Growing for life
2014 ANNUAL REPORT
Executive Summary
Significant Events
Message to Shareholders
Plasma-derived and
Small Molecule
Therapeutics
Table of contents
MD&A
Financial Statements
Management Team and
Board of Directors
Corporate Information
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2014 EXECUTIVE SUMMARY
From day one, our vision has been to leverage our unique proprietary
technologies and know-how to build a company that would bring
safer, more cost-effective and more convenient therapeutic products to
underserved patient populations in both existing and emerging markets.
This platform rapidly allowed for the efficient targeting and
removal of multiple high-value proteins from a single plasma
sample at unprecedented activity levels through the use of
ProMetic’s Mimetic™ Ligand adsorbent technology.
After years of continuous improvement and significant
investments, ProMetic is now operating a robust and scalable
manufacturing process in its own plasma purification facility,
ProMetic BioProduction Inc., situated in Laval, Quebec,
where it is currently developing plasma-derived therapeutics
to address unmet medical conditions. It is a well-known fact
that plasma-derived drug candidates benefit from a simpler
and quicker regulatory pathway to approval as compared to
traditional new chemical entity drug candidates.
its first plasma-derived drug candidate
In addition to
(plasminogen) already in clinical trials in patients and with
more plasma-derived therapeutics scheduled to enter clinical
trial stages in 2015 and the coming years, ProMetic is rapidly
building a significant plasma derived product pipeline of
substantial value.
2- SMALL MOLECULE THERAPEUTICS
ProMetic is also actively pursuing the development of a
small molecule product pipeline composed of orally active
drug candidates targeting fibrosis, unmet medical needs as
well as various rare disease opportunities affecting different
key organs. ProMetic already possesses all the necessary
elements to build such a deep product pipeline. With its lead
drug candidate, PBI-4050, currently in clinical trials in patients
for chronic kidney diseases, idiopathic pulmonary fibrosis
and metabolic syndrome with its resulting type 2 diabetes,
ProMetic is well positioned to create substantial value upon
the demonstration of efficacy in such patient populations.
Historically known for its world-class expertise
in bioseparation, ProMetic is continuing
to transition into a vertically integrated
biopharmaceutical corporation with a
rapidly growing pipeline of drug candidates
originating from two development platforms.
1- PROTEIN TECHNOLOGIES
BIOSEPARATION TECHNOLOGIES
The bioseparation technologies enable the capture of
multiple, targeted proteins directly from source products
and provide for a highly efficient and cost-effective process.
In order to assure high quality standards required for
protein pharmaceuticals, ProMetic has employed its affinity
technologies to create a range of bioseparation products that
assist in improving the purification of therapeutic proteins
and antibodies. The Corporation’s proprietary purification
adsorbents and manufacturing processes for biological
products are used by more than 30 companies in the
pharmaceutical, biotechnology and medical industries, where
ProMetic’s clients employ this technology to purify proteins,
remove impurities and pathogens, reduce manufacturing
costs, and increase the yield of therapeutic products.
PLASMA-DERIVED BIOPHARMACEUTICALS
At the heart of our proprietary manufacturing process resides
our bioseparation technologies and products, such as our
affinity resins. These technologies and related know-how
enable the capture of multiple targeted proteins and provide
for a highly efficient and cost-effective plasma purification
process.
More than a decade ago, ProMetic, in collaboration with
the American Red Cross, started developing a sequential
purification process employing powerful affinity separation
materials in a multi-step process to extract and purify valuable
plasma proteins in high yields. The Plasma Protein Purification
System (“PPPSTM”) resulted from this great collaboration.
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PROMETIC LIFE SCIENCES INC.
2014 SIGNIFICANT EVENTS
JANUARY > On January 22, 2014, ProMetic announced
the achievement of a manufacturing milestone related to
its strategic agreement with Hematech Biotherapeutics
Inc. triggering a US$ 1.0 million payment to ProMetic. This
milestone was achieved following the successful completion
of the first large-scale production run at its ProMetic
BioProduction Inc. (“PBP”) plasma purification facility located
in Laval, Quebec.
MAY > On May 8, 2014, ProMetic increased its ownership
in NantPro following the amendment of its related corporate
and commercial agreements with NantPharma, LLC. The
amended agreements provided ProMetic with the effective
control of NantPro and a greater portion of the future
value and revenues associated with the development and
sales of IVIG in the US market. Following the revised and
amended agreements, ProMetic’s equity position in NantPro
exceeded 65%.
FEBRUARY > On February 6, 2014, ProMetic appointed
Dr. John Moran as its new Chief Medical Officer, effective as
of March 1st, 2014 and announced that its UK based subsidiary,
ProMetic BioSciences Ltd., entered into a new agreement
with a leading vaccines company, for the development of an
affinity adsorbent and associated purification process for the
production of a novel vaccine product.
APRIL > On April 2, 2014, ProMetic reported on a
successful Pre-Investigational New Drug meeting held with
the US Food and Drug Administration for a plasma-derived
biopharmaceutical under development under the NantPro
LLC partnership. The Pre-IND meeting focused on ProMetic’s
proprietary Plasma Protein Purification System (“PPPSTM”)
manufacturing process as well as the clinical and regulatory
pathway for this specific plasma-derived therapeutic.
On April 3, 2014, ProMetic presented new pre-clinical data
at the 2014 International Society of Nephrology Nexus
Symposium held in Bergamo, Italy. PBI-4050 was shown
to significantly reduce oxidative stress markers as well as
inflammatory and profibrotic cytokines in animal models
designed to emulate chronic kidney disease (CKD) and
diabetic kidney disease (DKD). In animal models designed to
reproduce long term complications related to human Type 2
diabetes, PBI-4050 brought blood glucose levels back into
the normal range.
On April 10, 2014, ProMetic presented new pre-clinical data
at the 2014 annual meeting of the European Association for
the Study of the Liver held in London, UK. The new data
supports the claim that PBI-4050’s anti-fibrotic activity could
also address various liver conditions such as non-alcoholic
steatohepatitis (“NASH”), a condition affecting 2% to 5% of
Americans, as well as liver cancer.
JUNE > On June 5, 2014, ProMetic received a $5.6 million
purchase order under
its ongoing supply agreement
with Octapharma. This order relates to the purchase of
PrioClearTM, a proprietary prion capture resin incorporated
into Octapharma’s manufacturing process for its solvent/
detergent treated plasma product, OctaplasLG®.
On June 18, 2014, ProMetic reported having successfully
completed its PBI-4050 Phase I clinical trial in 40 healthy
volunteers. ProMetic’s PBI-4050 was found to be safe and very
well tolerated without any serious adverse events reported in
any of the 5 cohorts tested. The objectives of this oral, double
blind, placebo controlled, single ascending dose study were
to demonstrate the safety and tolerability of PBI-4050 and to
establish the pharmacokinetic profile of the drug candidate
at different doses.
JULY > On July 10, 2014, ProMetic announced the launch
of fibrinogen for commercial sales during the fourth quarter
of 2014 after its successful scale-up at its Laval based
plasma purification facility, ProMetic BioProduction Inc. The
fibrinogen protein has many commercial applications ranging
from harvesting and culturing stem cells to use in wound
healing products, hemostatic bandages and drug delivery
systems.
On July 24, 2014, ProMetic entered into an agreement with
one of its existing multinational clients, a global leader in the
biotherapeutics industry, for the development and scale-up
of a new affinity resin and associated manufacturing process
in order to enhance the quality and purity of an existing
biopharmaceutical product manufactured in large quantities.
