinical trials along with further reductions in overhead, any of which could impair the current and future value
of the business.
European Phase I/II clinical study in Poland (“LDOS002”)
On July 25, 2011, Helix announced that the Company had received approval from the Central Register of Clinical Trials at the
Polish Ministry of Health to perform a European Phase I/II clinical study with L-DOS47 and, on May 14, 2012, announced that
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clinical site initiation and patient recruitment activities had commenced for its European Phase I/II clinical study of L-DOS47. On
October 23, 2012, the Company announced that its first patient had been enrolled and the first dose had been administered in this
study.
The study is being conducted at five Polish centers under the direction of Dr. Dariusz Kowalski at The Maria Sklodowska-Curie
Memorial Cancer Centre & Institute of Oncology as the overall coordinating investigator, together with four other principal
investigators: Prof. Cezary Szczylik, MD, PhD at the Military Medical Institute, Prof. Elzbieta Wiatr, MD, PhD at the National
Tuberculosis and Lung Diseases Research Institute, Dr. Aleksandra Szczensa, MD, PhD at the Mazovian Center of Pulmonary
Diseases and Tuberculosis in Otwock and Prof. Rodryg Ramlau, MD, PhD at Med. Polonia Hospital Poznan.
The study is being conducted in patients with inoperable, locally advanced, recurrent or metastatic, non-squamous stage IIIb/IV
NSCLC.
The study, which is now well underway, recruits patients eligible for inclusion into escalating doses of L-DOS47 given as a
monotherapy. The study utilizes an open-label design, allowing for periodic status updates through its course. The study is
intended to demonstrate valuable safety and proof-of-concept efficacy data for L-DOS47.
Patients in the study receive weekly doses of L-DOS47, administered as an intravenous infusion over 14 days, followed by seven
days' rest (one treatment cycle is three weeks). Once the MTD of L-DOS47 has been determined in Phase I, an estimated 20
patients will be enrolled to evaluate the preliminary efficacy of L-DOS47 in the Phase II portion of the study.
The total number of patients to be enrolled in the Phase I portion of the study will depend on how many escalating dose levels are
required to reach MTD. The Company originally estimated that MTD would be reached after enrolling eight cohorts of three
patients each. Management also originally assumed that there would be two DLT events requiring a further six patients to be
enrolled, for a total of up to 30 patients by the time the study dosed patients in Cohort 8. However, L-DOS47 continued to display
a good safety profile. In clinical study LDOS002, L-DOS47 is approved for dosing up to Cohort 16. This will allow the Company
to study the highest safe dose to be administrated in the Phase II portion of the study. The Company has now enrolled 46 patients
and is enrolling patients in the 13th dosing cohort. The Company intends to enroll up to MTD or Cohort 16, whichever event
occurs first. Study patients are male or female, at least 18 years of age, with histologically confirmed non-squamous NSCLC.
Patients have an Eastern Cooperative Oncology Group performance status of 0 – 2 at the screening visit for this study, and have
at least one site of measurable disease per RECIST v1.1.
Efficacy evaluation of L-DOS47 is based upon response rate using the RECIST version 1.1 criteria, disease progression and
survival. Monitoring includes radiologic evaluations prior to the first dose to establish a baseline and every six weeks thereafter
(“Radiologic Evaluations”). For all patients (Phase I and II), treatment with L-DOS47 will continue until the patient experiences
disease progression or unacceptable toxicity, the patient withdraws consent, or the patient has completed four treatment cycles
and does not wish to continue with additional cycles, whichever occurs first. After four treatment cycles, at the discretion of the
investigator and in consultation with the medical monitor, patients who experience clinical benefit may be eligible to continue L-
DOS47 for as long as the treatment is well tolerated and the clinical benefit is sustained.
For Cohorts 1 through 12, doses of 0.12, 0.21, 0.33, 0.46, 0.59, 0.78, 1.04, 1.38, 1.84, 2.45, 3.26, and 4.33 of L-DOS47 per
kilogram of patient body weight have been successfully administered to study patients with no dose limiting toxicities (“DLT”). In
Cohort 13, of the three patients that were dosed at 5.76 micrograms, one of these patients experienced an adverse event that met
the definition of DLT. After review, the Trial Steering Committee agreed to expand Cohort 13 to an additional three patients per
the clinical trial protocol.
On February 10, 2015 the central ethics committee overseeing the Phase I clinical study in Poland approved additional dose levels
in the Phase I component of the LDOS002 study in anticipation of continued dose escalation beyond the 4.33 µg/kg administered
to patients in Cohort 12. The additional four cohort (Cohorts 13 to 16) approved dose levels include 5.76, 7.66, 10.19 and 13.55
µg/kg. The Phase II component will start after the maximum tolerated dose of L-DOS47 is determined in Phase I and is expected
to enrol 20 patients to evaluate the preliminary efficacy of L-DOS47.
The Company has now completed two interim data reviews in connection with the LDOS002 study. On October 15, 2013, the
Company announced the completion of an interim data review of the first four cohorts for this study. The release stated that L-
DOS47 was well tolerated for all patients treated within all cohorts. None of the treatment related adverse events reported to date
has met the definition of a dose-limiting toxicity. Adverse events reported as of that date are those normally expected for the
population under study.
A review of available pharmacokinetic (“PK”) and immunogenicity data showed that these data so far, are consistent with trends
seen within pre-clinical animal studies of L-DOS47. Results from these reviews, together with safety data will provide guidance
on the treatment schedule and dosing for the Phase II portion of the study.
Based on Radiologic Evaluations, patients assigned a status of “Progressive Disease” following any such assessment were
withdrawn from the study. At least one patient in each of the four cohorts dosed had a radiological assessment of “Stable
Response”. Duration of treatment increased with each dose escalation up to Cohort 4. One patient in Cohort 3 was dosed for 6
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cycles without disease progression. None of the patients treated to date have had a partial or complete response as defined by
RECIST v1.1 definition.
On September 30, 2014, the Company announced the completion of a further interim data review for the first eight cohorts for the
LDOS002 study. The review included all available data, including patient demographics, safety assessments, PK data,
immunogenicity and radiological tumour assessments. The following observations were made:
adverse events reported are those expected for investigational product and population under study;
no DLTs have been reported;
stable disease observed in radiological assessments of 12 of 24 (50%) of patients treated; and
two patients completed six cycles of treatment each.
On September 8, 2015, the Company announced the presentation and update of the ongoing clinical study LDOS002 for the
Company’s drug candidate L-DOS47 during the 16th World Conference on Lung Cancer held in Denver Colorado. The
presentation included the following data:
forty (40) patients were enrolled in the first twelve dosing cohorts;
L-DOS47 was well tolerated at the dose levels up to 4.33 µg/kg;
no Dose Liming Toxicities ("DLT") were reported for Cohorts 1-12;
one (1) DLT was reported for Cohort 13;
adverse events reported to date were expected for the population under study;
twenty-one (21) of the forty (40) patients had an overall response of stable disease based on radiological assessment
after completing two cycles of L-DOS47;
eleven (11) of these 21 patients continued with a response of stable disease based on radiological assessment after
completing four cycles of L-DOS47;
one patient in cohort 9 was dosed for ten (10) cycles (approximately seven (7) months) without disease progression;
the study is currently enrolling patients in the thirteen dosing cohort (5.76 µg/kg).
The Company continues to have insufficient cash resources to see the entire LDOS002 European Phase I/II clinical study in
Poland through to completion. Given the Company’s limited current cash resources and the possibility of not being able to obtain
additional financing on a timely basis, the Company may be required to reduce, delay or cancel one or more of its planned research
and development programs, including clinical trials along with further reductions in overhead, any of which could impair the current
and future value of the business.
Phase I/II clinical study (“LDOS003”)
The Company continues to assess the viability of an LDOS003 clinical study of L-DOS47 in combination with Vinorelbine and
Cisplatin (“VIN/CIS”) in patients with metastatic or advanced solid tumours. Following discussions with key advisors, the Company
is considering a re-design of the LDOS003 study to focus on advanced stage lung cancer patients by combining L-DOS47 with
VIN/CIS.
Given the Company’s limited current cash resources and the possibility of not being able to obtain additional financing on a timely
basis, the Company may be required to reduce, delay or cancel one or more of its planned research and development programs,
including clinical trials along with further reductions in overhead, any of which could impair the current and future value of the
business.
Additional potential therapeutic applications of L-DOS47
The Company is evaluating L-DOS47 for other potential therapeutic applications beyond NSCLC, such as in colorectal, breast
and pancreatic cancer types as well as other alternatives to current first-line therapies or in the use as adjuvant/neoadjuvant
therapies. In addition, the Company is also exploring the interaction of L-DOS47 with the human immune system. Subject to
positive outcomes from these evaluations and the availability of sufficient cash and other resources, the Company intends to
evaluate the possibility of expanding its clinical testing program of L-DOS47 beyond NSCLC, and the potential of combining L-
DOS47 with immunotherapies in the future.
New potential DOS47 drug candidates
The Company continues to reach out to third parties in order to identify and test additional tumor-targeting antibodies for
conjugation with DOS47. In the event that antibody candidates worthy of further development are identified, the Company will
need to discuss development and licensing arrangements, which may not be available on terms acceptable to the Company or at
all.
In fiscal 2012, the Company entered into a collaborative research agreement with Amorfix Life Science Inc. (“Amorfix”) to develop
therapeutics against cancers associated with misfolded prion protein. Amorfix, announced in January 2015, the closing of their
laboratory in Mississauga and plans to relocate to San Francisco. The Company has suspended all research activity in this project.
Page | 7
In fiscal 2015, the Company entered into a collaborative research agreement with Affilogic to assess proprietary anti-tumor
targeting agents in combination with DOS47. The agreement calls for a feasibility study using a targeting agent in conjugation
with DOS47. Continuing development of these new conjugates is subject to a successful feasibility study, execution of a formal
development and licensing agreement, and the availability sufficient financial resources.
Commercialization
The Company’s commercialization objective with DOS47 is to eventually enter into a strategic partnering alliance with a large
pharmaceutical company, on an individual or multiple drug candidate basis, such as L-DOS47 or any potential new DOS47 drug
product candidate. In the meantime, the Company’s objective is to continue generating value-adding clinical findings, which
demonstrate the safety and efficacy of L-DOS47 in patients or any other new potential DOS47 drug candidate so as to maximize
value for shareholders when entering into a strategic partnering alliance.
Market and Competition
Based on information published in “Cancer Facts and Figures 2015” by the American Cancer Society (www.cancer.org), lung
cancer accounts for about 27% of all cancer deaths and is by far the leading cause of cancer death among men and women in
the U.S. It is estimated that in 2015 there will be over 221,200 new lung cancer cases.
If detected early, surgical removal of the cancerous tissue is currently a patient’s best option. However, in the vast majority of
cases, the cancer is not typically identified until it has advanced to a level at which surgical intervention is no longer an option. In
the cases of inoperable, locally advanced, recurrent or metastatic NSCLC and with no known targetable mutations, treatment
strategies consist of one or more of today’s leading chemotherapeutic drug regimens for lung cancer (e.g. platinum therapy
together with certain leading chemotherapeutic drugs). Typically, these regimens relieve symptoms and, at best, delay
progression of the disease.
Disease progression, even with targeted therapies, is highly likely to occur, and there are no clear guidelines and/or indications
once such therapies fail. Maintenance therapy following the induction of first-line therapy is also a treatment strategy gaining
support.
Immunotherapies such as immune checkpoint inhibitors that target Programmed Death 1 (“PD-1”) or its ligands, Programmed
Death Ligand 1 or 2 (“PD-L1” and “PD-L2”) are showing significant clinical successes in NSCLC. On March 4, 2015 the FDA
approved Nivolumab, the generic name for the trade drug named Opdivo®, which targets PD-1 for the treatment of metastatic
squamous NSCLC with progression on or after platinum-based chemotherapy. More recently, on October 2, 2015, the FDA
granted accelerated approval for Pembrolizumab, the generic name for the trade drug named Keytruda®, which targets PD-1 to
treat patients with advanced metastatic NSCLC whose disease has progressed after other treatments and with tumors that express
PD-L1. Anti-PD-L1 drugs such as MPDL3280A from Roche are also advancing rapidly through late stage clinic trials. The
company anticipates some of these approved drugs will eventually be approved as front line therapies for advanced stage NSCLC.
These and other rapidly advancing immunotherapy treatments, currently in development, have the potential to significantly alter
the treatment of cancer, not in just one cancer type but across many cancer types. As a result of these developments in
immunotherapies, and in particular with the success of immunotherapies in the treatment of NSCLC, the Company is currently
reassessing its L-DOS47 clinical program given that: (a) its target therapeutic indication, being inoperable, locally-advanced,
recurrent or metastatic NSCLC, may be a good candidate to combine with the emerging best-in-class immunotherapies; and (b)
leading therapeutics for such oncology applications have commonly been high revenue generators for the pharmaceutical sector.
Technological competition from pharmaceutical companies, biotechnology companies and university researchers is intense and
is expected to continue to be very intense. Many competitors and potential competitors have substantially greater product
development capabilities and financial, scientific, marketing and human resources than the Company, providing them with a
competitive advantage over the Company.
The BiphasixTM Topical Formulation System
The Biphasix™ Topical Formulation System is a platform technology which the Company acquired and further developed for
microencapsulating therapeutic compounds in multilayered, lipid-based microvesicles. These microvesicles have complex
structures that include a variety of compartments into which drug molecules can be integrated. The principal application of the
technology is in the preparation of topical dosage forms for the dermal (into the skin) or mucosal (into the mucosal tissues) delivery
of large molecular weight drug compounds.
Topical Interferon Alpha-2b
The Company received IND approval by the FDA to conduct a U.S. Phase II/III clinical trial of Topical Interferon Alpha-2b in low-
grade cervical dysplasia patients, as well as Clinical Trial Application (“CTA”) approval by the Bundesinstitut fur Arzneimittel und
Page | 8
Medizinprodukte and conditional CTA approval by the Medicines and Healthcare Regulatory Authority to conduct an identical
European Phase III confirmatory trial in Germany and/or the United Kingdom respectively.
Due to a lack of funding, a decision was made by the Company in fiscal 2012 to downsize and eventually close the Saskatoon
laboratory which supported the Topical Interferon Alpha-2b drug development program, and focus any ongoing activities to
sourcing and qualifying alternative interferon alpha-2b raw material samples, and finding suitable strategic partner(s) who would
be willing to license or acquire the product and support the remaining development costs through to commercial launch. The
Company has since ceased all activities related to Topical Interferon Alpha-2b, other than maintaining existing intellectual property
associated with Topical Interferon Alpha-2b.