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PROMETIC LIFE SCIENCES INC.
On July 31, 2014, ProMetic secured a follow-on investment
from Thomvest Seed Capital Inc. consisting of a $20 million
investment in a Loan and warrants. As partial consideration
for the Loan, ProMetic granted Thomvest 16,723,807 warrants
with an exercise price of $1.87 per common share. Part
of the proceeds have been used for the development and
manufacture of both additional and existing plasma-derived
orphan drugs, the advancement of the ongoing PBI-4050
clinical program as well as the repayment of secured debt
provided by certain shareholders.
SEPTEMBER > On September 3, 2014, ProMetic
announced a successful Pre-Investigational New Drug
(“Pre-IND) meeting with the US Food and Drug Administration
(“FDA”) for its anti-fibrotic, lead drug candidate, PBI-4050.
This Pre-IND meeting with the FDA focused on ProMetic’s
proposed phase II clinical program, for PBI-4050, in patients
with chronic kidney disease (“CKD”), other rare diseases
as well as the manufacturing and pre-clinical package that
ProMetic intends to include in the IND submission.
On September 16, 2014, ProMetic announced its addition
to the S&P/TSX SmallCap Index (“Index”), effective after the
close of trading on Friday, September 19, 2014, as a result of
the annual review of the Index.
OCTOBER > On October 15, 2014, ProMetic announced
the pursuit of IPF as one of its PBI-4050 orphan indications.
This decision followed the completion of a favorable external
review of the extensive anti-fibrotic preclinical data generated
to date by an independent panel of world experts on
idiopathic pulmonary fibrosis and the analysis of the current
market landscape.
On October 28, 2014, ProMetic received clearance by the
US Food and Drug Administration for its Investigational New
Drug (“IND”) application for ProMetic’s IV plasminogen for the
treatment of hypoplasminogenemia, or type I plasminogen
deficiency. The FDA has also accepted that ProMetic’s
proposed Phase II / III clinical program for the IV plasminogen
provides an adequate surrogate endpoint for licensure using
the accelerated approval pathway.
NOVEMBER > On November 11, 2014, ProMetic
reported that its small molecule lead compound PBI-4050
received approval to commence clinical trials in patients
suffering from Chronic Kidney Disease (“CKD”) following the
CTA clearance by Health Canada.
On November 13, 2014, ProMetic disclosed during the
Annual Meeting of the American Society of Nephrology
(ASN) held in Philadelphia, USA, new preclinical data on
PBI-4050. Dr. Raymond Harris and Dr. Ming-Zhi Zhang from
the Department of Nephrology, Vanderbilt University School
of Medicine performed studies in a very severe model of
accelerated type 2 diabetes. The authors concluded that
PBI-4050
the development of diabetic
nephropathies in type 2 diabetes through the improvement
of glycemic control and the inhibition of renal TGFβ-mediated
fibrotic pathways, in association with decrease in macrophage
infiltration, oxidative stress and increase in autophagy.
attenuates
On November 18, 2014, ProMetic entered into an agreement
with a syndicate of underwriters led by Canaccord Genuity
Corp. under which the Underwriters have agreed to buy, on a
bought deal basis, 15.2 million common shares in the capital
of the Corporation at a price of $1.90 per share for gross
proceeds of $28.8 million.
DECEMBER > On December 4, 2014, ProMetic announced
the pursuit of a clinical program designed to evaluate the
benefit of PBI-4050 in patients affected by the metabolic
syndrome and resulting type 2 diabetes. The metabolic
syndrome is a major risk factor for cardiovascular disease and
for type 2 diabetes, and consists of the constellation of central
(truncal) obesity, high blood triglycerides, low HDL (“good”)
cholesterol, elevated blood pressure, and elevated blood
glucose.
On December 22, 2014, ProMetic entered into definitive
agreements with GENERIUM Pharmaceuticals for several
plasma-derived biopharmaceuticals to be manufactured
and commercialized in Russia and CIS. The strategic alliance
includes the granting of manufacturing rights by ProMetic to
GENERIUM for several plasma-derived biopharmaceuticals
using ProMetic’s proprietary PPPSTM technology for the
manufacture of said plasma-derived biopharmaceuticals in a
up to 600, 000 liters per year facility to be built and operated
by GENERIUM, in Russia.
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PROMETIC LIFE SCIENCES INC.
MESSAGE TO SHAREHOLDERS
The most successful biopharmaceutical
companies all have 1 thing in common. They
all have deep product pipelines, filled with
high quality assets at various stages of clinical
development addressing well defined unmet
medical needs. The milestones achieved by
ProMetic in 2014 have favorably positioned
us within this category.
In order to maximize its future commercial success potential,
ProMetic has leveraged its own expertise and proprietary
technologies
to systematically build and advance a
significant product pipeline. With numerous drug candidates
progressing through and towards advanced stages of
clinical development, ProMetic now possesses the deep and
diversified product pipeline required to become a leader in
the field of rare diseases.
Having dedicated the majority of our efforts and resources to
the advancement of our lead clinical development programs
during the past year, we can now affirm to have successfully
continued our transition towards becoming a vertically
integrated biopharmaceutical company.
The successful advancement of this transition
is best
evidenced by the numerous milestones achieved throughout
the year within both our plasma-derived and small molecule
therapeutic segments. The achievement of our first commercial
scale production run in December 2013 at our Laval, Quebec
based plasma purification facility allowed us to demonstrate
that cGMP grade biotherapeutics with industry leading yields
and purity could efficiently be produced using our proprietary
PPPSTM technology. The achievement of this manufacturing
milestone was not only critical for the advancement of our
plasminogen clinical program but for numerous other plasma
derived therapeutics currently under development as well.
This achievement clearly demonstrate the potential of our
PPPSTM platform for creating a multi-product pipeline of
plasma-derived proteins able to address a significant number
of unmet and rare medical conditions.
Our belief that our proprietary manufacturing process
could create a multi-product plasma-derived therapeutics
pipeline was well founded. Following the decision to actively
pursue the development of the plasminogen, IVIG and
increase
alpha-1 antitrypsin programs, we decided to
our ownership in NantPro LLC in order to gain control of
the IVIG program. This was done to insure that a greater
portion of the future value and revenues associated with
the development and sales of IVIG in the US market would
indeed remain ours in the future. The potential for adding
that could quickly
therapeutics
more plasma-derived
generate commercial revenues was also further confirmed
later in the year following the announcement that fibrinogen
would be commercially available for sale by the end of the
year. The successful advancement of our product pipeline will
undoubtedly facilitate the pursuit of the commercialization
label.
of certain biotherapeutics under
the ProMetic
Already known in the industry and throughout various
regulatory authority bodies as a provider of world class
bioseparation and purification solutions, ProMetic took
advantage of its interaction with regulatory authorities in 2014
to demonstrate that its reputation as a purification solutions
provider of choice to the industry was entirely justified.
ProMetic successfully met with both Health Canada and the
FDA regarding its proprietary PPPSTM manufacturing process
as well as the clinical and regulatory pathway for some of its
specific plasma-derived and small-molecule therapeutics.
These successful regulatory meetings resulted in some
development programs entering and completing early
clinical trial stages. For example, we reported in June 2014
having successfully completed our PBI-4050 Phase I clinical
trial in 40 healthy volunteers where our orally active anti-
fibrotic lead drug candidate was found to be safe and well
tolerated without any serious adverse events being reported.