SELECTED FINANCIAL INFORMATION AND SUMMARY OF QUARTERLY RESULTS
The tables below reflect only selected annual and quarterly financial information of the Company’s continuing operations.
Net loss and total comprehensive loss from continuing operations, over the last eight quarters, ranged from a high of $2,665,000
in fiscal Q2 2015 to a low of $1,750,000 in fiscal Q4 of 2014 with fluctuations mainly dependant on the level of research and
development activities and operating, general and administration expenses.
Included in the research and development expense for fiscal Q2 2014 is a one-time payout of $500,000 related to the termination
of the Company’s former President and Chief Operating Officer. Lower research and development expenses in both Q4 2015
and 2014 are mainly the result of the Company recording investment tax credits.
The higher operating, general and administration expenditures in Q2 of fiscal 2015 and Q2 of fiscal 2014 were mainly the result
of stock-based compensation expense for options granted to directors of the Company. In addition Q4 2015 and Q2 2015 also
included various expenditures associated with the Company’s exploration of growth alternatives. In late fiscal 2014, the Board
approved a new policy regarding awarding options to directors, after a peer review with other comparable companies in the
biotechnology sector.
In fiscal Q3 2015, the Company closed two private placements for net proceeds of $8,243,000. In fiscal 2014, the Company closed
two private placements for net proceeds of $5,481,000 in Q4 2014 and $4,672,000 in Q2 2014, respectively.
The following table depicts selected quarterly data from continuing operations for the fiscal year ended July 31, 2015:
Research and development
Operating, general and administration
Q4
$
983,000
$ 1,138,000
Q3
$ 1,216,000
687,000
$
Q2
$ 1,442,000
$ 1,181,000
Q1
$ 1,244,000
886,000
$
Net loss and total comprehensive loss
Basic and diluted loss per common share
Weighted average number of common shares
$ (2,119,000)
(0.02)
$
84,653,837
$ (1,871,000)
(0.03)
$
77,812,392
$ (2,665,000)
(0.03)
$
75,936,750
$ (2,125,000)
(0.03)
$
75,900,337
Cash
$ 6,792,000
$ 9,151,000
$ 2,723,000
$ 4,814,000
The following table depicts selected quarterly data from continuing operations for the fiscal year ended July 31, 2014:
Research and development
Operating, general and administration
Q4
973,000
830,000
$
$
Q3
$ 1,285,000
829,000
$
Q2
$ 1,649,000
$ 1,011,000
Q1
$ 1,332,000
826,000
$
Net loss and total comprehensive loss
Basic and diluted loss per common share
Weighted average number of common shares
$ (1,750,000)
(0.02)
$
72,816,467
$ (2,114,000)
(0.03)
$
71,904,337
$ (2,660,000)
(0.04)
$
71,904,337
$ (2,158,000)
(0.03)
$
67,226,337
Cash
$ 6,980,000
$ 2,832,000
$ 4,386,000
$ 2,482,000
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The following table depicts selected annual data from continuing operations for the fiscal years ended July 31:
Revenue
Research and development expense
Operating, general and administration expense
Net loss and total comprehensive loss
Deficit, end of year
Basic and diluted loss per common share
Weighted average number of common shares
Cash
Working capital
Total assets
2015
-
4,885,000
3,892,000
2014
-
5,239,000
3,496,000
$
$
$
$
$
$
2013
1,868,000
5,032,000
3,196,000
$
$
$
8,780,000
$
$ 135,656,000
8,682,000
$
$ 126,926,000
8,194,000
$
$ 118,244,000
$
$
$
$
0.11
78,592,444
6,792,000
6,498,000
7,796,000
$
$
$
$
0.12
70,955,132
6,980,000
6,363,000
7,853,000
$
$
$
$
0.12
67,226,337
4,493,000
4,243,000
5,868,000
RESULTS FROM OPERATIONS
Net loss and total comprehensive loss from continuing operations
The Company recorded a net loss and total comprehensive loss of $8,780,000 ($0.11 loss per common share) and $8,682,000
($0.12 loss per common share) for the fiscal years ended 2015 and 2014, respectively.
Research & development
Research and development costs for fiscal 2015 and 2014 totalled $4,885,000 and $5,239,000, respectively.
The following table outlines research and development costs expensed and investment tax credits for the Company’s significant
research and development projects for the fiscal years ended July 31:
L-DOS47
Topical Interferon Alpha-2b
Corporate research and development expenses
Trademark and patent related expenses
Stock-based compensation expense
Depreciation expense
Research and development investment tax credit
2015
$ 4,031,000
-
567,000
339,000
16,000
121,000
(189,000)
2014
$ 2,730,000
383,000
1,407,000
612,000
83,000
222,000
(198,000)
$ 4,885,000
$ 5,239,000
L-DOS47 research and development expenses for fiscal 2015 and 2014 totalled $4,031,000 and $2,730,000, respectively. L-
DOS47 research and development expenditures relate primarily to ongoing expenditures towards the LDOS002 European Phase
I/II clinical study in Poland and costs associated with the LDOS001 U.S. Phase I clinical study in the U.S.
Topical Interferon Alpha-2b research and development expenses for fiscal 2015 and 2014 totalled $nil and $383,000, respectively.
In fiscal 2014, the Company had focused ongoing activities with respect to its Topical Interferon Alpha-2b program on sourcing
and qualifying alternative interferon alpha-2b raw material samples, strengthening the BiPhasix™ patent portfolio and finding a
suitable strategic partner(s) who would be willing to license or acquire the product and support the remaining development costs.
In fiscal 2015, the Company suspended any activity associated with the Topical Interferon Alpha-2b program.
Corporate research and development expenses for fiscal 2015 and 2014 totalled $567,000 and $1,407,000, respectively. Included
in corporate research and development expense for fiscal 2014 is a one-time payout of $500,000 related to the termination of the
Company’s former President and Chief Operating Officer.
Trademark and patent related expenses for fiscal 2015 and 2014 totalled $339,000 and $612,000, respectively. Efforts were
taken by the Company in the previous fiscal year to strengthen the DOS47 and Biphasix™ patent portfolios.
Operating, general and administration
Operating, general and administration expenses for the fiscal 2015 and 2014 totalled $3,892,000 and $3,496,000, respectively.
Consulting services fees increased in fiscal 2015, primarily as a result of factors related to Helix’s exploration of growth
opportunities. This increase was partially offset by lower legal fees. In late fiscal 2014, the Board approved a new policy regarding
awarding options to directors, after a peer review with other comparable companies in the biotechnology sector.
Page | 10
SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial
statements.
Use of estimates and assumptions
The preparation of financial statements requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the year. Actual results could differ from those estimates. Significant areas
requiring the use of estimates include research and development tax credits associated with research and development
expenditures, the determination of fair value of stock options granted for estimating stock-based compensation, the allocation of
proceeds to share purchase warrants, estimates related to the determination of useful lives and assessment of impairment of long-
lived assets such as property, plant and equipment. In determining these estimates, the Company relies on assumptions regarding
applicable industry performance and prospects, as well as general business and economic conditions that prevail and are expected
to prevail. These assumptions are limited by the availability of reliable comparable data and the uncertainty of predictions
concerning future events. Actual results could differ from these estimates.
Functional and presentation currency
The functional and presentation currency of the Company is the Canadian dollar.
Basis of consolidation
These consolidated financial statements include the accounts of the Company and its subsidiaries listed below. Control is achieved
when the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its
activities. Subsidiaries are fully consolidated from the date on which control is acquired by the Company. Inter-company
transactions and balances are eliminated upon consolidation. They are de-consolidated from the date that control by the Company
ceases. The consolidated financial statements include the assets and liabilities and results of operations of all subsidiaries after
elimination of intercompany transactions and balances.
As at July 31, 2015, the subsidiaries of the Company include: Helix BioPharma Inc., incorporated in the USA, Helix Polska sp.z.o.o
incorporated in Poland and Helix Product Development (Ireland) Limited, incorporated in Ireland. All these subsidiaries are 100%
owned by Helix BioPharma Corp.
Cash
The Company considers cash on hand, deposits in banks and bank term deposits with maturities of 90 days or less as cash.
Property, plant and equipment
Property, plant and equipment are recorded at cost less accumulated depreciation. Impairment charges are included in
accumulated depreciation. Depreciation is provided using the following methods and estimated useful life:
Asset
Computer equipment and software
Furniture and fixtures
Research and manufacturing equipment
Leasehold improvements
Research and development costs
Basis
Straight line
Straight line
Straight line
Straight line
Rate
3 years
5 years
10 years
Lease term
Research costs are expensed as incurred. Development costs are expensed as incurred except for those which meet the criteria
for deferral, in which case, the costs are capitalized and amortized to operations over the estimated period of benefit. No costs
have been deferred to date.
Investment tax credits
The Company is entitled to Canadian federal and provincial investment tax credits, which are earned as a percentage of eligible
research and development expenditures incurred in each taxation year. Investment tax credits are accounted for as a reduction
of the related expenditure for items of a current nature and a reduction of the related asset cost for items of a capital nature,
provided that the Company has reasonable assurance that the tax credits will be realized.
Page | 11
Stock-based compensation
The Company accounts for stock-based compensation and other stock-based payments made in exchange for goods and services
provided by employees and non-employees in accordance with the fair value method. The fair value of stock options granted is
determined at the appropriate measurement date using the Black-Scholes option pricing model, and generally expensed over the
options’ vesting period for employee awards and non-employee awards. Awards with graded vesting are considered multiple
awards for fair value measurement and stock-based compensation calculation. In determining the expense, the Company
accounts for forfeitures using an estimate based on historical trends.
Income taxes
The Company follows the asset and liability method of accounting for income taxes. Under this method, deferred income tax
assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of certain existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities
are measured using enacted or substantively enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the date of substantive enactment. Given the Company’s history of net
losses and expected future losses, the Company is of the opinion that it is probable that these tax assets will not be realized in
the foreseeable future and therefore, the deferred tax asset has not been recognized.
Financial instruments
Financial assets and financial liabilities are initially recorded at fair value and their subsequent measurements are determined in
accordance with their classification. The classification depends on the purpose for which the financial instruments were acquired
or issued and their characteristics. Cash and cash equivalents are classified as held-for-trading assets and are accounted for at
fair value. Accounts receivable are classified as loans and receivables, and after initial recognition are recorded at amortized cost.
Accounts payable and accrued liabilities are classified as other financial liabilities, and after initial recognition are recorded at
amortized cost.
Impairment
(i) Financial assets:
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is
objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred
after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that
asset that can be estimated reliably.
An impairment test is performed, on an individual basis, for each material financial asset. Other individually non-material financial
assets are tested as groups of financial assets with similar risk characteristics. Impairment losses are recognized in income.
An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying
amount and the present value of the estimated future cash flows discounted at the assets original effective interest rate. Losses
are recognized in income and reflected in an allowance account against the respective financial asset. Interest on the impaired
asset continues to be recognized through the unwinding of the discount. When a subsequent event causes the amount of
impairment loss to decrease, the decrease in impairment loss is reversed through income for all financial assets except available-
for-sale equity securities.
(ii) Non-financial assets:
The carrying amounts of the Company’s non-financial assets are reviewed at each reporting date to determine whether there is
any indication of impairment. If such an indication exists, the recoverable amount is estimated.
The recoverable amount of an asset or a cash-generating unit is the greater of its value in use and its fair value less costs to sell.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit. For
the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets
that generates cash inflows from continuing use that are largely independent of cash inflows of other assets or cash-generating
units. An impairment loss is recognized if the carrying amount of an asset or its related cash-generating unit exceeds its estimated
recoverable amount.
Impairment losses recognized in prior periods are assessed each reporting date for any indications that the loss has decreased
or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable
amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount
that would have been determined, net of depreciation, if no impairment loss had been recognized.
Page | 12
Basic and diluted loss per common share
Basic loss per share is computed by dividing the net loss available to common shareholders by the weighted average number of
shares outstanding during the reporting period. Diluted loss per share is computed similarly to basic loss per share, except that
the weighted average shares outstanding are increased to include additional shares for the assumed exercise of stock options
and warrants, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options and warrants
were exercised and that the proceeds from such exercises were used to acquire common stock at the average market price during
the reporting periods. The inclusion of the Company’s stock options and warrants in the computation of diluted loss per share has
an anti-dilutive effect on the loss per share and, therefore, they have been excluded from the calculation of diluted loss per share.
NEW ACCOUNTING STANDARDS AND PRONOUNCEMENTS NOT YET ADOPTED
New accounting standards and pronouncements issued but not yet effective up to the date of issuance of the Company's
consolidated financial statements are listed below. This listing includes standards and interpretations issued, which the Company
reasonably expects to be applicable at a future date. The Company intends to adopt those standards when they become effective.
Certain pronouncements have been issued by the IASB or International Financial Reporting Interpretations Committee. Many of
these updates are not applicable or are inconsequential to the Company and have been excluded from the discussion below:
IFRS 1, Presentation of Financial Statements
In December 2014, the IASB issued amendments to IAS 1, Presentation of Financial Statements as part of the IASB’s disclosure
initiative. These amendments encourage entities to apply professional judgment regarding disclosures and presentation in their
financial statements. The amendments are effective for annual periods beginning on or after January 1, 2016 with early adoption
permitted. The Company is evaluating the impact of the new standard on its results of operations, financial position and
disclosures.
IFRS 9, Financial Instruments
The IASB has issued a new standard, IFRS 9, Financial Instruments (“IFRS 9”), which will ultimately replace IAS 39, Financial
Instruments: Recognition and Measurement (“IAS 39”). The project had three main phases: classification and measurement,
impairment and general hedging. The standard becomes effective for annual periods beginning on or after January 1, 2018 and
is to be applied retrospectively. Early adoption is permitted. The Company is evaluating the impact of the new standard on its
results of operations, financial position and disclosures.
IFRS 15, Revenue from Contracts with Customers
The IASB has issued a new standard, IFRS 15, Revenue from Contracts with Customers (“IFRS 15”). IFRS 15 contains a single
model that applies to contracts with customers and two approaches to recognizing revenue: at a point in time or over time. The
model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is
recognized. New estimates and judgmental thresholds have been introduced, which may affect the amount and/or timing of
revenue recognized. The standard becomes effective for annual periods beginning on or after January 1, 2017. The Company
is evaluating the impact of the new standard on its results of operations, financial position and disclosures.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has mainly relied on financing its operations from public and private sales of equity. The Company
does not have any credit facilities and is therefore not subject to any externally imposed capital requirements or covenants.