Following this safety and tolerability milestone, we announced
later in the year that we would also pursue in addition to
diabetic kidney diseases, other follow-on indications such as
idiopathic pulmonary fibrosis and the metabolic syndrome
and its resulting type 2 diabetes. All scheduled PBI-4050
clinical development programs have been cleared by Health
Canada so far to start clinical trial stages in patients.
ProMetic’s plasma-derived therapeutics have progressed
towards clinical trial stages with the Investigational New
Drug application for plasminogen being cleared by the
FDA to commence trials in patients for the treatment of
hypoplasminogenemia, or type I plasminogen deficiency.
ProMetic also filed late in 2014 its IND for the IVIG clinical
program and intends to proceed with the filing of additional
INDs before the end of 2015 for both plasma-derived
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PROMETIC LIFE SCIENCES INC.
PBI-4050 Stéatose hépatique non alcoolique
Stéatose hépatique
Fibrose hépatique
Hyperimmuns – transplantation du foie
Albumine
PBI-1402 anémie
Carence en plasminogène
Maladies du sang
Produits thérapeutiques dérivés du plasma
Médicaments à base de petites molécules
PBI-4050 IPF – Fibrose pulomaire idiopatique
AAT
Emphyseme héréditaire
Maladie pulmonaire obstructive chronique
PBI-4050 Fibrose cardiaque
PBI-4050 CKD - Maladie rénale chronique
DKD – Néphropaties diabétiques
ESRD – Maladies rénales terminales
PBI-4419 AKI – Maladies rénales aiguës
PBI-1308 Glomerulonéphrite
Médicaments orphelins insuffisance rénale
PBI-4050 Fatty Liver Disease
Liver Steatosis
Liver fibrosis
Hyperimmunes – liver transplant
Albumin
PBI-1402 anemia
Plasminogen deficiency
Blood disorders
Plasma-derived therapeutics
Small molecules Therapeutics
PBI-4050 IPF – Idiopathic pulmonary
Fibrosis
AAT
Hereditary Emphysema
COPD
PBI-4050 Heart Fibrosis
PBI-4050 CKD - Chronic Kidney Disease
DKD – Diabetic Kidney Disease
ESRD – End Stage Renal Disease
PBI-4419 AKI – Acute Kidney Injury
PBI-1308 Autoimmune – glomerulonephritis
Orphan Rx kidney failure
With numerous drug candidates progressing through and towards advanced
stages of clinical development, ProMetic now possesses the deep and diversified
product pipeline required to become a leader in the field of rare diseases.
products and small molecule therapeutics. The successful
filing of INDs followed by the beginning of clinical trials in
patients are normally recognized as significant value creation
milestone events as they mark a significant progression
within critical stages of the regulatory approval process.
2014 was also a year during which we successfully
implemented previously undertaken changes
to our
commercialization strategy whereby the Corporation decided
to further develop more of its assets to an advanced stage
prior to partnering. This resulted in a reduction of service and
licensing revenues during the first three quarters of 2014 but
more importantly, it has allowed us to retain a greater portion
of the future returns expected from the high-value products
and lucrative markets currently being pursued, thereby
serving to increase shareholder value. To compensate for the
lower licensing revenue levels and increased costs attached
to building a deeper product pipeline, ProMetic successfully
completed 2 financings. The first one was a $20 million
follow-on investment from Thomvest Seed Capital Inc.
consisting of a $20 million investment in a loan and warrants,
the second significant
investment made by Thomvest.
ProMetic also secured a bought deal financing totaling
$28.8 million.
Our review of the year achievements would not be
complete without mentioning the licensing agreement with
for several plasma-derived
GENERIUM Pharmaceuticals
biopharmaceuticals to be manufactured and commercialized
in Russia and CIS. This strategic alliance also included the
granting of manufacturing rights for several plasma-derived
biopharmaceuticals using ProMetic’s proprietary PPPSTM
technology for the manufacture of said plasma-derived
biopharmaceuticals in a up to 600,000 liters per year facility
to be built and operated by GENERIUM, in Russia. A clear
demonstration that our state of the art technologies are now
gaining international recognition.
Going forward in 2015 and the coming years, ProMetic will
continue to advance its product pipeline, grow its product and
service revenues in the bioseparation space as well as in the
plasma protein field by partnering some of its products and
assets. The Corporation is also anticipating to see growth in
licensing revenues to take place as a result of the conclusion
of some commercial partnership agreements.
We look at 2015 and the coming years with great excitement
and confidence in our ability to create value for all our
stakeholders. We believe the Corporation to be getting
closer and closer to multiple significant inflexion points.
Starting in 2016, and the following years, ProMetic should see
the new market entry of at least one of its plasma-derived
biotherapeutic every year. ProMetic also expects to see its
orally-active lead small molecule drug candidate, PBI-4050
and other follow-on compounds, successfully demonstrating
clinical efficacy in patients in various rare diseases and unmet
medical conditions within that same time frame. Once
validated in more advanced clinical trial stages, we expect
partnerships with large pharma companies to take place
regarding larger markets, resulting in a significant increase
in revenue generation as well. ProMetic is now better than
ever positioned to become a leading force in the rare disease
and orphan indications universe and we intend to take full
advantage of this situation.
We are very thankful for the hard work and dedication of our
employees and collaborators, the stewardship of our Board
of Directors as well as the continued support and loyalty of all
our shareholders and look forward to updating them all as we
continue building a stronger ProMetic.
Very best regards,
Pierre Laurin,
President and Chief Executive Officer
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PROMETIC LIFE SCIENCES INC.
Continuing to transition
into vertically integrated
biopharmaceutical corporation
with rapidly growing pipeline
of drug candidates
two drug development platforms
Fro m su p plier of c h oice
of biose p aratio n pro d u cts
M)
T
To integration of Prometic
proprietary manufacturing
technologies (PPPS
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PROMETIC LIFE SCIENCES INC.
A - PLASMA-DERIVED THERAPEUTICS
Historically known for its world class expertise in bioseparation, ProMetic has
leveraged its own industry leading affinity technology to develop a highly
efficient extraction and purification process of therapeutic proteins from human
plasma in order to develop therapeutics and orphan drugs targeting unmet
medical conditions and rare diseases.
incorporated
ProMetic’s proprietary and proven affinity adsorbent
are
in a downstream, multi-sequential
chromatographic process to extract, isolate and purify high-
value proteins with superior yield and efficiency compared
to the industry Cohn based process. The process also
incorporates viral inactivation as well as prion reduction, a first
in the plasma purification industry. This gentle manufacturing
process provides for significantly better yield and economic
benefits and is easily adaptable to different protein market
needs. ProMetic has already successfully scaled-up its Plasma
Protein Purification System manufacturing process at its
ProMetic BioProduction Inc. (“PBP”) plasma purification facility
based in Laval, Quebec.
1 - PLASMINOGEN
WHAT IT IS: Plasminogen is a naturally occurring protein that is
synthesized by the liver and circulates in the blood. Activated
plasminogen, plasmin, is an enzymatic component of the
fibrinolytic system and is the main enzyme involved in the lysis
of clots and clearance of extravasated fibrin. Plasminogen is
therefore involved in wound healing, cell migration, tissue
remodeling, angiogenesis and embryogenesis.
MEDICAL CONDITION: One of the most well-defined
conditions associated with hypoplasminogenemia or type
I plasminogen deficiency is ligneous conjunctivitis, which
is characterized by thick, woody (ligneous) growths on the
conjunctiva of the eye, and if left untreated, can lead to
blindness. Most affected cases are infants and children
showing their first clinical manifestation at a median age of
approximately 10 months.