The Company manages its liquidity risk by continuously monitoring forecasts and actual cash flow from operations and anticipated
investing and financing activities.
The Company’s cash reserves of $6,792,000 as at July 31, 2015 are insufficient to meet anticipated cash needs for working capital
and capital expenditures through the next twelve months, nor are they sufficient to see the current research and development
initiatives through to completion. To the extent that the Company does not believe it has sufficient liquidity to meet its current
obligations, management considers securing additional funds, primarily through the issuance of equity securities of the Company,
to be critical for its development needs.
The Company’s long-term liquidity depends on its ability to access the capital markets, which depends substantially on the success
of the Company’s ongoing research and development programs, as well as economic conditions relating to the state of the capital
markets generally. Accessing the capital markets can be particularly challenging for companies that operate in the biotechnology
industry.
Page | 13
While the Company has been able to raise equity financing in recent years, there can be no assurance that additional funding by
way of equity financing will continue to be available. Any additional equity financing, if secured, would result in dilution to the
existing shareholders and such dilution may be significant. The Company may also seek additional funding from or through other
sources, including technology licensing, co-development collaborations, mergers and acquisitions, joint ventures, and other
strategic alliances, which, if obtained, may reduce the Company’s interest in its projects or products or result in significant dilution
to existing shareholders. The Company may also seek additional funding from government grants. There can be no assurance,
however, that any alternative sources of funding will be available. The failure of the Company to obtain additional financing on a
timely basis may result in the Company reducing, delaying or cancelling one or more of its planned research, development and/or
marketing programs, including clinical trials, further reducing overhead, or monetizing non-core assets, any of which could impair
the current and future value of the business or cause the Company to consider ceasing operations and undergoing liquidation.
Given the Company’s conclusion about the insufficiency of its cash reserves, significant doubt may be cast about the Company’s
ability to continue operating as a going concern. The continuation of the Company as a going concern for the foreseeable future
depends mainly on raising sufficient capital, and in the interim, reducing, where possible, operating expenses (including making
changes to the Company’s research and development plans), including the delay of one or more of the Company’s research and
development programs, further reducing overhead and the possible disposition of assets.
At July 31, 2015 and 2014, the total number of common shares issued was 84,653,837 and 75,900,337, respectively and the
Company’s working capital was $6,498,000 and $6,363,000, respectively.
PROPERTY, PLANT AND EQUIPMENT EXPENDITURES
There were no major purchases of capital equipment in fiscal 2015 and 2014. Any purchases of property, plant and equipment in
fiscal 2016 is expected to be limited.
The following table summarizes the capital expenditures made by the Company in the fiscal years ended July 31:
Fiscal 2015
Fiscal 2014
RELATED PARTY TRANSACTIONS
Amount
$ 14,000
3,000
$
Type
General IT purchases
General IT purchases
The key management personnel of the Company are the President and Chief Executive Officer, former President and Chief
Operating Officer, Chief Scientific Officer, Chief Financial Officer and Director of Clinical Development.
The following table summarizes key management personnel compensation for the fiscal years ended:
Compensation
Stock-based compensation
2015
2014
$ 1,185,000 $ 1,750,000
238,000
76,000
Included in 2014 compensation expense in the above table is a one-time payout of $500,000 related to the termination of the
Company’s former President and Chief Operating Officer.
The following table summarizes non-management Directors’ compensation for the fiscal years ended:
$ 1,261,000 $ 1,988,000
Directors’ fees
Stock-based compensation
Consultancy fee
$
2015
364,000 $
340,000
3,000
2014
291,000
182,000
–
$
707,000 $
473,000
During the year, a consultancy agreement was entered into with a current director of the Company to provide consulting services.
The consultancy agreement has an initial term lasting three months and automatically renews for an additional three months
unless the Company gives written notice not less than thirty days prior to the end of the initial term.
Related party transactions are at arm’s length and recorded at the amount agreed to by the related parties.
Page | 14
FINANCIAL INSTRUMENTS
The Company has classified its financial instruments as follows:
Cash
Fair value hierarchy
2015
2014
Fair Value
$ 6,792,000
Fair value
hierarchy
Level 1
Fair Value
$ 6,980,000
Fair value
hierarchy
Level 1
Financial instruments recorded at fair value on the balance sheet are classified using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
Level 1 reflects valuation based on quoted prices observed in active markets for identical assets or liabilities;
Level 2 reflects valuation techniques based on inputs that are quoted prices of similar instruments in active markets;
quoted prices for identical or similar instruments in markets that are not active; inputs other than quoted prices used in a
valuation model that are observable for that instrument; and inputs that are derived principally from or corroborated by
observable market data by correlation or other means; and
Level 3 reflects valuation techniques with significant unobservable market inputs.
A financial instrument is classified to the lowest level of the hierarchy for which a significant input has been considered in measuring
fair value. The financial instrument in the Company’s financial statements, measured at fair value, is cash.
Fair value
The fair value of financial instruments as at July 31, 2015 and 2014 approximates their carrying value because of the near-term
maturity of these instruments.
INTELLECTUAL PROPERTY
Patents and other proprietary rights are very valuable to the Company, even though the patent positions of biotechnology
companies may be uncertain and involve complex legal and factual issues. The Company has no assurance that any of its patent
applications will result in the issuance of any patents. Even issued patents may not provide the Company with a competitive
advantage against competitors with similar technologies, or who have designed around the Company’s patents. Furthermore, the
Company’s patents may be struck down if challenged. Intellectual property laws do not protect intellectual property to the same
extent from one country to another.
Because of the substantial length of time and expense associated with developing new products, the pharmaceutical, medical
device, and biotechnology industries place considerable importance on obtaining patent protection for new technologies, products,
and processes. The Company’s policy is to file patent applications to protect inventions, technology, and improvements that are
important to the development of our business and with respect to the application of our products and technologies to the treatment
of a number of disease indications. The Company’s policy also includes regular reviews related to the development of each
technology and product in light of its intellectual property protection, with the goal of protecting all key research and developments
by patent.
The Company seeks intellectual property protection in various jurisdictions around the world and owns patents and patent
applications relating to products and technologies in the United States, Canada, Europe and other jurisdictions. The scope and
duration of our intellectual property rights vary from country to country depending on the nature and extent of our intellectual
property filings, the applicable statutory provisions governing the intellectual property, and the nature and extent of our legal rights.
The Company will continue to seek intellectual property protection as appropriate and require our employees, consultants, outside
scientific collaborators, and sponsored researchers to enter into confidentiality agreements with us that contain assignment of
invention clauses outlining ownership of any intellectual property developed during the course of the individual’s relationship with
us.
DOS47
The Company currently owns two U.S. patents in respect of the DOS47 technology, and also has also licensed patent rights from
the NRC for the antibody component of L-DOS47. With respect to non-U.S. patents, the Company owns 52 DOS47 related
patents in other jurisdictions with a number of patent applications in countries around the world. The Company has recently filed
a joint patent application in the U.S. with Amorfix to cover the antibody-DOS47 conjugates derived from their collaboration (see
“New potential DOS47 Candidates” above). A new U.S. patent application to cover new features of the DOS47 technology was
Page | 15
filed by the Company during fiscal 2013. During January 2014, an additional U.S. patent application covering specific L-DOS47
manufacturing and novel features was filed.
BiphasixTM
The Company currently owns seven (7) U.S. BiphasixTM patents.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no material off-balance sheet arrangements.
TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
The Company’s commitments are summarized as follows:
$
Royalty and in-licensing (1)
Clinical research organizations (2)
3,687,000
Contract manufacturing organizations (3) 167,000
60,000
R&D distribution services (4)
77,000
Operating leases
246,000
Financial and investor relations (5)
2016
2017
10,000 $ 10,000
291,000
83,000
–
–
–
2018
$ 10,000
–
81,000
–
–
–
2021 and
beyond
2019
2020
Total
$ 10,000 $ 10,000 $ 40,000 $ 90,000
3,978,000
365,000
60,000
77,000
246,000
–
34,000
–
–
–
–
–
–
–
–
–
–
–
–
–
$ 4,247,000 $384,000 $
91,000 $
44,000 $ 10,000 $
40,000 $
4,816,000
(1) Represents future minimum royalties.
(2) The Company has two Clinical Research Organization supplier agreements in place for clinical research services related to
the management of the Company’s LDOS002 European Phase I/II clinical study in Poland and LDOS001 U.S. Phase I clinical
study in the U.S.
(3) The Company has four separate contract manufacturing organization supplier agreements related to the Company’s L-DOS47
program, all of which are interdependent in the manufacturing of L-DOS47.
(4) The Company has a distribution services agreement associated with the fulfillment of L-DOS47 and ancillary medical items
in support of the Company’s LDOS002 European Phase I/II clinical study in Poland and LDOS001 U.S. Phase I clinical study
in the U.S.
(5) The Company has three non-exclusive financial and investor relations agreements. The main agreement expired on May 1,
2013 with provisions to continue on a month-to-month basis where notice to terminate requires a ninety day written notice.
Of the other two agreements, both have terms out to no later than April 13, 2016 with notice to terminate up to 30 or 60 days,
respectively.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company’s main objectives when managing capital are to ensure sufficient liquidity to finance research and development
activities, clinical trials, ongoing administrative costs, working capital and capital expenditures. The Company includes cash and
components of shareholders’ equity, in the definition of capital. The Company endeavours not to unnecessarily dilute shareholders
when managing the liquidity of its capital structure.
Currency risk
The Company operates internationally and is exposed to foreign exchange risks from various currencies, primarily the Euro and
U.S. dollar. Foreign exchange risks arise from the foreign currency translation of the Company’s integrated foreign operation in
Ireland. In addition, foreign exchange risks arise from purchase transactions, as well as recognized financial assets and liabilities
denominated in foreign currencies.
The Company has maintained minimal cash balances denominated in both Euro and U.S. dollars due to Canadian dollar stability
and strength against foreign currencies. Any fluctuation in the exchange rates of the foreign currencies listed could have an impact
on the Company’s results from operations; however, they would not impair or enhance the ability of the Company to pay its foreign-
denominated expenses.
Page | 16
Balances in foreign currencies at July 31, 2015 and 2014 are as follows:
Cash
Accounts payable
Accruals
Net foreign currencies
2015
Euros
8,000
(9,000)
(162,000)
(163,000)
US
Dollars
7,000
(30,000)
(2,000)
(25,000)
Closing exchange rate
Impact of 1% change in exchange rate
1.4388
+/- 1,000
1.3047
+/- 1,000
2014
Euros
102,000
(64,000)
(65,000)
(27,000)
US
Dollars
162,000
(242,000)
–
(80,000)
1.4581
+/- 1,000
1.0890
+/- 1,000
Any fluctuation in the exchange rates of the foreign currencies listed above could have an impact on the Company’s results from
operations; however, they would not impair or enhance the ability of the Company to pay its foreign-denominated expenses.
Credit risk
Credit risk is the risk of a financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its
contractual obligation.
The table below breaks down the various categories that make up the Company’s accounts receivable balances as at July 31:
Accounts receivable
Government related – HST/VAT
Research and development investment tax credits
Other
Interest rate risk
2015
2014
$
96,000
388,000
7,000
$ 491,000
$
51,000
288,000
4,000
$ 343,000
Interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in interest rates, which
are affected by market conditions. The Company is exposed to interest rate risk arising from fluctuations in interest rates received
on its cash and cash equivalents. The Company does not have any credit facilities and is therefore not subject to any debt related
interest rate risk.
The Company manages its interest rate risk by maximizing the interest income earned on excess funds while maintaining the
liquidity necessary to conduct its operations on a day-to-day basis. Any investment of excess funds is limited to risk-free financial
instruments. Fluctuations in the market rates of interest do not have a significant impact on the Company’s results of operations
due to the relatively short term maturity of any investments held by the Company at any given point in time and the low global
interest rate environment. The Company does not use derivative instruments to reduce its exposure to interest rate risk.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its obligations as they come due.
Since inception, the Company has mainly relied on financing its operations from public and private sales of equity. The Company
does not have any credit facilities and is therefore not subject to any externally imposed capital requirements or covenants.
The Company manages its liquidity risk by continuously monitoring forecasts and actual cash flow from operations and anticipated
investing and financing activities.
The Company’s cash reserves of $6,792,000 as at July 31, 2015 are insufficient to meet anticipated cash needs for working capital
and capital expenditures through the next twelve months, nor are they sufficient to see the current research and development
initiatives through to completion. To the extent that the Company does not believe it has sufficient liquidity to meet its current
obligations, management considers securing additional funds primarily through equity arrangements to be of utmost importance.
The Company’s long-term liquidity depends on its ability to access the capital markets, which depends substantially on the success
of the Company’s ongoing research and development programs, as well as economic conditions relating to the state of the capital
markets generally. Accessing the capital markets is particularly challenging for companies that operate in the biotechnology
industry.
Page | 17
OUTSTANDING SHARE DATA
As at July 31, 2015, the Company had outstanding 84,653,837 common shares; warrants to purchase up to 19,948,584 common
shares; and incentive stock options to purchase up to 2,730,084 common shares.
DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL REPORTING
Management has designed the Company’s disclosure controls and procedures to provide reasonable assurance that all relevant
information is gathered, recorded, processed, summarized and reported to the Chief Executive Officer and the Chief Financial
Officer so that appropriate decisions can be made within the time periods specified in securities legislation regarding public
disclosure by the Company in its annual filings, interim filings or other documents or reports required to be filed or submitted by it
under securities legislation.
Management has also designed internal controls over financial reporting (“ICFR”) to provide reasonable assurance regarding the
reliability of the Company’s financial reporting and the preparation of financial statements for external purposes in accordance
with IFRS. Because of its inherent limitations, ICFR can provide only reasonable assurance and may not prevent or detect
misstatements. Further, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may
deteriorate.
The Company hired a Controller beginning November 1, 2014 in order to eliminate a previously disclosed material weakness
which resulted from a lack of segregation of duties associated with the Company’s financial close and reporting process. The
result of this previously disclosed material weakness also constituted a weakness in the design and operating effectiveness of the
Company’s disclosure controls and procedures. The additional hire of a Controller and the re-establishment of segregation of
duties has remedied the previously disclosed material weaknesses.
As of July 31, 2015, management evaluated the effectiveness of the Company’s ICFR and disclosure controls and procedures
and concluded that such ICFR and disclosure controls and procedures are effective.
RISKS AND UNCERTAINTIES
Helix is subject to risks, events and uncertainties, or “risk factors”, associated with being both a publicly traded company operating
in the biopharmaceutical industry, and as an enterprise with several projects in the research and development stage. As a result
of these risk factors, reported information and forward-looking information may not necessarily be indicative of future operating
results or of future financial position, and actual results may vary from the forward-looking information or reported information.
The Company cannot predict all of the risk factors, nor can it assess the impact, if any, of such risk factors on the Company’s
business or the extent to which any factor, or combination of factors, may cause future results or financial position to differ
materially from either those reported or those projected in any forward-looking statement. Accordingly, reported financial
information and forward-looking information should not be relied upon as a prediction of future actual results. Some of the risks
and uncertainties affecting the Company, its business, operations and results which could cause actual results to differ materially
from those reported or from forward-looking information include, either wholly or in part, those described elsewhere in this MD&A,
as well as the following:
The Company does not have any source of operating income and is dependent solely on outside sources of financing
The Company’s operations consist of research and development activities, which do not generate any revenue.
Accordingly, the Company has no source of revenue, positive operating cash flow or operating earnings to subsidize its
ongoing research and development and other operating activities. As a result, the Company will have to rely on cash on
hand, and on outside sources of financing to fund its ongoing research and development and other operating activities.
Such sources of financing involve risks, including that the Company will not be able to raise such financing on terms
satisfactory to the Company or at all, and that any additional equity financing, if secured, would result in dilution to existing
shareholders, and that such dilution may be significant.
The Company has a history of losses and expects to continue to incur additional losses for the foreseeable future
The Company’s primary focus continues to be on its research and development of pharmaceutical product candidates.
The research and development of pharmaceutical products requires the expenditure of significant amounts of cash over
a relatively long time period. The Company expects to continue to incur losses from continuing operations, for the
foreseeable future. The Company’s cumulative deficit as at July 31, 2015 is $135,656,000. There can be no assurance
that the Company will record earnings in the future.
Page | 18
The Company requires additional funding
The Company’s cash reserves will not be sufficient for the Company to fully fund its existing European Phase I/II clinical
trial with L-DOS47 in Poland or its U.S. Phase I trial or any of the Company’s other ongoing research and development,
operating activities, working capital or capital expenditures for the next twelve months.
The Company has no sources of external liquidity, such as a bank loan or line of credit. The Company will therefore
continue to rely on equity financing to fund its ongoing research and development activities and other expenses for the
foreseeable future.
Equity financing has historically been the Company’s primary source of funding; however, the market for equity financings
for companies such as the Company is challenging. While the Company has been able to raise equity financing in recent
years, there can be no assurance that additional funding by way of equity financing will continue to be available. Any
additional equity financing, if secured, would result in dilution to the existing shareholders which may be significant. The
Company may also seek additional funding from or through other sources, including grants, technology licensing, co-
development collaborations, disposition of assets, mergers and acquisitions, joint ventures, and other strategic alliances,
which, if obtained, may reduce the Company’s interest in its projects or products or result in significant dilution to existing
shareholders. There can be no assurance, however, that any alternative sources of funding will be available.
The failure of the Company to obtain additional financing on a timely basis may result in the Company reducing, delaying
or cancelling one or more of its planned research and development, including any clinical trials, further reducing overhead,
or monetizing non-core assets, any of which could impair the current and future value of the business or cause the
Company to consider ceasing operations and undergoing liquidation.
Competition and technological change; Immunotherapies
The biotechnology and pharmaceutical industries are subject to rapid and substantial technological change.
Technological competition from pharmaceutical companies, biotechnology companies and university researchers is
intense and is expected to continue to be intense.
The rapid advancement of immunotherapies now has the potential to significantly change the treatment of cancer and
may result in a reduction, which may be significant, in the potential patient population and/or treatment protocols available
to chemotherapies and other treatments currently in development, such as the Company’s primary drug product
candidate, L-DOS47. Furthermore developments in immunotherapies may require the Company to reposition its L-
DOS47 drug product candidate from a front line monotherapy to a combination therapy with immunotherapies or other
treatment protocols, and any such repositioning, would likely result in additional expenses being incurred by the Company
and in delays in the anticipated development timeline for L-DOS47, or in the Company determining that its L-DOS47 drug
product candidate is no longer viable.
The Company is conducting early stage research and development initiatives for products under development which
may not be accepted by the market and may never generate revenue and the Company has limited sales, marketing and
distribution experience
The Company is conducting early stage research and development initiatives and is currently in the process of developing
new products that require further time consuming and costly research and development. It will be a number of years, if
ever, before its products in development begin to generate revenues, if at all. There can be no assurance that any of the
drug product candidates will ever be successfully developed or commercialized.
Even with regulatory approval, the Company may not achieve market acceptance, which depends on a number of factors,
including the establishment and demonstration in the medical community of the clinical utility of the Company’s products,
and their potential advantage over alternative treatment methods. There is also the risk that the actual market size or
opportunity for the Company’s drug candidates is not certain. Failure to gain market acceptance of either of the
Company’s products currently under development or an incorrect estimate in the nature and size of their respective
markets could have a material adverse effect on the Company.
The Company has limited sales, marketing and distribution experience, and there is no assurance that the Company will
be able to establish adequate sales, marketing, and distribution capabilities or make arrangements with any collaborators,
strategic partners, licensees, or others to perform such activities, or that such efforts will be successful. The Company’s
objective for its drug candidate products is to enter into strategic alliances with appropriate pharmaceutical partners.
There can be no assurance that any such strategic alliance will be maintained or achieved, or if achieved, that it will result
in revenue to the Company.
Page | 19
The timing of the Company’s internal goals and projected timelines may not be met
The Company sets internal goals for and makes public statements regarding its expected timing of meeting the objectives
material to its success, including the commencement, duration and completion of clinical trials and anticipated regulatory
approvals. The actual timing of these forward-looking events can vary dramatically due to a number of factors, including,
without limitation, delays in scaling-up of drug product candidates, delays or failures in clinical trials, additional data
requirements from the regulators, the Company failing to obtain required financing, and other risks referred to herein.
Without limiting the generality of the foregoing, it is possible that required regulatory approvals may be delayed or denied,
including those related to undertaking clinical trials, manufacturing of drug products, and marketing.
The Company has expressed certain estimated timelines for its European Phase I//II clinical trials for L-DOS47 in Poland,
the U.S. Phase I study. The timeline for the European Phase I/II trials and any future timelines are contingent on the
Company having adequate financing to complete the trials and the assumption that the trials will be completed according
to the current schedules. A failure to obtain necessary financing or a change in the schedule of the trials (which may
occur if certain cost-deferral measures are taken, or due to factors beyond the Company’s reasonable control, such as
scheduling conflicts, the occurrence of serious adverse events, interruption of supplies of study drugs, withdrawals of
regulatory approvals, or slow patient recruitment) could delay their commencement or completion, or result in their
suspension or early termination, which could have a material adverse effect on the Company.
Intellectual property risks, including the loss of patent protection, the potential termination of licences, the inability to
protect proprietary property, and possible claims of infringement against the Company or against a third-party from
whom the Company licenses intellectual property
The Company’s success depends, in part, on its ability to secure and protect its intellectual property rights and to operate
without infringing on the proprietary rights of others or having third parties circumvent the rights owned or licensed by the
Company. However, the Company cannot predict the enforceability of its patents or its ability to maintain trade secrets
that may not be protected by patents. Patent risks include the fact that patent applications may not result in issued
patents, issued patents may be circumvented, challenged, invalidated or insufficiently broad to protect the Company’s
products and technologies; blocking patents by third parties could prevent the Company from using its patented
technology; it may be difficult to enforce patent rights, particularly in countries that do not have adequate legal enforcement
mechanisms, and enforcing such rights may divert management attention and may cause the Company to incur significant
expenses; and any expiry of an issued patent may negatively impact the underlying technology.
To protect its trade secrets, the Company enters into confidentiality undertakings with parties that have access to them,
such as the Company’s current and prospective distributors, collaborators, employees and consultants, but a party may
breach the undertakings and disclose the Company’s confidential information or competitors might learn of the information
in some other way, which could have a material adverse effect on the Company.
The Company uses processes, technology, products, or information, the rights to certain of which are owned by others,
such as a license from the NRC of the lung antibody used by the Company for L-DOS47. Termination or expiry of any
licenses or rights during critical periods, and an inability to obtain them on commercially favourable terms or at all could
have a material adverse effect on the Company and its drug candidates’ development.
The Company operates in an industry that experiences substantial litigation involving the manufacture, use and sale of
new products that are the subject of conflicting proprietary rights. The Company or one or more of its licensors may be
subject to a claim of infringement of proprietary rights by a third party. It is possible that the Company’s products and
technologies do infringe the rights of third parties, and the Company or such licensor could incur significant expenses,
and diversion of management attention, in defending allegations of infringement of proprietary rights, even if there is no
infringement. Furthermore, the Company or such licensors may be required to modify its products or obtain licenses for
intellectual property rights as a result of any alleged proprietary infringement. The inability to modify products or obtain
licenses on commercially reasonable terms, in a timely manner or at all, could adversely affect the Company’s business.
Research and development risks, including the need to prove the Company’s drug candidates are safe and effective in
clinical trials
The Company’s drug candidates are complex compounds and the Company faces difficult challenges in connection with
the manufacture of clinical batches of each of them, which could further delay or otherwise negatively affect the
Company’s planned clinical trials, or required regulatory approvals.
There is also the risk that the Company could obtain negative findings or factors that may become apparent during the
course of research or development. The results from preclinical and clinical trials may not be predictive of results obtained
in any ongoing or future clinical trials. A number of companies in the biotechnology and pharmaceutical industry have
suffered significant setbacks in advanced clinical trials, even after achieving promising results in earlier trials and pre-
clinical trials.
Page | 20
The timing and success of the Company’s clinical trials also depend on a number of other factors, including, but not
limited to: (a) obtaining additional financing, which is not assured; (b) sufficient patient enrolment, which may be affected
by the incidence of the disease studied, the size of the patient population, the nature of the protocol, the proximity of
patients to clinical sites, the eligibility criteria for a patient to participate in the study and the rate of patient drop-out; (c)
regulatory agency policies regarding requirements for approval of a drug, including granting permission to undertake
proposed human testing; (d) the Company’s capacity to produce sufficient quantities and qualities of clinical trial materials
to meet the trial schedule; (e) performance by third parties, on whom the Company relies to carry out its clinical trials;
and (f) the approval of protocols and/or protocol amendments.
Clinical trials are complex, expensive and uncertain, and have a high risk of failure, which can occur at any stage. Data
obtained from pre-clinical and clinical trials may be interpreted in different ways, or be incorrectly reported, which could
delay or prevent further development of the drug candidate studied. Failure to complete clinical trials successfully and
to obtain successful results on a timely basis could have a material adverse effect on the Company.
Even if the Company’s drug candidates successfully complete the clinical trials and receive the regulatory approval
necessary to market the drug candidates to the public, there is also the risk of unknown side effects, which may not
appear until the drug candidates are on the market and may result in delay or denial of regulatory approval or withdrawal
of previous approvals, product recalls or other adverse events, which could materially adversely affect the Company.
While the Company continues to explore opportunities to expand its drug product pipeline with new DOS47-based
therapeutics pending the identification of further tumor targeting agents, there can be no assurance that any such tumor
targeting agents will be identified or that any new DOS47-based therapeutics will be developed.
The Company is dependent on a number of third-parties and the failure or delay in the performance of one of these third-
parties’ obligations may adversely affect the Company
The Company is dependent on third parties to varying degrees in virtually all aspects of its business, including without
limitation, on contract research organizations, contract manufacturing organizations, clinical trial consultants, raw material
suppliers, collaborative research consultants, regulatory affairs advisers, medical and scientific advisors, clinical trial
investigators, business service providers and other third parties. Critical supplies may not be available from third parties
on acceptable terms, or at all, including GMP grade materials. Service providers may not perform, or continue to perform,
as needed, or be available to provide the required services on acceptable terms or at all. Any lack of or interruption in
supplies of raw materials or services, or any change in supply or service providers or any inability to secure new supply
or service providers, would have an adverse impact on the development and commercialization of the Company’s
products. For example, the Company has previously experienced delays in the manufacturing of both engineering and
clinical batches of L-DOS47, which have in turn caused delays in the progression of its development program, and there
may be further delays. The Company relies on a third party for its supply of urease and if the contract with the third-party
urease supplier is terminated early, the Company will have to find a new supplier of urease, as well as a new manufacturer
of bulk drug product for future clinical testing programs. There can be no assurance that a new supplier or manufacturer
can be contracted in a timely manner or at all, and this could negatively impact the Company’s development plans for L-
DOS47.
With respect to L-DOS47, the Company is currently dependent on, in addition to third party suppliers, manufacturers and
consultants, the NRC and its license to the Company of a lung cancer antibody in order to develop and commercialize L-
DOS47. Early termination of the license with NRC would have a material adverse effect on the further development of
L-DOS47 and may require the cessation of such development, which would have a material adverse effect on the
Company.
Given the Company`s lack of financing, expertise, infrastructure and other resources to support a new drug product from
clinical development to marketing, the Company also requires strategic partner support to develop and commercialize its
drug candidates. There can be no assurance that such strategic partner support will be obtained upon acceptable terms
or at all.
The Company relies heavily on contract manufacturers for the production of product required for its clinical trials, product
formulation work, scaling-up experiments and commercial production. The Company may not be able to obtain new, or
keep its current, contract manufacturers to provide these services. Even if the Company does, contract manufacturers
may not be reliable in meeting its requirements for cost, quality, quantity or schedule, or the requirements of any
regulatory agencies. The Company may not be able to manufacture products in quantities or qualities that would enable
the Company to meet its business objectives, and failure to do so would materially adversely affect the Company’s
business.
If the Company can successfully develop markets for its products, the Company would have to arrange for their scaled-
up manufacture. There can be no assurance that the Company will, on a timely basis, be able to make the transition
from manufacturing clinical trial quantities to commercial production quantities successfully or be able to arrange for
scaled-up commercial contract manufacturing. Any potential difficulties experienced by the Company in manufacturing
Page | 21
scale-up, including recalls or safety alerts, could have a material adverse effect on the Company’s business, financial
condition, and results of operations.