While ligneous conjunctivitis is the most well characterized
lesion of plasminogen deficiency, hypoplasminogenemia is
actually a multisystem disease that can also affect the ears,
sinuses, tracheobronchial tree, genitourinary tract, and
gingiva.
INCIDENCE: The incidence of type I plasminogen deficiency
is approximately 1.6 / 1,000,000 people with approximately
10,000 patients worldwide and 2,500 patients in developed
markets suffering from this deficiency. It is also estimated that
a larger number of people suffer to various degrees from the
type II plasminogen deficiency (lower concentration level of
plasminogen).
DEVELOPMENT STAGE AND TIMELINES: ProMetic has
already secured an orphan designation status by the American
Food and Drug Administration (“FDA”). The FDA has also
completed its review and has cleared the Investigational
New Drug application for ProMetic’s IV plasminogen for the
treatment of hypoplasminogenemia, or type I plasminogen
deficiency.
ProMetic’s IV plasminogen is currently in a Phase I clinical trial,
an open label, single ascending dose study investigating the
safety, tolerability and pharmacokinetics of ProMetic’s plasma
purified human plasminogen in 6 patients suffering from
hypoplasminogenemia. The Corporation expects to progress
to Phase II / III in H2 2015, and to enroll a total of 15 to 18
patients. Under the current program the Corporation expects
to be in a position to be ready to file a Biological License
Application (BLA) for plasminogen commercialization in late
2015, early 2016 with a market entry sometime in 2016.
Revenues (US$) per liter of plasma*
REVENUES (US$) PER LITER OF PLASMA*
PPPSTM
PPPS™
Orphan Rx
Plasminogen
Orphan Rx
Albumin
~ $ 75
Hemostasis Rx
~ $ 300
*ESTIMATED
*Estimated
IVIG
~ $ 400
Alpha-1 antitrypsin
~ $ 300
Revenues (US$) per liter of plasma*
Cohn & ∕ or Industry Average
Alpha1 antitryspin
~ $ 80
IVIG
~ $ 280
7
Hemostasis Rx
~ $ 100
Albumin
~ $ 75
*Estimated
PROMETIC LIFE SCIENCES INC. 2 - INTRAVENOUS IMMUNOGLOBULIN (“IVIG”)
3 - ALPHA-1 ANTITRYPSIN (“AAT”)
WHAT IT IS: Intravenous immunoglobulin (IVIG) is a blood
product administered intravenously. It contains the pooled,
polyvalent, IgG antibodies extracted from the plasma of
over one thousand blood donors. IVIG’s effects last between
2 weeks and 3 months.
MEDICAL CONDITIONS: IVIG is mainly used as treatment in
four major disease categories:
i) Primary Immune deficiencies such as X-linked agamma-
globulinemia (XLA), Common variable immuno-deficiency
ii) Acquired
hypogammaglobulinemia,
(CVID)
and
compromised
immune
immunity conditions
deficiencies) featuring low antibody levels, iii) Autoimmune
diseases, e.g. immune thrombocytopenia, and inflammatory
diseases, e.g. Kawasaki disease and iv) Acute infections.
(secondary
INCIDENCE: It is estimated that there are more than 250,000
people in the US suffering from primary immunodeficiency
alone.
DEVELOPMENT STAGE AND TIMELINES: ProMetic has
already held a successful pre-IND meeting with the FDA,
filed its IND and is awaiting clearance of the IND before
proceeding with patients enrolment in clinical trials. Prometic
is targeting market approval in the US for IVIG in the second
half of 2017.
WHAT IT IS: Alpha-1 Antitrypsin deficiency is a genetic
disorder that causes defective production of alpha-1
antitrypsin, leading to decreased AAT activity in the blood
and lungs, and deposition of excessive abnormal AAT
protein in liver cells. There are several forms and degrees of
deficiency, principally depending on whether the sufferer has
one or two copies of the affected gene because it is a co-
dominant trait.
MEDICAL CONDITIONS: Severe AAT deficiency causes
panacinar emphysema or COPD in adult life in many people
with the condition (especially if they are exposed to cigarette
smoke), as well as various liver diseases in a minority of
children and adults, and occasionally more unusual problems.
It is treated by avoidance of damaging inhalants, and in
severe cases by intravenous infusions of the AAT protein or
by transplantation of the liver or lungs. It usually produces
some degree of disability and reduced life expectancy.
INCIDENCE: Current evidence suggests that there are
about 100,000 people with alpha-1 antitrypsin deficiency
in the United States with less than 10% treated. There may
be as much as 3% of the 20 million patients suffering from
Chronic Obstructive Pulmonary Disease that may also have
an undetected AAT deficiency.
DEVELOPMENT STAGE AND TIMELINES: ProMetic
anticipates filing its IND in the second half of 2015 and is
targeting market approval in the US in the second half
of 2017.
4 - ADDITIONAL ORPHAN DRUGS
As ProMetic’s manufacturing team
is producing GMP
material to support the clinical trials for its Plasminogen,
IVIG and AAT programs, 2 other orphan drugs have been
earmarked for development this year. Because these 2 other
orphan drugs are sequentially recovered from the same
liter of plasma from which plasminogen, IVIG and alpha-1
antitrypsin are produced, ProMetic can further leverage
its core competencies and manufacturing capabilities to
advance these additional Orphan Drug candidates at an
affordable cost.
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PROMETIC LIFE SCIENCES INC. B - SMALL MOLECULES THERAPEUTICS
ProMetic scientists are focused on developing orally active drugs with
improved pharmaco-economics and safety profiles. ProMetic is focusing
on targeting the following indications; fibrosis, inflammation and
autoimmune diseases, with a focus on treating unmet medical needs.
PBI-4050, PROMETIC’S LEAD COMPOUND
1 - CHRONIC KIDNEY DISEASES (“CKD”)
PBI-4050 is an orally active lead drug candidate with excellent
safety and efficacy profiles confirmed in several in vivo
experiments targeting fibrosis. Fibrosis is a very complex
process by which continuing inflammation causes vital organs
to lose their function as normal tissue is replaced by fibrotic scar
tissue. The proof of concept data generated to date confirms
our lead drug candidates’ anti-fibrotic activity in several key
organs including the kidneys, the heart, the lungs and the
liver. As a result of positive data generated in 2012, 2013 and
2014 in some of the most stringent gold-standard animal
models and a successfully completed Phase I clinical trial in
40 healthy volunteers where ProMetic’s PBI-4050 was found
to be safe and very well tolerated without any serious adverse
events reported, PBI-4050 has now entered clinical trials
in patients in 3 different clinical indications with additional
orphan indications to also be pursued in 2015.
WHAT IT IS: Diabetic nephropathy is a complication of long-
standing diabetes mellitus, of both Type 1 and Type 2.
MEDICAL CONDITIONS: Patients with severe CKD stages
(3 and 4) suffer from a gradual and accelerated loss of their
renal function (end-stage renal disease or ESRD) leading to
the need for hemodialysis. Cardiovascular complications for
ESRD patients on hemodialysis are a common cause of death.
INCIDENCE: This medical condition is increasing in incidence
throughout the world, and in many countries, including the
United States and Canada and is the leading cause of end-
stage renal disease requiring maintenance dialysis and/or
kidney transplantation. Twenty six million patients in the U.S.
alone are diagnosed with Chronic Kidney Diseases (“CKD”).
DEVELOPMENT STAGE AND TIMELINES: ProMetic has
completed the enrolment of patients with CKD in the multi-
dose part of the phase Ib trial. PBI-4050 was found to be safe,
well tolerated without any serious adverse events reported.
ProMetic anticipates starting its phase II clinical trial in CKD
patients in the second half of 2015.
THERAPEUTICS
PIPELINE DEVELOPMENT STATUS
Clinical Programs
Phase II & III*
Phase II 2015
Phase II 2015
scale up
Phase I
pre-clinical
R&D
PBI-4050 − Chronic Kidney Disease (CKD)
PBI-4050 − Idiopathic Pulmonary Fibrosis (IPF)
PBI-4050 − Metabolic Syndrome, Type II Diabetes
PBI-4050 − Other Orphan Indication
Plasminogen − Hypoplasminogenemia
IGIV − Primary Immune Deficiency (PID)
Orphan Rx TBA
AAT
Orphan Rx TBA
Phase II 2015
Phase Ib/II 2015
Phase II/III 2015
Phase III 2015
Phase III 2015
*Phases II & III clinical trials scheduled for 2015
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PROMETIC LIFE SCIENCES INC. 2 - METABOLIC SYNDROME AND RESULTING
TYPE 2 DIABETES
WHAT IT IS: Metabolic syndrome is a major risk factor for
cardiovascular disease and for Type 2 diabetes, and consists
of the constellation of central (truncal) obesity, high blood
triglycerides, low HDL (“good”) cholesterol, elevated blood
pressure, and elevated blood glucose.
in turn result
MEDICAL CONDITIONS: Obesity is believed to cause a
chronic inflammatory state, which leads to insulin resistance
in cardiovascular disease
and so may
and/or Type 2 diabetes. Given the global epidemic of obesity,
both in the developed and developing world, the metabolic
syndrome and its consequences present a devastating public
health problem.
INCIDENCE: It is difficult to grasp the numbers and the
overwhelming public health issues presented by the global
epidemic of obesity, the metabolic syndrome, and Type 2
diabetes. The International Diabetes Federation estimates
that in 2013 there were 300 million diabetics world-wide, and
that that number will increase to 600 million by the year 2035.
The Centers for Disease Control estimates that 1 of 3 children
born in the U.S. during the year 2000 will develop diabetes
during their lifetime.
DEVELOPMENT STAGE AND TIMELINES: PBI-4050, has
commenced the clinical trial in patients suffering from
metabolic syndrome and resulting Type 2 diabetes, following
the CTA clearance by Health Canada. ProMetic will be looking
during this trial to see whether the significant improvements
observed in diabetic animals when treated with PBI-4050
can be translated to humans. In a study conducted by the
Vanderbilt University, PBI-4050 demonstrated to have a
direct effect on the pancreas itself, reduced inflammation
and macrophage infiltration which led to the preservation of
insulin production in the islets. The initial phase of this clinical
program calls for the enrolment of a minimum of 12 patients
and maximum of 36 patients.
3 - IDIOPATHIC PULMONARY FIBROSIS (“IPF”)
WHAT IT IS: Idiopathic Pulmonary Fibrosis is a chronic,
devastating, and ultimately fatal disease characterized by a
progressive decline in lung function.
MEDICAL CONDITIONS: It is a specific type of interstitial
lung disease in which the small air sacs of the lung, the
“alveoli,” gradually become replaced by fibrotic (scar) tissue
and is the cause of worsening dyspnea (shortness of breath).
IPF is usually associated with a poor prognosis. The term
‘idiopathic’ is used because the cause of pulmonary fibrosis
is still unknown. IPF usually occurs in adult individuals of
between 50 and 70 years of age, particularly those with a
history of cigarette smoking, and affects men more often than
women.
INCIDENCE: IPF affects about 130,000 people in the United
States, with about 48,000 new cases diagnosed annually.
Approximately 40,000 people die each year with IPF, a similar
number of deaths to those due to breast cancer. The 5-year
mortality rate for patients with IPF is estimated to range from
50% to 70%.
DEVELOPMENT STAGE AND TIMELINES: PBI-4050, has
commenced the clinical trial in patients suffering from IPF,
following the CTA clearance by Health Canada and ProMetic
has been granted an orphan drug designation status by
the FDA for the treatment of IPF. In gold standard animal
models proven to emulate pulmonary fibrosis in humans,
PBI-4050 performed favorably compared to recently approved
drugs to treat such condition. PBI-4050 significantly reduced
tissue scarring in the lungs observed in non-treated animals,
indicating the potential for clinically significant improvement
and stabilization in lung function. Moreover, the combination
of PBI-4050 and another approved drug generated
unprecedented reduction of fibrotic markers in this model,
suggesting that synergistic clinical benefit may be found.
ProMetic will be looking during this 12 weeks open-label,
single-arm, exploratory Phase II study to evaluate the safety
and tolerability of PBI-4050 in 40 patients suffering from IPF
and to gather data on the effects of PBI-4050 on pulmonary
function, disease progression and
inflammatory/fibrotic
markers.
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PROMETIC LIFE SCIENCES INC. ProMetic continued to generate positive preclinical data in several
gold-standard preclinical models throughout the year and presented it
at various prestigious industry conferences during 2014.
2014 R&D ACHIEVEMENTS AND CONFERENCE
PRESENTATIONS
2014 Annual Meeting of the European AssocIation
for the Study of the Liver (“EASL”):
2014 Annual Meeting of the American Society of
Nephrology (ASN)
ProMetic presented new data supporting the claim that
PBI-4050’s anti-fibrotic activity could also address various liver
conditions such as non-alcoholic steatohepatitis (“NASH”),
a condition affecting 2% to 5% of Americans, as well as liver
cancer. PBI-4050’s favorable effect in reducing the progression of
fibrosis in the liver was demonstrated in a gold standard animal
model where liver fibrosis is induced by chronic administration
of carbon tetrachloride (“CCL4”), a chemical which at high
chronic doses, causes irreversible damages to the liver and
kidneys. Animals treated with PBI-4050 displayed a significant
reduction of liver lesions as evidenced by histology and relevant
biomarkers results. Following prolonged exposure to CCL4, a
significant number of the non-treated animals also developed
hepatocellular carcinoma contrary to the animals treated with
PBI-4050.
ProMetic presented new preclinical data on PBI-4050 where
Dr. Raymond Harris and Dr. Ming-Zhi Zhang from the
Department of Nephrology, Vanderbilt University School
of Medicine performed studies in a very severe model of
accelerated type 2 diabetes, (eNOS -/- db/db mice). The
animals in this model have concomitant type 2 diabetes and
hypertension which mimic the conditions of several patients
affected with Chronic Kidney Disease.
that PBI-4050 attenuates
The authors concluded
the
development of diabetic nephropathies in type 2 diabetes
through the improvement of glycemic control and the inhibition
of renal TGFβ-mediated fibrotic pathways, in association with
decrease in macrophage infiltration, oxidative stress and increase
in autophagy. Dr. Harris and Dr. Zhang have shown in their model
that PBI-4050 prevented further increase in proteinuria and
decreased fibrosis, as measured by collagen deposition and
confirmed by histology.
2014 International Society of Nephrology (“lSN”):
Nexus Symposium
ProMetic presented new preclinical data where PBI-4050 was
shown to significantly reduce oxidative stress markers as well
as inflammatory and profibrotic cytokines in animal models
designed to emulate chronic kidney disease (CKD) and diabetic
kidney disease (DKD). All of these mediators play a major role
in the evolution of CKD and DKD, and some can be monitored
in blood and in urine. In animal models designed to reproduce
long term complications related to human Type 2 diabetes,
PBI-4050 brought blood glucose levels back into the normal
range. Ultimately the mice or rats treated with PBI-4050
displayed a significant improvement of their renal function and a
significant reduction of fibrosis in their kidneys compared to the
non-treated rats.