The marketability of the Company’s products may be affected by delays and the inability to obtain necessary approvals,
and following any market approval, the Company’s products will be subject to ongoing regulatory review and
requirements which may continue to affect their marketability, including but not limited to regulatory review of drug
pricing, healthcare reforms or the payment and reimbursement policies for drugs by the various insurers and other
payors in the industry
The research, development, manufacture and marketing of pharmaceutical products are subject to regulation by the
FDA, and comparable regulatory authorities in other countries. These agencies and others regulate the testing,
manufacture, safety and promotion of the Company’s products. The Company must receive applicable regulatory
approval of a product candidate before it can be commercialized in any particular jurisdiction. Approval by a regulatory
authority of one country does not ensure the approval by regulatory authorities of other countries. Changes in regulatory
approval policies or regulations during the development period may cause delays in the approval or rejection of an
application. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any
application, or may decide that our data are insufficient for approval, or require additional preclinical, clinical or other trials
and place our IND submissions on hold for an indeterminate amount of time. The development and regulatory approval
process in each jurisdiction takes many years, requires the expenditure of substantial resources, is uncertain and subject
to delays, and can adversely affect the successful development and commercialization of our drug candidates.
Even if the Company obtains marketing approval in a particular jurisdiction, there may be limits on the approval and the
Company’s products likely will be subject to ongoing regulatory review and regulatory requirements in that jurisdiction.
Pharmaceutical companies are subject to various government regulations, including without limitation, requirements
regarding occupational safety, laboratory practices, environmental protection and hazardous substance control, and may
be subject to other present and future regulations.
The availability of reimbursement by governmental and other third-party payors, such as private insurance plans, will
affect the market for any pharmaceutical product, and such payors tend to continually attempt to contain or reduce the
costs of healthcare. Significant uncertainty exists with respect to the reimbursement status of newly approved healthcare
products.
The Company operates in an industry that is more susceptible than others to legal proceedings and, in particular, liability
claims
The Company operates in a field whose firms are more susceptible to legal proceedings than firms in other industries,
due to the uncertainty involved in the development of pharmaceuticals. Defense and prosecution of legal claims can be
expensive and time consuming, and may adversely affect the Company regardless of the outcome due to the diversion
of financial, management and other resources away from the Company’s primary operations. Negative judgments
against the Company, even if the Company is planning to appeal such a decision, or even a settlement in a case, could
negatively affect the cash reserves of the Company, and could have a material negative effect on the development of its
drug products.
The Company may be exposed, in particular, to liability claims which are uninsured or not sufficiently insured, and any
claims may adversely affect the Company’s ability to obtain insurance in the future or result in negative publicity regarding
the efficacy of its drug products. Such liability insurance is expensive, its ability is limited and it may not be available on
terms that are acceptable to the Company, if at all.
The use of any of the Company’s unapproved products under development, the use of its products in clinical trials, and,
if regulatory approval is received, the sale of such products, may expose the Company to liability claims which could
materially adversely affect the Company’s business. The Company may not be able to maintain or obtain commercially
reasonable liability insurance for future products, and any claims under any insurance policies may adversely affect its
ability to maintain existing policies or to obtain new insurance on existing or future products. Even with adequate
insurance coverage, publicity associated with any such claim could adversely affect public opinion regarding the safety
or efficacy of the Company’s products. As a result, any product liability claim or recall, including in connection with
products previously sold by the Company through its former distribution business, could materially adversely affect the
Company’s business.
The Company is dependent upon key personnel
The Company’s ability to continue its development of potential products depends on its ability to attract and maintain
qualified key management personnel. Competition for such personnel is intense and the Company may not be able to
attract and retain such personnel. In addition, the Company does not carry key-man insurance on any individuals. If the
Company loses and is unable to replace key personnel, its business could be negatively affected.
Page | 22
Indemnification obligations to directors and officers of the Company may adversely affect its finances
The Company has entered into agreements pursuant to which the Company has agreed to indemnify its directors and
senior management in respect of certain claims made against them while acting in their capacity as such. If the Company
is called upon to perform its indemnity obligations, its finances may be adversely affected.
The Company’s finances may fluctuate based on foreign currency exchange rates
The Company operates internationally and is exposed to foreign exchange risks from various currencies, primarily the
U.S. dollar and the Euro.
Dilution through exercise of stock options, warrants and future equity financings
To attract and retain key personnel, the Company has granted options to its key employees, directors and consultants to
purchase common shares and share awards as non-cash incentives. In addition, the Company has a significant number
of warrants to purchase common shares outstanding. The issuance of shares pursuant to share awards and the exercise
of a significant number of such options and warrants may result in significant dilution of other stockholders of the
Company.
As noted above, the Company needs additional funding and has historically turned to the equity markets to raise this
funding. The future sale of equity and warrants may also result in significant dilution to the stockholders of the Company.
Volatility of share price and trading volumes
The price of the Company’s shares, as well as market prices for securities of biopharmaceutical and drug delivery
companies generally, have historically been highly volatile, and have from time to time experienced significant price and
volume fluctuations that are unrelated to the operating performance of particular companies. Sales of substantial
numbers of the Company’s common shares could cause a decline in the market price of such common shares. There
are minimum listing requirements for an issuer to maintain its listing on the Toronto Stock Exchange (“TSX”), and if the
Company fails to maintain these listing requirements, it may be involuntarily delisted from the TSX. De-listing the
Company or the Company shares from any securities exchange could have a negative effect on the liquidity of the
Company shares and/or the ability of a shareholder to trade in shares of the Company, and could have an adverse effect
on the Company’s ability to raise future equity financings. The Company’s common shares trade in a very low volume
compared to the number of common shares outstanding. This means a shareholder could have difficulty disposing of
common shares, especially if there are other shareholders of the Company trying to sell their shares in the Company at
the same time. Volatility in share price and trading volumes could have an adverse effect on the Company’s ability to
raise future equity financings.
Trading in the Company’s shares outside of Canada may be subject to restrictions on trading under foreign securities
laws, and purchasers of securities under private placements by the Company will be subject to certain restrictions on
trading
The Company’s shares trade on the TSX and are freely tradable only in Canada. As such, shareholders trading the
Company’s shares outside of Canada may be subject to restrictions imposed by foreign securities laws that may restrict
their ability to transfer shares freely or at all. Certain securities offered by the Company pursuant to its private placements,
including the unlisted warrants issued by the Company, are subject to certain initial hold periods and other restrictions
on trading imposed by applicable securities laws and, in the case of the warrants, pursuant to the terms of the applicable
warrant certificates. These restrictions may affect the liquidity of the investment of certain shareholders in the securities
of the Company.
General economic conditions may have an adverse effect on the Company and its business
Continuing global economic volatility and uncertainty may have an adverse effect on the Company and its business,
including without limitation the ability to raise additional financing, to obtain strategic partner support or commercialization
opportunities and alliances for the Company’s new drug candidates, and to obtain continued services and supplies.
The Company’s business involves environmental risks that could result in accidental contamination, injury, and
significant capital expenditures in order to comply with environmental laws and regulations
The Company and its commercial collaborators are subject to laws and regulations governing the use, manufacture,
storage, handling and disposal of materials and certain waste products. Although the Company believes that its safety
procedures comply with the regulations, the risk of accidental contamination or injury from these materials cannot be
eliminated. In the event of such an accident, the Company could be held liable for any damages that result and any such
liability could exceed the resources of the Company. The Company is not specifically insured with respect to this liability.
The Company (or its collaborators) may be required to incur significant costs to comply with environmental laws and
Page | 23
regulations in the future; and the operations, business or assets of the Company may be materially adversely affected
by current or future environmental laws or regulations.
RISK FACTORS IN OTHER PUBLIC FILINGS
For all of the reasons set forth above, together with those additional risk factors identified under the headings “Forward-Looking
Statements” and “Risk Factors” in the Company’s most recent Annual Information Form filed under the Company’s profile on
SEDAR at www.sedar.com, investors should not place undue reliance on forward-looking information. Other than any obligation
to disclose material information under applicable securities laws, the Company undertakes no obligation to revise or update any
forward-looking information after the date hereof.
Data relevant to estimated market sizes and penetration for the Company’s lead products under development are presented in
this MD&A. This data has been obtained from a variety of published resources including published scientific literature, websites
and information generally available through publicized means. The Company attempts to source reference data from multiple
sources whenever possible for confirmatory purposes. Although the Company believes the foregoing data is reliable, the Company
has not independently verified the accuracy and completeness of this data.
ADDITIONAL INFORMATION
Additional information relating to the Company’s fiscal year ended July 31, 2015, is available under the Company’s profile on
SEDAR at www.sedar.com.
Dated October 27, 2015
Page | 24
Consolidated Financial Statements of Helix BioPharma Corp.
Years ended July 31, 2015 and 2014
Page | 25
MANAGEMENT’S RESPONSIBILITY FOR
FINANCIAL INFORMATION
The accompanying consolidated financial statements of Helix BioPharma Corp. and other financial information contained in this
annual report are the responsibility of management. The consolidated financial statements have been prepared in conformity with
International Financial Reporting Standards, using management’s best estimates and judgments, where appropriate. In the
opinion of management, these consolidated financial statements reflect fairly the financial position and the results of operations
and cash flows of the Company within reasonable limits of materiality. The financial information contained elsewhere in this annual
report has been reviewed to ensure consistency with that in the consolidated financial statements.
To assist management in discharging these responsibilities, the Company maintains an effective system of procedures and
internal controls which is designed to provide reasonable assurance that its assets are safeguarded against loss from unauthorized
use or disposition, that transactions are executed in accordance with management’s authorization and that the financial records
form a reliable base for the preparation of accurate and reliable financial information.
The Board of Directors ensures that management fulfills its responsibilities for the financial reporting and internal control. The
Board of Directors exercises this responsibility through its independent Audit Committee comprising a majority of unrelated and
outside directors. The Audit Committee meets periodically with management and annually with the external auditors to review
audit recommendations and any matters that the auditors believe should be brought to the attention of the Board of Directors. The
Audit Committee also reviews the consolidated financial statements and recommends to the Board of Directors that the statements
be approved for issuance to the shareholders.
The consolidated financial statements have been audited by BDO Canada LLP, Chartered Professional Accountants, Licensed
Public Accountants, which has full and unrestricted access to the Audit Committee. BDO Canada LLP’s report on the consolidated
financial statements is presented herein.
/s/ Robert Verhagen
Robert Verhagen
President and Chief Executive Officer
/s/ Photios (Frank) Michalargias
Photios (Frank) Michalargias
Chief Financial Officer
October 27, 2015
Page | 26
BDO Canada LLP
60 Columbia Way, Suite 300
Markham, Ontario, L3R 0C9
Canada
Telephone (905) 946-1066
Fax (905) 946-9524
Internet www.bdo.ca
INDEPENDENT AUDITORS’ REPORT OF
REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders of Helix BioPharma Corp.
We have audited the accompanying consolidated financial statements of Helix BioPharma Corp., which comprise the consolidated
statements of financial position as at July 31, 2015 and July 31, 2014, the consolidated statements of net loss and comprehensive
loss, changes in shareholders’ equity and cash flows for the years then ended and a summary of significant accounting policies
and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with
International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our
audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements
are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements
in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Helix
BioPharma Corp., as at July 31, 2015 and July 31, 2014, and its financial performance and its cash flows for the years then ended
in accordance with International Financial Reporting Standards.
Emphasis of Matter
Without modifying our opinion, we draw attention to Note 1 in the consolidated financial statements, which indicates that Helix
BioPharma Corp.’s cash of $6,792,000 as at July 31, 2015 is insufficient to meet anticipated cash needs for working capital and
capital expenditures through the next twelve months. This condition, along with other matters as set forth in Note 1 in the
consolidated financial statements, indicates the existence of a material uncertainty that may cast significant doubt about Helix
BioPharma Corp.’s ability to continue as a going concern.
/s/ BDO Canada LLP
Chartered Professional Accountants, Licensed Public Accountants
Markham, Ontario
October 27, 2015
Page | 27
HELIX BIOPHARMA CORP.
Consolidated Statement of Financial Position
In thousands of Canadian dollars
As at July 31, 2015 and 2014
As at:
ASSETS
Non-current assets
Property, plant and equipment (note 4)
Current assets
Prepaid expenses
Accounts receivable
Cash
Total assets
SHAREHOLDERS’ EQUITY AND LIABILITIES
Shareholders’ equity (note 5)
Current liabilities
Accrued liabilities
Accounts payable
July 31, 2015
July 31, 2014
$
329
329
184
491
6,792
7,467
$
448
448
82
343
6,980
7,405
$
7,796
$
7,853
6,827
707
262
969
6,811
476
566
1,042
Total liabilities and shareholders’ equity
$
7,796
$
7,853
The accompanying notes are an integral part of these consolidated financial statements.
On behalf of the Board of Directors:
/s/ Yvon Bastien
Yvon Bastien,
Chair, Board of Directors
/s/ Sven Rohmann
Sven Rohmann,
Chair, Audit Committee
Page | 28
HELIX BIOPHARMA CORP.
Consolidated Statement of Net Loss and Comprehensive Loss
Years ended July 31, 2015 and 2014 (In thousands of Canadian dollars, except per share amounts)
Expenses
Research and development
Operating, general and administration
Results from operating activities before finance items
Finance items
Finance income
Finance expense
Foreign exchange gain (loss)
Loss and total comprehensive loss from continuing operations
Gain from sale of discontinued operations (note 12)
2015
2014
4,885
3,892
(8,777)
56
(13)
(46)
(3)
(8,780)
50
5,239
3,496
(8,735)
43
(19)
29
53
(8,682)
-
Net loss and total comprehensive loss
$
(8,730)
$
(8,682)
Loss per common share from continuing operations
Basic
Diluted
Loss per common share
Basic
Diluted
$
$
(0.11)
(0.11)
$
$
(0.11)
(0.11)
(0.12)
$
$ (0.12)
(0.12)
$
$ (0.12)
Weighted average number of common shares used in the calculation of
basic and diluted loss per share
78,592,444
70,955,132
The accompanying notes are an integral part of these consolidated financial statements.
Page | 29
HELIX BIOPHARMA CORP.