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PROMETIC LIFE SCIENCES INC. MANAGEMENT’S DISCUSSION & ANALYSIS
This Management’s Discussion and Analysis (MD&A) is intended to help the reader to better understand ProMetic Life
Sciences Inc.’s [“ProMetic” or the “Corporation”] operations, present and future business environment, financial performance
and results of operations. This MD&A which has been prepared as of March 31, 2015, should be read in conjunction with
ProMetic’s consolidated financial statements for the year ended December 31, 2014. Additional information related to the
Corporation, including the Corporation’s Annual Information Form, is available on SEDAR at www.sedar.com.
FORWARD-LOOKING STATEMENTS
The information contained in Management’s Discussion and Analysis of the results of operations and the financial condition
contains statements regarding future financial and operating results. It also contains forward-looking statements with regards
to partnerships and agreements and future opportunities based on these. There are also statements related to the discovery
and development of intellectual property, as well as other statements about future expectations, goals and plans. We have
attempted to identify these statements by use of words such as “expect”, “believe”, “anticipate”, “intend”, and other words
that denote future events. These forward-looking statements are subject to material risks and uncertainties that could cause
actual results to differ materially from those in the forward-looking statements. These risks and uncertainties include but are
not limited to the Corporation’s ability to develop, and successfully manufacture pharmaceutical products, and to obtain
contracts for its products and services and commercial acceptance of advanced affinity separation technology. Additional
information on risk factors can be found in the Corporation’s Annual Information Form for the year ended December 31, 2014.
Shareholders are cautioned that these statements are predictions and actual events or results may differ materially from
those anticipated in these forward-looking statements. Any forward-looking statements we may make as of the date hereof
are based on assumptions that we believe to be reasonable as of this date and we undertake no obligation to update these
statements as a result of future events or for any other reason, unless required by applicable securities laws and regulations.
ProMetic is a long-established, publicly traded (TSX symbol: PLI) (OTCQX symbol: PFSCF), biopharmaceutical Corporation
with globally recognized expertise in bioseparation, plasma-derived therapeutics and small-molecule drug development.
ProMetic is focused on bringing safer, more cost-effective and more convenient products to both existing and emerging
markets. ProMetic offers its state of the art technologies for large-scale drug purification of biologics, drug development,
proteomics and the elimination of pathogens to a growing base of industry leaders and uses its own affinity technology that
provides for highly efficient extraction and purification of therapeutic proteins from human plasma in order to develop best-
in-class therapeutics. ProMetic is also active in developing its own novel small molecule therapeutic products targeting unmet
medical needs in the field of fibrosis, autoimmune disease/inflammation and cancer. A number of both the plasma-derived
and small molecule products are under development for orphan drug indications. Headquartered in Laval (Canada), ProMetic
has R&D facilities in the UK, the U.S. and Canada, manufacturing facilities in the Isle of Man and Canada and business
development activities in the U.S., Europe and Asia.
BUSINESS SEGMENTS
The Protein Technologies segment comprises different operating subsidiaries. The principal subsidiaries are:
ProMetic BioProduction Inc. (“PBP”), based in Laval, Quebec, Canada,
ProMetic BioTherapeutics Inc. (“PBT”), based in Rockville, MD, USA;
ProMetic BioSciences Ltd. (“PBL”), based in the United Kingdom (Isle of Man and Cambridge), and
NantPro BioSciences LLC (“NantPro”) based in Delaware, USA.
ProMetic and its Protein Technologies segment has been historically known for its world-class expertise in bioseparation,
specifically for large-scale purification of biologics and the elimination of pathogens, to a growing base of industry leaders.
However, ProMetic has also leveraged its own industry leading affinity technology to develop a highly efficient extraction and
purification process of therapeutic proteins from human plasma in order to develop best-in-class therapeutics and orphan
drugs targeting unmet medical conditions and rare diseases.
With all the necessary elements to accelerate the development of a strong product pipeline, ProMetic is now successfully
transitioning into a vertically integrated specialty biopharmaceutical corporation. At the heart of this strategy resides the
bioseparation technologies and products of the Corporation. The bioseparation technologies enable the capture of multiple,
targeted proteins directly from source products and provide for a highly efficient and cost-effective process.
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Using its bioseparation technologies, ProMetic has developed a multi-product, sequential, purification process employing
powerful affinity separation materials to extract and purify commercially important plasma proteins in high yields. This
purification process is known and referred to as the Plasma Protein Purification System (“PPPSTM”). ProMetic has now
implemented its own technology and launched its plasma purification facility, ProMetic BioProduction Inc. where it is
now currently developing best-in-class plasma-derived therapeutics to address various unmet medical conditions in both
established and emerging markets.
The completed development of PPPSTM as a manufacturing process, the number of licensees and improved financial situation
have all contributed to the implementation and operational launch of ProMetic’s plasma purification facility.
PBP successfully completed, in December 2013, the first commercial-scale production run on schedule and generated
better than expected results, confirming at the same time both the scalability and robustness of the process. PBP is currently
operating a robust and scalable manufacturing process and manufacturing material that is being used in the Corporation’s
current and upcoming plasma derived products clinical trials. With the previously disclosed proteins already scheduled for
production at PBP, namely IVIG, alpha-1 antitrypsin and plasminogen and with several plasma-derived therapeutics earmarked
for further development, ProMetic is rapidly building a significant plasma-derived product pipeline of substantial value. The
US Food and Drug Administration (“FDA”) completed its review and cleared the Investigational New Drug (“IND”) application
for the treatment of hypoplasminogenemia or Type 1 plasminogen deficiency in October 2014. ProMetic’s intravenous
plasminogen is the first PPPSTM generated plasma-derived therapeutic to enter clinical trial stages and should be followed by
additional plasma-derived therapeutics in 2015 and the coming years.
PBP’s Laval facility will also serve in the future as a blueprint for other partners’ future plants, as a technological showroom and
training center.
The Therapeutics segment is a small molecule drug discovery business comprised of one entity:
ProMetic BioSciences Inc. (“PBI”), based in Laval, Quebec, Canada
PBI is a small-molecule drug discovery business, with a strong pipeline of products. PBI scientists are focused on developing
orally active drugs that can emulate the activity of proven biologics, and provide competitive advantages including improved
pharmaco-economics and safety profiles. Typically, these first-in-class therapeutics have efficacy and high safety profiles
confirmed in several in vivo experiments and enjoy strong proprietary positions. The unmet medical applications targeted are
fibrosis, inflammation, autoimmune diseases, oncology and hematopoietic disorders.