Consolidated Statement of Changes in Shareholders’ Equity
Years ended July 31, 2015 and 2014 (In thousands of Canadian dollars, except per share amounts)
In thousands of Canadian dollars, except common share and warrant numbers
Common shares warrants
Share purchase
Amount
Number Amount
Contributed
Number Options surplus
Accumulated
other
comprehensive
Total
income shareholders
equity
(loss)
Deficit
Balances, July 31, 2013 $ 101,407 67,226,337 $ 8,153 13,726,084 $4,632 $ 8,972 $(118,244) $ –
$ 4,920
Net loss for the year
Common stock, issued
Warrants, issued
Warrants, expired unexercised
Warrants, amended terms
Stock-based compensation
Options, exercised
Options, expired unexercised
–
6,518
–
(846)
–
–
–
–
8,674,000
–
–
–
–
–
–
–
–
–
–
3,635 8,674,000
–
–
–
–
–
–
846
–
–
–
–
–
–
–
–
420
–
(993)
–
–
–
–
–
–
–
993
(8,682)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Balances, July 31, 2014 $ 107,079 75,900,337 $12,634 22,400,084 $4,059 $ 9,965 $(126,926) $ –
–
Net loss for the year
–
Common stock, issued
–
Warrants, issued
–
Warrants, expired unexercised
–
Warrants, amended terms
–
Stock-based compensation
–
Options, exercised
–
Options, expired unexercised
–
–
3,141 8,703,500
(6,950) (11,155,000)
–
–
–
–
–
8,703,500
–
–
–
–
50,000
–
–
–
–
–
–
436
(40)
(1,540)
(8,730)
–
–
–
–
–
–
–
–
–
–
6,950
–
–
–
1,540
–
5,102
–
–
–
–
107
–
–
–
–
–
–
–
(8,682)
6,518
3,635
–
–
420
–
–
$ 6,811
(8,730)
5,102
3,141
–
–
436
67
–
Balances, July 31, 2015 $ 112,288 84,653,837 $ 8,825 19,948,584 $2,915 $18,455 $(135,656) $ –
$ 6,827
The accompanying notes are an integral part of these consolidated financial statements.
Page | 30
2015
2014
$
(8,780)
$
(8,682)
HELIX BIOPHARMA CORP.
Consolidated Statement of Cash Flows
Years ended July 31, 2015 and 2014 (In thousands of Canadian dollars)
Cash flows from operating activities
Net loss and total comprehensive loss
from continuing operations
Items not involving cash:
Depreciation of property, plant and equipment
Deferred lease credit
Stock-based compensation
Foreign exchange gain (loss)
Change in non-cash working capital:
Accounts receivable
Prepaid expenses
Accounts payable
Accrued liabilities
Net cash used in operating activities
Cash flows from financing activities
Proceeds from the issuance of common shares and
share purchase warrants, net of issue costs
Proceeds from the exercise of stock options
Net cash provided by financing activities
Cash flows from investing activities
Purchase of property, plant and equipment
Net cash used in investing activities
Foreign exchange loss on cash
Net increase (decrease) in cash from continuing operations
Net increase in cash from discontinued operations
$
$
Cash, beginning of period
Cash, end of period
The accompanying notes are an integral part of these consolidated financial statements.
133
–
436
46
(148)
(102)
(304)
231
(8,488)
8,243
67
8,310
(14)
(14)
(46)
(238)
50
6,980
$
6,792
232
(23)
420
(29)
216
57
262
(145)
(7,692)
10,153
–
10,153
(3)
(3)
29
$
$
$
2,487
–
4,493
6,980
Page | 31
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2015 and 2014
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
Helix BioPharma Corp (the “Company”), incorporated under the Canada Business Corporations Act, is a biopharmaceutical
company primarily focused in the areas of cancer prevention and treatment. The Company has funded its research and
development activities, mainly through the issuance of common shares and warrants. The Company expects to incur additional
losses and therefore will require additional financial resources, on an ongoing basis. It is not possible to predict the outcome of
future research and development activities or the financing thereof.
1. Basis of presentation and going concern
These consolidated financial statements have been prepared on a going-concern basis, which assumes that the Company will
continue in operation for the foreseeable future and, accordingly, will be able to realize its assets and discharge its liabilities in the
normal course of operations. The Company's ability to continue as a going concern is dependent mainly on obtaining additional
financing, which is always challenging for research and development companies. As at July 31, 2015, the Company does not
have sufficient cash to meet anticipated cash needs for working capital and capital expenditures through the next twelve months.
The Company will require additional financing in the near term and in the future to see the current research and development
initiates through to completion. There can be no assurance however, that additional financing can be obtained in a timely manner,
or at all. Not raising sufficient additional financing on a timely basis may result in delays and possible termination of all or some
of the Company’s research and development initiatives, and as a result, may cast significant doubt as to the ability of the Company
to operate as a going concern and accordingly, the appropriateness of the use of the accounting principles applicable to a going
concern. These consolidated financial statements do not include any adjustments to the carrying amount and classification of
reported assets, liabilities and expenses that might be necessary should the Company not be successful in its aforementioned
initiatives. Such adjustments could be material. The Company cannot predict whether it will be able to raise the necessary funds
it needs to continue as a going concern.
Statement of compliance
The Company’s consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International
Financial Reporting Interpretation Committee.
The consolidated financial statements of the Company were approved and authorized for issue by the Board of Directors on
October 27, 2015.
Use of estimates and assumptions
The preparation of financial statements requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the year. Actual results could differ from those estimates. Significant areas
requiring the use of estimates include research and development tax credits associated with research and development
expenditures, the determination of fair value of stock options granted for estimating stock-based compensation, the allocation of
proceeds to share purchase warrants, estimates related to the determination of useful lives and assessment of impairment of long-
lived assets such as property, plant and equipment. In determining these estimates, the Company relies on assumptions regarding
applicable industry performance and prospects, as well as general business and economic conditions that prevail and are expected
to prevail. These assumptions are limited by the availability of reliable comparable data and the uncertainty of predictions
concerning future events. Actual results could differ from these estimates.
Functional and presentation currency
The functional and presentation currency of the Company is the Canadian dollar.
2. Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial
statements.
Basis of consolidation
These consolidated financial statements include the accounts of the Company and its subsidiaries listed below. Control is achieved
when the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its
activities. Subsidiaries are fully consolidated from the date on which control is acquired by the Company. Inter-company
transactions and balances are eliminated upon consolidation. They are de-consolidated from the date that control by the Company
ceases. The consolidated financial statements include the assets and liabilities and results of operations of all subsidiaries after
elimination of intercompany transactions and balances.
Page | 32
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2015 and 2014
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
As at July 31, 2015, the subsidiaries of the Company include: Helix BioPharma Inc., incorporated in the USA, Helix Polska
sp.z.o.o., incorporated in Poland and Helix Product Development (Ireland) Limited, incorporated in Ireland. All these subsidiaries
are 100% owned by Helix BioPharma Corporation.
Cash
The Company considers cash on hand, deposits in banks and bank term deposits with maturities of 90 days or less as cash.
Property, plant and equipment
Property, plant and equipment are recorded at cost less accumulated depreciation. Impairment charges are included in
accumulated depreciation.
Depreciation is provided using the following methods and estimated useful life:
Asset
Computer equipment and software
Furniture and fixtures
Research and manufacturing equipment
Leasehold improvements
Basis
Straight line
Straight line
Straight line
Straight line
Rate
3 years
5 years
10 years
Lease term
Research and development costs
Research costs are expensed as incurred. Development costs are expensed as incurred except for those which meet the criteria
for deferral, in which case, the costs are capitalized and amortized to operations over the estimated period of benefit. No costs
have been deferred to date.
Investment tax credits
The Company is entitled to Canadian federal and provincial investment tax credits, which are earned as a percentage of eligible
research and development expenditures incurred in each taxation year. Investment tax credits are accounted for as a reduction
of the related expenditure for items of a current nature and a reduction of the related asset cost for items of a capital nature,
provided that the Company has reasonable assurance that the tax credits will be realized.
Stock-based compensation
The Company accounts for stock-based compensation and other stock-based payments made in exchange for goods and services
provided by employees and non-employees in accordance with the fair value method. The fair value of stock options granted is
determined at the appropriate measurement date using the Black-Scholes option pricing model, and generally expensed over the
options’ vesting period for employee awards and non-employee awards. Awards with graded vesting are considered multiple
awards for fair value measurement and stock-based compensation calculation. In determining the expense, the Company
accounts for forfeitures using an estimate based on historical trends.
Foreign currency translation
The Company’s currency of presentation is the Canadian dollar, which is also the Company’s functional currency. Foreign
currency-denominated items are translated into Canadian dollars. Monetary assets and liabilities in foreign currencies are
translated into Canadian dollars at the rates of exchange in effect at the balance sheet dates. Non-monetary items are translated
at historical exchange rates. Revenue and expenses are translated at the exchange rates prevailing at their respective transaction
dates. Exchange gains and losses arising on translation are included in income.
Income taxes
The Company follows the asset and liability method of accounting for income taxes. Under this method, deferred income tax
assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of certain existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities
are measured using enacted or substantively enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the date of substantive enactment. Given the Company’s history of net
losses and expected future losses, the Company is of the opinion that it is probable that these tax assets will not be realized in
the foreseeable future and therefore, the deferred tax asset has not been recognized.
Financial instruments
Financial assets and financial liabilities are initially recorded at fair value and their subsequent measurements are determined in
accordance with their classification. The classification depends on the purpose for which the financial instruments were acquired
or issued and their characteristics. Cash and cash equivalents are classified as held-for-trading assets and are accounted for at
Page | 33
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2015 and 2014
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
fair value. Accounts receivable are classified as loans and receivables, and after initial recognition are recorded at amortized cost.
Accounts payable and accrued liabilities are classified as other financial liabilities, and after initial recognition are recorded at
amortized cost.
Impairment
(i) Financial assets:
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is
objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred
after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that
asset that can be estimated reliably.
An impairment test is performed, on an individual basis, for each material financial asset. Other individually non-material financial
assets are tested as groups of financial assets with similar risk characteristics. Impairment losses are recognized in income.
An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying
amount and the present value of the estimated future cash flows discounted at the assets original effective interest rate. Losses
are recognized in income and reflected in an allowance account against the respective financial asset. Interest on the impaired
asset continues to be recognized through the unwinding of the discount. When a subsequent event causes the amount of
impairment loss to decrease, the decrease in impairment loss is reversed through income for all financial assets except available-
for-sale equity securities.
(ii) Non-financial assets:
The carrying amounts of the Company’s non-financial assets are reviewed at each reporting date to determine whether there is
any indication of impairment. If such an indication exists, the recoverable amount is estimated.
The recoverable amount of an asset or a cash-generating unit is the greater of its value in use and its fair value less costs to sell.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit. For
the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets
that generates cash inflows from continuing use that are largely independent of cash inflows of other assets or cash-generating
units. An impairment loss is recognized if the carrying amount of an asset or its related cash-generating unit exceeds its estimated
recoverable amount.
Impairment losses recognized in prior periods are assessed each reporting date for any indications that the loss has decreased
or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable
amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount
that would have been determined, net of depreciation, if no impairment loss had been recognized.
Basic and diluted loss per common share
Basic loss per share is computed by dividing the net loss available to common shareholders by the weighted average number of
shares outstanding during the reporting period. Diluted loss per share is computed similarly to basic loss per share, except that
the weighted average shares outstanding are increased to include additional shares for the assumed exercise of stock options
and warrants, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options and warrants
were exercised and that the proceeds from such exercises were used to acquire common stock at the average market price during
the reporting periods. The inclusion of the Company’s stock options and warrants in the computation of diluted loss per share has
an anti-dilutive effect on the loss per share and, therefore, they have been excluded from the calculation of diluted loss per share.
3. New accounting standards and pronouncements not yet adopted
New accounting standards and pronouncements issued but not yet effective up to the date of issuance of the Company's
consolidated financial statements are listed below. This listing includes standards and interpretations issued, which the Company
reasonably expects to be applicable at a future date. The Company intends to adopt those standards when they become effective.
Certain pronouncements have been issued by the IASB or International Financial Reporting Interpretations Committee. Many of
these updates are not applicable or are inconsequential to the Company and have been excluded from the discussion below:
IFRS 1, Presentation of Financial Statements
In December 2014, the IASB issued amendments to IAS 1, Presentation of Financial Statements as part of the IASB’s disclosure
initiative. These amendments encourage entities to apply professional judgment regarding disclosures and presentation in their
financial statements. The amendments are effective for annual periods beginning on or after January 1, 2016 with early adoption
Page | 34
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2015 and 2014
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
permitted. The Company is evaluating the impact of the new standard on its results of operations, financial position and
disclosures.
IFRS 9, Financial Instruments
The IASB has issued a new standard, IFRS 9, Financial Instruments (“IFRS 9”), which will ultimately replace IAS 39, Financial
Instruments: Recognition and Measurement (“IAS 39”). The project had three main phases: classification and measurement,
impairment and general hedging. The standard becomes effective for annual periods beginning on or after January 1, 2018 and
is to be applied retrospectively. Early adoption is permitted. The Company is evaluating the impact of the new standard on its
results of operations, financial position and disclosures.
IFRS 15, Revenue from Contracts with Customers
The IASB has issued a new standard, IFRS 15, Revenue from Contracts with Customers (“IFRS 15”). IFRS 15 contains a single
model that applies to contracts with customers and two approaches to recognizing revenue: at a point in time or over time. The
model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is
recognized. New estimates and judgmental thresholds have been introduced, which may affect the amount and/or timing of
revenue recognized. The standard becomes effective for annual periods beginning on or after January 1, 2017. The Company
is evaluating the impact of the new standard on its results of operations, financial position and disclosures.
4. Property, plant and equipment
2015
Cost
$ 1,303
1,555
370
207
89
19
$ 3,543
Accumulated
depreciation
$ 1,042
1,499
370
196
89
18
$ 3,214
Research equipment
Manufacturing equipment
Leasehold improvements
Computer equipment
Computer software
Furniture and fixtures
5. Shareholders’ equity
$
Net book
value
261
56
–
11
–
1
329
$
2014
Cost
$ 1,298
1,555
370
198
89
19
$ 3,529
$
Accumulated
depreciation
980
1,441
370
188
85
17
$ 3,081
$
Net book
value
318
114
–
10
4
2
448
$
Preferred shares
Authorized 10,000,000 preferred shares.
As at July 31, 2015 and 2014 the Company had nil preferred shares issued and outstanding.
Common shares and share purchase warrants
Authorized unlimited common shares without par value.
As at July 31, 2015 the Company had 84,653,837 (2014 – 75,900,337) common shares issued and outstanding.
On March 28, 2011, the Company completed a private placement, issuing 1,652,719 units at $2.39 per unit, for gross proceeds
of $3,950,000. Each unit consists of one common share and one common share purchase warrant. Each common share purchase
warrant entitles the holder to purchase one common share at a price of $3.35 until March 27, 2016. Of the gross proceeds amount,
$1,362,000 was allocated to the share purchase warrants based on fair value and the residual amount of $2,588,000 was allocated
to common stock. Share issue costs totalling $34,000 were proportionately allocated to the share purchase warrants ($12,000)
and common stock ($22,000), respectively.
On March 30, 2011, the Company completed a private placement, issuing 918,365 units at $2.39 per unit, for gross proceeds of
$2,195,000. Each unit consists of one common share and one common share purchase warrant. Each common share purchase
warrant entitles the holder to purchase one common share at a price of $3.35 until March 29, 2016. Of the gross proceeds amount,
$759,000 was allocated to the share purchase warrants based on fair value and the residual amount of $1,436,000 was allocated
to common stock. Share issue costs totalling $175,000 were proportionately allocated to the share purchase warrants ($60,000)
and common stock ($115,000), respectively.
On November 4, 2013, the Company completed a private placement, issuing 4,678,000 units at $1.15 per unit, for gross proceeds
of approximately $5,380,000. Each unit consists of one common share and one common share purchase warrant. Each common
share purchase warrant entitles the holder to purchase one common share at a price of $1.61 until October 31, 2018. Of the gross
proceeds amount, $1,897,000 was allocated to the share purchase warrants based on fair value and the residual amount of
Page | 35
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2015 and 2014
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
$3,483,000 was allocated to common stock. Share issue costs totalling $708,000 were proportionately allocated to the share
purchase warrants ($248,000) and common stock ($460,000), respectively.
On July 10, 2014 the company completed a private placement, issuing 3,996,000 units at $1.60 per unit, for gross proceeds of
$6,394,000. Each unit consists of one common share and one common share purchase warrant. Each common share purchase
warrant entitles the holder to purchase one common share at a price of $2.24 until July 9, 2019. Of the gross proceeds amount,
$2,317,000 was allocated to the share purchase warrants based on fair value and the residual amount of $4,077,000 was allocated
to common stock. Share issue costs totalling $913,000 were proportionately allocated to the share purchase warrants ($331,000)
and common stock ($582,000), respectively.
On April 1, 2015 the Company completed a private placement, issuing 5,430,000 units at $1.10 per unit, for gross proceeds of
$5,973,000. Each unit consists of one common share and one common share purchase warrant. Each common share purchase
warrant entitles the holder to purchase one common share at a price of $1.54 until March 30, 2020. Of the gross proceeds amount,
$2,266,000 was allocated to the share purchase warrants based on fair value and the residual amount of $3,707,000 was allocated
to common stock. Share issue costs totalling $836,000 were proportionately allocated to the share purchase warrants ($317,000)
and common stock ($519,000), respectively.
On April 29, 2015 the Company completed a private placement, issuing 3,273,500 units at $1.10 per unit, for gross proceeds of
$3,601,000. Each unit consists of one common share and one common share purchase warrant. Each common share purchase
warrant entitles the holder to purchase one common share at a price of $1.54 until April 28, 2020. Of the gross proceeds amount,
$1,382,000 was allocated to the share purchase warrants based on fair value and the residual amount of $2,219,000 was allocated
to common stock. Share issue costs totalling $495,000 were proportionately allocated to the share purchase warrants ($190,000)
and common stock ($305,000), respectively.
The following table provides information on share purchase warrants outstanding as at:
July 31, 2015
July 31, 2014
Weighted average
remaining contractual
life (in years)
Number of share
purchase warrants
outstanding
Weighted average
remaining contractual
life (in years)
Number of share
purchase warrants
outstanding
Exercise Price
$1.54
$1.54
$1.61
$2.24
$3.35
$3.35
$3.51
$4.15
Outstanding, end of period
4.67
4.75
3.25
3.94
.66
.66
–
–
5,430,000
3,273,500
4,678,000
3,996,000
1,652,719
918,365
–
–
19,948,584
–
–
4.25
4.94
1.66
1.66
0.10
0.52
–
–
4,678,000
3,996,000
1,652,719
918,365
6,625,000
4,530,000
22,400,084
Stock options
The Company’s equity compensation plan reserves up to 10% of the Company’s outstanding common stock from time to time for
granting to directors, officers and employees of the Company or any person or company engaged to provide ongoing management
or consulting services. Based on the Company’s current issued and outstanding common shares as at July 31, 2015, options to
purchase up to 8,465,383 common shares may be granted under the plan. As at July 31, 2015, options to purchase a total of
2,730,084 common shares have been issued and are outstanding under the equity compensation plan.
Page | 36
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2015 and 2014
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
The following table provides information on options outstanding and exercisable as at:
July 31, 2015
July 31, 2014
Weighted average
remaining contractual
Exercise
Price
1.92
$1.30
2.90
$1.34
4.46
$1.50
4.26
$1.65
1.38
$1.68
4.77
$2.00
0.05
$2.43
–
$2.74
$3.00
.99
Outstanding, end of period 1.99
Number of
options
life (in years) outstanding
250,000
425,000
300,000
150,000
692,084
60,000
358,000
–
495,000
2,730,084
Number of
vested and
exercisable
options
250,000
425,000
100,002
50,001
692,084
–
358,000
–
495,000
2,370,087
Weighted average
remaining contractual
life (in years)
2.92
3.97
–
–
2.38
–
1.04
0.37
1.99
2.10
Number of
options
outstanding
250,000
525,000
–
–
942,084
–
458,000
518,000
645,000
3,338,084
Number of
vested and
exercisable
options
166,667
50,000
–
–
942,084
–
458,000
518,000
645,000
2,779,751
The following table summarized activity under the Company’s stock option plan for the fiscal years ended July 31, 2015 and 2014:
July 31, 2015
July 31, 2014
Outstanding, beginning of year
Granted
Exercised
Expired
Outstanding, end of year
Number
3,338,084
510,000
(50,000)
(1,068,000)
2,730,084
Vested and exercisable, end of year 2,370,087
Weighted average
exercise price
2.12
1.60
1.34
2.43
$
$
$
1.92
1.96
Number
3,554,084
525,000
–
(741,100)
3,338,084
2,779,751
Weighted average
exercise price
2.24
1.34
–
2.12
$
$
$
2.12
2.28
The fair value of each option granted was estimated on the date of grant using the Black-Scholes option pricing model with the
following assumptions:
Grant
Date
May 8, 2015
January 16, 2015
November 3, 2014
November 1, 2013
November 1, 2013
July 3, 2012
July 29, 2011
August 17, 2010
December 17, 2008
Number
of options
granted
60,000
300,000
150,000
50,000
475,000
250,000
1,164,000
893,000
2,070,000
Volatility
factor
80.27 %
79.56 %
78.61 %
97.99 %
76.69 %
62.16 %
61.88 %
67.10 %
64.30 %
Risk free
interest
rate
0.91 %
1.02 %
1.37 %
1.13 %
1.62 %
1.25 %
2.04 %
2.18 %
2.44 %
Dividend
rate
Expected
life
0.00 %
0.00 %
0.00 %
0.00 %
0.00 %
0.00 %
0.00 %
0.00 %
0.00 %
5 years
5 years
5 years
2 years
5 years
5 years
5 years
5 years
8 years
Vesting
period
3 years
3 years
3 years
immediate
1 year
3 years
3 years
3 years
3 years
Fair value
of options
granted
$
$
$
$
$
$
$
$
$
72
333
160
35
379
170
1,781
1,440
2,525
For the year ended July 31, 2015, 708,336 stock options vested (2014 – 320,834) with a fair value of $600,142 (2014 – $367,387).
Page | 37
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2015 and 2014
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
6. Commitments, contingent liabilities and contingent assets
The Company’s commitments are summarized as follows:
Royalty and in-licensing
Clinical research organizations
Contract manufacturing organizations
R&D distribution services
Operating leases
Financial and investor relations
Royalty and in-licensing commitments
$
2016
10
3,687
167
60
77
246
$
2017
10
291
83
–
–
–
$
2018
10
–
81
–
–
–
$ 4,247
$ 384
$
91
2019
$ 10
–
34
–
–
–
$ 44
2020
$ 10
–
–
–
–
–
$ 10
2021 and
beyond
40
$
–
–
–
–
–
$
Total
90
3,978
365
60
77
246
$
40
$ 4,816
Pursuant to a Royalty Agreement dated March 27, 1997 with University of Saskatchewan Technologies Inc. (“UST”), the Company
is required to pay UST a royalty of 2% of the net sales revenue generated from certain products containing prostaglandin E1, and
in the case of sub-licenses of such products, 15% of the non-royalty considerations (up-front payments) received from the sub-
licensee.
Pursuant to an Amended Royalty Agreement, effective November 1, 1999, the Company is required to pay royalties of 2% of the
Company’s net sales revenue received from the marketing, manufacture, distribution or sale of certain products, or in the case of
sub-license revenue, 2% of license fees or other revenue received by the Company related to the marketing, manufacture,
distribution or sale of certain products, which revenue is not allocated by the Company to the further development of the product.
Any future revenue generated through the commercialization of Topical Interferon Alpha-2b is subject to this royalty agreement,
which expires on March 27, 2017.
Pursuant to an agreement dated April 28, 2005 with the National Research Council of Canada, the Company is required to pay a
royalty of 3% of net sales, with a minimum royalty of $10,000 per annum generated from the use of a certain antibody to target
cancerous tissues of the lung. In addition to the royalty payments, the Company is also required to make certain milestone
payments: $25,000 upon successful completion of Phase I clinical trials; $50,000 upon successful completion of Phase IIb clinical
trials; $125,000 upon successful completion of Phase III clinical trials; and $200,000 upon receipt of market approval by regulatory
authority. L-DOS47 is subject to this agreement.
As at July 31, 2015, the Company has $90,000 (2014 – $90,000) in financial obligations outstanding related to royalty and in-
licensing commitments.
Clinical Research Organization (“CRO”) Commitments
The Company has two CRO supplier agreements in place for clinical research services related to the management of the
Company’s Phase I clinical study in Europe of L-DOS47.
As at July 31, 2015, the Company accrued $261,000 (2014 – $194,000) for services provided by these CRO’s.
Contract Manufacturing Organization (“CMO”) commitments
The Company has four separate CMO supplier agreements related to the Company’s L-DOS47 program, all of which are inter-
dependant in the manufacturing of L-DOS47.
As at July 31, 2015, the Company accrued $25,000 (2014 – $1,000) for CMO services it had received and is committed to pay
$nil in for additional services.
Collaborative Research Organization Service Commitments
The Company has one collaborative research agreement relating to the Company’s L-DOS47 program. The nature of the services
includes assay development, animal studies and imaging and ongoing future clinical sample analysis.
As at July 31, 2015, the Company accrued $69,000 (2014 – nil) for collaborative research organizations services it had received.
Page | 38
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2015 and 2014
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
Research and development distribution services
The Company has a distribution services agreement associated with the fulfillment of L-DOS47 and ancillary medical items in
support of the Company’s L-DOS47 European Phase I study.
As at July 31, 2015, the Company accrued $6,000 (2014 – $9,000) for research and development distribution services it had
received and is committed to pay $60,000 for additional collaborative research services.
Operating lease commitments
The Company is committed to pay $77,000 under two facility lease agreements with lease terms up to February 2016 for office
and research premises.
Financial and investor relations agreements
The Company engaged Cantor Fitzgerald & Co. (“Cantor”), effective December 1, 2014, to act as the Company’s exclusive
financial advisor with any transaction with or involving any acquiree by the Company. A non-refundable fee of USD75,000 was
paid to Cantor upon execution of this agreement. The agreement may be terminated by either party at any time upon written
notice to the other party. The agreement includes the following provisions:
(i) a flat fee of USD250,000 upon the signing of a definitive transaction agreement arranged by Cantor,
(ii) a transaction fee on the aggregate consideration on capital raised, as follows:
a. 2.0% up to USD50 million, plus
b. 1.5% from USD50 to USD100 million, plus
c. 1.0% in excess of USD100 million, plus
(iii) Upon the first closing of any part of an equity and/or debt financing and upon each subsequent closing:
a. a fee of 7.0% of the aggregate of any equity financing irrevocably committed at or in connection with such
closing, whether or not drawn, and
b. a fee of 3.0% of the aggregate of any debt financing irrevocably committed with such closing, whether or not
drawn.
(iv) a fee of 3% of any debt financing irrevocably committed from an applicable transaction, and
(v) reimbursement of certain expenses.
As at July 31, 2015, the Company accrued $nil (2014 – $nil) for services by Cantor.
The Company engaged The Trout Group LLC (“Trout”) as the Company’s investor relations consultant, effective April 14, 2015.
This agreement expires on April 13, 2016. Beginning 180 days after the effective date of the agreement, either party may terminate
this agreement for any reason by providing 60 days’ prior written notice. The agreement includes the following provisions:
(i) a monthly fee of USD12,500, and
(ii) bonus payments of:
a. USD25,000 for each instance in which Trout introduces the Company to a research analyst that results in
coverage of the Company within 180 days of such introduction;
b. USD10,000 for each instance in which Trout introduces the Company to an investor that becomes a top 10
institutional shareholder of the Company within 180 days of such introduction;
c. USD10,000 for each invitation the Company receives that is reasonably and directly attributable to Trout’s
efforts to conduct a presentation at a conference of U.S. based investors.
As at July 31, 2015, the Company accrued $nil (2014 – $nil) for services provided by Trout.
The Company entered into a non-exclusive financial and investor relations agreement with ACM Alpha Consulting Management
EST (“ACMest”), effective May 1, 2012. The agreement may now be terminated by either party at any time upon ninety days
written notice to the other party. On March 7, 2014, Mr. Andreas Kandziora was asked to act as an Observer on the Board of
Directors of the Company. Mr. Kandziora is President and CEO of ACM. The agreement includes the following provisions:
Page | 39
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2015 and 2014
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
(i) a monthly fee for investor relation services of CHF33,000 and reimbursement of certain expenses;
(ii) a 12.5% fee on the gross proceeds on any capital raised up to six months after the termination of this agreement from
an ACMest introduced investor with residency outside Canada and the U.S.;
(iii) a 12.5% fee on the value of a transaction up to twelve months after the termination of this agreement from an ACMest
introduced strategic partner, including but not limited to, any cash payments to the Company as an up-front payment,
any co-development proceeds, any milestone payments and any royalties associated with the transaction; and
(iv) a 12.5% fee on the gross proceeds of any capital raised up to twelve months after the termination of this agreement from
an ACMest introduced strategic partner.
At July 31, 2015, the Company accrued $45,000 (2014 – $40,000) for services provided by ACM. During fiscal 2015, the
Company paid ACM $508,000 (2014 - $462,000) in monthly fees, $91,000 (2014 - $nil) for expense reimbursements and
$1,228,000 (2014 - $1,452,000) in finders’ fees on gross proceeds on capital raised from private placements.