The business model for this division is to partner promising drug candidates upon completion of in vivo proof of concept
studies. While the Therapeutics segment has several of such promising drug candidates, Management has focused on
working towards the Investigational New Drug (“IND”) enabling and partnering activities for its anti-fibrosis lead drug
candidate PBI-4050. As a result of positive data generated in 2012 and 2013 in several gold-standard animal models clearly
indicating favorable effects in reducing the progression of fibrosis in various key organs and overall progress achieved by the
Corporation, PBI-4050 has entered the clinical program stage in December 2013. PBI-4050 successfully completed in June
2014 its Phase I clinical trial in 40 healthy volunteers where it was found to be safe and very well tolerated without any serious
adverse events reported in any of the 5 cohorts tested. ProMetic held a successful Pre-Investigational New Drug (“Pre-IND)
meeting with the US Food and Drug Administration regarding PBI-4050 in 2014. This Pre-IND meeting with the FDA focused
on ProMetic’s proposed phase II clinical program, for PBI-4050, in patients with Chronic Kidney Disease (“CKD”), other rare
diseases as well as the manufacturing and pre-clinical package that ProMetic intends to include in the IND submission. As
a result of these successful Pre-IND meetings with both the FDA and Health Canada, a series of Clinical Trial Applications
(“CTA”) and INDs were filed before the end of 2014 and cleared by Health Canada in the latter part of 2014 and early 2015,
thereby authorizing ProMetic to commence clinical in patients suffering from CKD, Idiopathic Pulmonary Fibrosis (“IPF”) and
the metabolic syndrome and its resulting Type 2 diabetes. Additional CTA and INDs are expected to be filed in the coming
months and will target additional orphan indications.
The multi-center study for CKD will be 3-arm, double-blind, placebo-controlled involving 2 different doses of PBI-4050. The
trial will be performed at sites already identified across Canada and in the USA. The clinical trials targeting unmet medical
needs and some orphan indications will be open label in order to monitor progress against well-established disease state
baselines. The trials will monitor safety and tolerability in patients as well as the effect of PBI-4050 on recognized biomarkers
for fibrosis and diabetes in blood and urine.
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ProMetic also presented some of its data generated so far at several of the most prestigious industry conferences throughout
the year, including the 2014 annual meeting of the European Association for the Study of the Liver, the 2014 International
Society of Nephrology: Nexus Symposium, the 2013 American Society of Nephrology annual meeting, the 2013 American
Association for the Study of Liver Diseases (AASLD) annual meeting and the 2013 European Respiratory Society annual
congress. ProMetic also anticipates continuing to present new and additional data at leading industry conferences going
forward.
QUARTER AND YEAR ENDED DECEMBER 31, 2014 IN SUMMARY
Throughout 2014, the Corporation successfully continued its transition towards becoming a vertically integrated
biopharmaceutical company. The majority of efforts and corporate resources were dedicated to the advancement of clinical
assets and development programs. This has resulted in the creation of a deep product pipeline that has favorably positioned
the Corporation to maximize its future commercial success potential in the coming years.
As part of this transition, ProMetic continued the implementation of changes to its commercialization strategy whereby
the Corporation decided to further develop more of its assets to an advanced stage prior to partnering. As a result, the
Corporation experienced, as anticipated, a temporary reduction of service and licensing revenues during the first three
quarters of 2014. This has however allowed ProMetic to retain a greater portion of the future returns expected from the high-
value products and lucrative markets currently being pursued, thereby serving to ultimately increase shareholder value.
The Corporation realized some licensing revenues in the last quarter of 2014 with the completion of the GENERIUM
Pharmaceuticals (“GENERIUM”) licensing agreement for several plasma-derived biopharmaceuticals to be manufactured and
commercialized in Russia and Commonwealth of Independent States (“CIS”) as well as using ProMetic’s proprietary PPPSTM
technology for the manufacture of the plasma-derived biopharmaceuticals in a up to 600, 000 litres per year facility to be
built and operated by GENERIUM, in Russia. Furthermore, as ProMetic continues to advance its various programs, licensing
deals and associated revenues are expected to materialize following the finalization of additional commercial partnership
agreements.
The licensing and service revenues shortfalls experienced during the first three quarters of the year and increased costs
related to building a deeper product pipeline had to be compensated. To remedy this situation, the Corporation successfully
completed two financings. Firstly, ProMetic secured a $20 million follow-on investment from Thomvest Seed Capital Inc.,
their second significant investment in the Corporation and secondly, ProMetic secured a bought deal financing totalling
$28.8 million.
Total revenues reached $23.0 million for 2014 and in spite of the increase in spending related to the advancement of the
various development and clinical programs as well as some non-cash items such as the variation in fair value of the warrant
liability associated to the Thomvest Seed Capital Inc. (“Thomvest”) financing transaction, the Corporation generated a net
profit of $2.6 million for the year, mainly due to the recognition of a purchase gain on business combination of $14.8 million
in regards to the additional 40.83% of equity acquired in NantPro and the recognition of a gain on revaluation of the equity
investment of $34.4 million representing the difference between the fair value and the carrying amount of ProMetic’s equity
interest in NantPro just before the transaction.
2014 has proven to be a pivotal year for both the plasma-derived and small-molecule therapeutic development programs. Not
only did the Corporation confirmed the pursuit of the development of its plasminogen, IVIG and alpha-1 antitrypsin programs,
it also increased its own ownership in NantPro and obtained control of the American IVIG program. This in turn will secure a
greater portion of the future expected profits associated with sales of IVIG in the US market, its largest market worldwide. With
additional plasma-derived therapeutics expected to join clinical trial stages in 2015, ProMetic’s product pipeline is poised for
significant progress.
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candidate. In June 2014, the Corporation reported having successfully completed its PBI-4050 Phase I clinical trial in 40 healthy
volunteers where it was found to be safe and well tolerated without any serious adverse events being reported. Following this
safety and tolerability milestone, the decision was publicly disclosed to also pursue in addition to diabetic kidney diseases,
other follow-on indications such as IPF and the metabolic syndrome and its resulting Type 2 diabetes.
With a rapidly growing number of drug candidates progressing through advanced stages of clinical development, ProMetic is
now well positioned to become a leader in the field of rare diseases and orphan conditions.
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2014 SIGNIFICANT EVENTS
The Corporation announced in January that it had achieved a major corporate milestone in December 2013 by successfully
completing the first commercial-scale production run at its ProMetic BioProduction Inc. plasma purification facility located in
Laval, Quebec. This production run was completed on schedule and generated better than expected results.
The Corporation appointed Dr. John Moran as its new Chief Medical Officer (“CMO”), effective as of March 1, 2014.
The Corporation entered into a new agreement with a leading vaccines company, for the development of an affinity
adsorbent and associated purification process for the production of a novel vaccine product.
The Corporation received approximately $3.2 million from InvHealth Holding Inc. (“Invhealth”), a corporation
wholly-owned and controlled by Mr. Pierre Laurin, President and Chief Executive Officer of ProMetic, as repayment of the
amended and restated loan entered into in March, 2010 with ProMetic.
The Corporation reported a successful Pre-Investigational New Drug meeting with the US Food and Drug Administration
(“FDA”) for the plasma-derived biopharmaceutical, IVIG.
The Corporation presented new pre-clinical data at the 2014 International Society of Nephrology conference held in
Bergamo, Italy where PBI-4050 brought blood glucose levels back into the normal range in animal models designed to
reproduce long term complications related to human Type 2 diabetes.
The Corporation presented new pre-clinical data at the 2014 annual meeting of the European Association for the Study of
the Liver held in London, UK. The new data supports the claim that PBI-4050’s anti-fibrotic activity could also address various
liver conditions such as non-alcoholic steatohepatitis (“NASH”), a condition affecting 2% to 5% of Americans, as well as liver
cancer.
The Corporation announced an increase in its ownership in NantPro following the amendment of its related corporate and
commercial agreements with NantPharma, LLC. The amended agreements provide ProMetic with the effective control of
NantPro and a greater portion of the future value and profits associated with the development and sales of IVIG in the US
market.
The Corporation received a $5.6 million purchase order under its ongoing supply agreement with Octapharma, a leading,
Swiss, independent, global plasma fractionation company that specializes in human proteins.