Director and officers’ indemnification
The Company indemnifies its directors and officers against any and all claims or losses reasonably incurred in the performance
of their service to the Company to the extent permitted by law.
Given the nature of this indemnification, the Company is unable to reasonably estimate its maximum potential liability as this
indemnification provision does not provide for a maximum potential amount and the amounts are dependent on the outcome of
future contingent events, the nature and likelihood of which cannot be determined at this time. Consequently, no amounts have
been accrued in these consolidated financial statements relating to this indemnification.
Legal Services Agreement
(i) The Company engaged Sadkowski I Wspolinicy Spolka Akcnjna (“Sadkowski”) to assist and advise the Company in the
selection of other consultants and advisors connected with the potential filing of a prospectus and potential listing on the
Warsaw Stock Exchange. The agreement may be terminated at any time by either party by giving notice in writing,
subject to a two-week notice period. The fee for such services are as follows:
(ii) a monthly fee based on the number of hours and applicable hourly rate spent incurred by Sadkowski;
(iii) PLN300,000 for drawing up a prospectus to be invoiced as follows;
a. PLN100,000 after the agreement is signed;
b. PLN100,000 after prospectus submission to Polish Financial Supervision Authority (“PFSA”); and
c. PLN100,000 after prospectus approval by the PFSA;
(iv) a fee of PLN7,500 for each supplemental prospectus files that includes financial data or PLN3,000 if no financial data is
included;
(v) additional success fees after approval of a prospectus by the PFSA:
a. PLN150,000 if approved by the PFSA by December 31, 2015
b. PLN 100,000 if approved by the PFSA by March 31, 2016
As at July 31, 2015, the Company accrued $nil (2014 – $nil) for services provided by Sadkowski.
Legal proceedings and claims
One claim made against the Company in the normal course of operations during fiscal 2012 remains pending at the end of fiscal
2015 and at the date of this Annual Report. Management believes that this claim is without merit. The action is not sufficiently
advanced for the outcome to be presently determinable and, accordingly, no provision for this claim has been made in these
financial statements.
7. Capital risk management
The Company’s main objectives when managing capital are to ensure sufficient liquidity to finance research and development
activities, clinical trials, ongoing administrative costs, working capital and capital expenditures. The Company includes cash in
the definition of capital. The Company endeavours not to unnecessarily dilute shareholders when managing the liquidity of its
capital structure.
Page | 40
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2015 and 2014
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
Since inception, the Company has financed its operations from public and private sales of equity, the exercise of warrants and
stock options, and, to a lesser extent, from interest income from funds available for investment, government grants and investment
tax credits. Since the Company does not have net earnings from its operations, the Company’s long-term liquidity depends on its
ability to access capital markets, which depends substantially on the success of the Company’s ongoing research and
development programs, as well as capital market conditions and availability.
The Company does not currently have enough cash reserves to fully fund its clinical trials nor does the Company have sufficient
cash reserves to meet anticipated cash needs for working capital and capital expenditures through at least the next twelve months.
The Company does not have any credit facilities and is therefore not subject to any externally imposed capital requirements or
covenants.
8. Financial instruments and risk management
The Company has classified its financial instruments as follows:
Cash
2015
2014
Fair Value
$ 6,792
Fair value
hierarchy
Level 1
Fair Value
$ 6,980
Fair value
hierarchy
Level 1
Fair value hierarchy
Financial instruments recorded at fair value on the balance sheet are classified using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
Level 1 reflects valuation based on quoted prices observed in active markets for identical assets or liabilities;
Level 2 reflects valuation techniques based on inputs that are quoted prices of similar instruments in active markets;
quoted prices for identical or similar instruments in markets that are not active; inputs other than quoted prices used in a
valuation model that are observable for that instrument; and inputs that are derived principally from or corroborated by
observable market data by correlation or other means; and
Level 3 reflects valuation techniques with significant unobservable market inputs.
A financial instrument is classified to the lowest level of the hierarchy for which a significant input has been considered in measuring
fair value.
The financial instrument in the Company’s financial statements, measured at fair value, is cash and cash equivalents.
Fair value
The fair value of financial instruments as at July 31, 2015 and 2014 approximates their carrying value because of the near-term
maturity of these instruments.
Financial risk management
The Company is exposed to a variety of financial risks by virtue of its activities: market risk (including currency and interest rate
risk), credit risk and liquidity risk. The overall risk management program focuses on the unpredictability of financial markets and
seeks to minimize potential adverse effects on financial performance.
Risk management (the identification and evaluation of financial risk) is carried out by the finance department, in close cooperation
with management. The finance department is charged with the responsibility of establishing controls and procedures to ensure
that financial risks are mitigated in accordance with the approved policies. The Company’s Board of Directors has the overall
responsibility for the oversight of these risks and reviews the Company’s policies on an ongoing basis to ensure that these risks
are appropriately managed.
Market risk
Market risk is the risk that changes in market prices, such as interest rates and foreign exchange rates, will affect the Company’s
income or the value of its financial instruments.
Page | 41
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2015 and 2014
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
Currency risk
The Company has international transactions and is exposed to foreign exchange risks from various currencies, primarily the Euro
and U.S. dollar. Foreign exchange risks arise from the foreign currency translation of the Company’s integrated foreign operation
in Ireland. In addition, foreign exchange risks arise from purchase transactions, as well as recognized financial assets and
liabilities denominated in foreign currencies.
The Company has maintained minimal cash balances denominated in both Euro and U.S. dollars due to Canadian dollar stability
and strength against foreign currencies.
Balances in foreign currencies at July 31, 2015 and 2014 are as follows:
2015
2014
Cash
Accounts payable
Accruals
Net foreign currencies
Euros
8
(9)
(162)
(163)
Closing exchange rate
Impact of 1% change in exchange rate
1.4388
+/- 1
US
Dollars
7
(30)
(2)
(25)
1.3047
+/- 1
Euros
102
(64)
(65)
(27)
1.4581
+/- 1
US
Dollars
162
(242)
–
(80)
1.0890
+/- 1
Any fluctuation in the exchange rates of the foreign currencies listed above could have an impact on the Company’s results from
operations; however, they would not impair or enhance the ability of the Company to pay its foreign-denominated expenses.
The following summary illustrates the fluctuations in the exchange rates during fiscal 2015 and 2014 to the Canadian dollar:
High
Average
Low
2015
US
Dollars
1.3060
1.1924
1.0857
Euros
1.4729
1.4005
1.3111
2014
Euros
1.3819
1.4610
1.5358
US
Dollars
1.0343
1.0734
1.1107
Interest rate risk
Interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in interest rates, which
are affected by market conditions. The Company is exposed to interest rate risk arising from fluctuations in interest rates received
on its cash and cash equivalents. The Company does not have any credit facilities and is therefore not subject to any debt related
interest rate risk.
The Company manages its interest rate risk by maximizing the interest income earned on excess funds while maintaining the
liquidity necessary to conduct its operations on a day-to-day basis. Any investment of excess funds is limited to risk-free financial
instruments. Fluctuations in the market rates of interest do not have a significant impact on the Company’s results of operations
due to the relatively short term maturity of any investments held by the Company at any given point in time and the low global
interest rate environment. The Company does not use derivative instruments to reduce its exposure to interest rate risk.
Credit risk
Credit risk is the risk of a financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its
contractual obligation.
The table below breaks down the various categories that make up the Company’s accounts receivable balances as at July 31:
Government related – HST/VAT
Research and development investment tax credits
Other
2015
96
388
7
$ 491
2014
51
288
4
$ 343
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its obligations as they come due.
Page | 42
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2015 and 2014
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
Since inception, the Company has mainly relied on financing its operations from public and private sales of equity. The Company
does not have any credit facilities and is therefore not subject to any externally imposed capital requirements or covenants.
The Company manages its liquidity risk by continuously monitoring forecasts and actual cash flow from operations and anticipated
investing and financing activities.
The Company’s cash reserves of $6,792,000 as at July 31, 2015 are insufficient to meet anticipated cash needs for working capital
and capital expenditures through the next twelve months, nor are they sufficient to see the current research and development
initiates through to completion. To the extent that the Company does not believe it has sufficient liquidity to meet its current
obligations, management considers securing additional funds primarily through equity arrangements to be of utmost importance.
The Company’s long-term liquidity depends on its ability to access the capital markets, which depends substantially on the success
of the Company’s ongoing research and development programs, as well as economic conditions relating to the state of the capital
markets generally. Accessing the capital markets is particularly challenging for companies that operate in the biotechnology
industry.
The following are the contractual maturities of the undiscounted cash flows of financial liabilities as at July 31:
Accounts payable and accruals $
Carrying
amount
969
2015
Less than Greater than
one year
one year
–
$
969
$
2014
Carrying
amount
1,042
Less than Greater than
one year
one year
–
$
$ 1,042
This table only covers liabilities and obligations relative to financial instruments and does not anticipate any income associated
with assets.
9. Related party transactions
The key management personnel of the Company are the President and Chief Executive Officer, former President and Chief
Operating Officer, Chief Scientific Officer, Chief Financial Officer and Director of Clinical Development.
The following table summarizes for key management personnel compensation for the fiscal years ended:
Compensation
Stock-based compensation
2015
$ 1,185
76
$ 1,261
2014
$ 1,750
238
$ 1,988
Included in the 2014 Compensation number is a one-time payout of $500,000 related to the termination of the Company’s former
President and Chief Operating Officer.
The following table summarizes non-management Directors’ compensation for the fiscal years ended:
Directors’ fees
Stock-based compensation
Consultancy fee
$
2015
364
340
3
$
2014
291
182
–
$
707
$
473
During the year, a consultancy agreement was entered into with a current director of the Company to provide consulting services.
The consultancy agreement has an initial term lasting three months and automatically renews for an additional three months
unless the Company gives written notice not less than thirty days prior to the end of the initial term.
Related party transactions are at arm’s length and recorded at the amount agreed to by the related parties.
10. Research and development projects
As at July 31, 2015, the Company has incurred research and development expenditures primarily on the L-DOS47 research and
development program.
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HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2015 and 2014
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
Included in research and development expenditures are costs directly attributable to the various research and development
functions and initiatives the Company has underway and include: salaries; bonuses; benefits; stock based compensation;
depreciation of property, plant and equipment; patent costs; consulting services; third party contract manufacturing, third party
clinical research organization services; and all overhead costs associated with the Company’s research facilities.
The following table outlines research and development costs expensed and investment tax credits for the Company’s significant
research and development projects for the fiscal years ended July 31:
L-DOS47
Topical Interferon Alpha-2b
Corporate research and development expenses
Trademark and patent related expenses
Stock-based compensation expense
Depreciation expense
Research and development investment tax credit
11. Income taxes
$
2015
4,031
-
567
339
16
121
(189)
2014
$ 2,730
383
1,407
612
83
222
(198)
$
4,885
$ 5,239
The Company recognizes deferred tax assets and liabilities for expected future tax consequences of temporary differences
between the carrying amounts and the tax basis of assets and liabilities and certain carry-forward balances. The Company’s
effective income tax rate in fiscal 2015 is 26.7% (2014 – 26.3%). The increase in the effective income tax rate is the result of
changes to the allocation of provincial tax rates.
Current income tax expense and non-capital tax carry-forwards
The tax effects of temporary differences for the Company that gives rise to the unrecorded deferred tax asset presented in the
following table:
Deferred tax assets:
Scientific Research & Experimental Development expenditure pool
Non-capital losses and other credits carried forward
Capital losses carried forward
Excess of tax basis over book basis of capital assets
Deductible share issue costs
Other
2015
2014
$ 11,563
16,222
161
1,400
544
1
$ 11,048
14,076
159
1,257
434
1
29,891
26,975
As at July 31, 2015, the Company has Canadian tax losses that can be carried forward of approximately $60,840,000 (2014 –
$53,475,000) and are available until 2035 as follows:
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
862
2,113
2,904
2,438
9,188
6,552
6,793
13,242
2,437
6,727
7,584
$ 60,840
Scientific Research & Experimental Development expenditures (“SR&ED”)
Under the Income Tax Act (Canada), certain expenditures are classified as SR&ED expenditures and are grouped into a pool for
tax purposes. This expenditure pool can be carried forward indefinitely and deducted in full in any subsequent year. The SR&ED
expenditure pool at July 31, 2015 is approximately $43,367,000 (2014 – $41,974,000).
Page | 44
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2015 and 2014
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
Investment tax credits
The Company has also earned investment tax credits in Canada, on eligible SR&ED expenditures at July 31, 2015 of
approximately $10,740,000 (2014 – $10,213,000), which can offset Canadian income taxes otherwise payable in future years up
to 2035. Investment tax credits are accounted for as a reduction of the related expenditure for items of a current nature and a
reduction of the related asset cost for items of a capital nature, provided that the Company has reasonable assurance that the tax
credits will be realized. During the year, the Company received cash refundable investment tax credits related to prior years in
the amount of $89,000 (2014 – $345,000). At July 31, 2015, cash refundable investment tax credits total $388,000 (2014 –
$288,000). The research and development investment tax credits recorded are based on management’s estimates of amounts
expected to be recovered and are subject to audit by the taxation authorities and, accordingly, these amounts may vary. Federal
investment tax credits are non-refundable to the Company. Refundable investment tax credits reflect eligible SR&ED expenditures
incurred in various provinces.
12. Other Items
A holdback amount of $200,000 was applied to the proceeds upon closing of the sale of the Company’s distribution business back
on December 10, 2012. This holdback amount was scheduled to be paid to the Company beginning at the end of 2014, subject
to the achievement of certain sales objectives by the purchaser. The Company received a payment of $50,000 during the year
as a partial payment of the holdback.
Page | 45
Corporate Information
DIRECTORS AND OFFICERS
Yvon Bastien
Director & Chairman
Slawomir Majewski, MD.
Director
Marek Orlowski, MD.
Director
Sylwester Cacek
Director
Sven Rohmann, MD. Ph.D.
Director
Gary Littlejohn
Director
Heman Chao, Ph.D.
Chief Scientific Officer
Photios (Frank) Michalargias, CPA, CA
Chief Financial Officer
TRANSFER AGENT
Computershare
100 University Avenue
9th Floor, North Tower
Toronto, Ontario
Canada M5J 2Y1
Tel: 800-564-6253
EXCHANGE SYMBOLS
TSX: HBP
Frankfurt: HBP
T - 905 841 2300
F - 905 841 2244
E - helix@helixbiopharma.com
305 Industrial Parkway South, Unit 3
Aurora, Ontario L4G 6X7
Canada
helixbiopharma.com