The Corporation successfully completed its PBI-4050 Phase I clinical trial in 40 healthy volunteers where ProMetic’s
PBI-4050 was found to be safe and very well tolerated without any serious adverse events reported in any of the
5 cohorts tested.
The Corporation announced the launch of fibrinogen for commercial sales during the fourth quarter of 2014 after its
successful scale-up at its Laval based plasma purification facility, ProMetic BioProduction Inc.
The Corporation entered into an agreement with one of its existing multinational clients, a global leader in the
biotherapeutics industry. The agreement relates to the development and scale-up of a new affinity resin and associated
manufacturing process in order to enhance the quality and purity of an existing biopharmaceutical product manufactured in
large quantities.
The Corporation secured a follow-on investment from Thomvest Seed Capital Inc. consisting of a $20 million investment in
a loan and warrants. ProMetic is using part of the proceeds for the development and manufacture of both additional and
existing plasma-derived orphan drugs, the advancement of the ongoing PBI-4050 clinical program as well as the repayment
of secured debt provided by certain shareholders.
The Corporation announced the promotion of Mr. Bruce Pritchard to the newly created position of Chief Operating Officer
(“COO”) as well as the nomination of Mr. Stefan Clulow to its Board of Directors, both effective in August, 2014.
The Corporation reported a successful Pre-Investigational New Drug meeting with the US Food and Drug Administration for
its anti-fibrotic, lead drug candidate, PBI-4050. This Pre-IND meeting with the FDA focused on ProMetic’s proposed phase
II clinical program for patients with Chronic Kidney Disease, other rare diseases as well as the manufacturing and pre-clinical
package.
The Corporation announced that its addition to the S&P/TSX SmallCap Index (“Index”) as the result of the annual review of
the Index.
The Corporation announced the pursuit of IPF as one of its PBI-4050 orphan indications. This decision follows the completion
of a favorable external review of the extensive anti-fibrotic preclinical data generated to date by an independent panel of
world experts on IPF and the analysis of the current market landscape.
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The Corporation announced that the US Food and Drug Administration completed its review and cleared the Investigational
New Drug application for ProMetic’s intravenous plasminogen for the treatment of hypoplasminogenemia, or Type 1
plasminogen deficiency.
The Corporation announced that its small molecule lead compound PBI-4050 has been approved to commence clinical trials
in patients suffering from CKD following the Clinical Trial Application clearance by Health Canada.
The Corporation announced during the Annual Meeting of the American Society of Nephrology (ASN) held in Philadelphia,
USA, new preclinical data on PBI-4050. Dr. Raymond Harris and Dr. Ming-Zhi Zhang from the Department of Nephrology,
Vanderbilt University School of Medicine performed studies in a very severe model of accelerated Type 2 diabetes. The
authors concluded that PBI-4050 attenuates the development of diabetic nephropathies in Type 2 diabetes through the
improvement of glycemic control and the inhibition of renal TGFβ-mediated fibrotic pathways, in association with decrease in
macrophage infiltration, oxidative stress and increase in autophagy.
The Corporation entered into an agreement with a syndicate of underwriters led by Canaccord Genuity Corp. under which
the Underwriters have agreed to buy, on a bought deal basis, 15.2 million common shares including the overallotment in the
capital of the Corporation at a price of $1.90 per share for gross proceeds of $28.8 million.
The Corporation announced the pursuit of a clinical program designed to evaluate the benefit of PBI-4050 in patients
affected by the metabolic syndrome and resulting Type 2 diabetes. The metabolic syndrome is a major risk factor for
cardiovascular disease and for Type 2 diabetes, and consists of the constellation of central (truncal) obesity, high blood
triglycerides, low HDL (“good”) cholesterol, elevated blood pressure, and elevated blood glucose.
The Corporation entered into definitive agreements with GENERIUM Pharmaceuticals for several plasma-derived
biopharmaceuticals to be manufactured and commercialized in Russia and CIS. The strategic alliance includes the granting of
manufacturing rights by ProMetic to GENERIUM for several plasma-derived biopharmaceuticals using ProMetic’s proprietary
PPPSTM technology for the manufacture of said plasma-derived biopharmaceuticals in a up to 600,000 liters per year facility to
be built and operated by GENERIUM, in Russia.
2015 SIGNIFICANT EVENTS
The Corporation announced the approval for its orally active anti-fibrotic lead drug candidate PBI-4050 to commence the
clinical trial in patients suffering from metabolic syndrome and resulting Type 2 diabetes, following the CTA clearance by
Health Canada.
The Corporation announced the approval for its orally active anti-fibrotic lead drug candidate PBI-4050 to commence the
clinical trial in patients suffering from idiopathic pulmonary fibrosis, following the CTA clearance by Health Canada.
The Corporation announced an $11.4 million purchase order for the supply of affinity resin from an existing client, a global
leader in the biotherapeutics industry.
The Corporation announced the grant of an orphan drug designation status by the FDA for its orally active anti-fibrotic lead
drug candidate, PBI-4050, for the treatment of IPF.
The Corporation reported that it has successfully completed its PBI-4050 Phase Ib multi-dose clinical trial in patients with
Chronic Kidney Disease. ProMetic’s orally active lead drug candidate, PBI-4050, was found to be safe and well tolerated
without any serious adverse events reported.
On March 27, 2015, the Corporation and Octapharma who is party to the advance on revenues from a supply agreement
amended the loan agreement further extending the maturity date of the unpaid balance of the advance, if any, to
April 30, 2018.
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On March 31, 2015, the Corporation and Structured Alpha LP, assignee of Thomvest Seed Capital Inc. and the holder of the
long-term debt, amended the terms of the two Original Issue Discount (“OID”) loans by extending the maturity dates of the
loans to July 31, 2022 without changing their face values, modifying certain terms and conditions, including affirmative and
negative covenants, and a right of repayment of the OID loans commencing on September 13, 2018. In consideration of the
above modifications, ProMetic has issued 7 million warrants to purchase common shares of the Corporation at an exercise
price of $3.00 per common share. The warrants expire on July 31, 2022. The Corporation also granted a pre-emptive right
to the debt holder to participate into in any future public offering or private placement of ProMetic’s common shares or
securities convertible or exchangeable into common shares.
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FINANCIAL PERFORMANCE
Amounts in tables are expressed in thousands of Canadian dollars, except per share amounts.
BUSINESS COMBINATION
On May 8, 2014 (“date of acquisition”), the Corporation and NantPharma, LLC (“NantPharma”) amended the terms of
their partnership in NantPro BioSciences, LLC. Prior to the transaction, the Corporation’s equity position in NantPro was
24.38% while NantPharma’s equity position in NantPro was 75.62%. In accordance with the terms of the transaction, $6,607
(US$6,085,998) of accounts receivable due from NantPro to ProMetic, which normally would have been paid by NantPro
with the NantPharma funding, was invested by ProMetic in order to obtain an additional 40.83% of equity units in NantPro.
As a result of this investment, ProMetic owned 65.21% and NantPharma owned 34.79% of the equity units respectively on
May 8, 2014.
From the date of acquisition onwards, NantPro is entirely funded by ProMetic and as a result, ProMetic continued to acquire
equity units in NantPro until it reached the maximum of 73% allowed in accordance with the agreement while NantPharma’s
ownership has been reduced to 27%.
This issuance of units combined with the amendments to the terms of the partnership, including providing ProMetic with
three out of five board seats, resulted in ProMetic obtaining control over NantPro, and NantPro being considered a subsidiary
from the date of acquisition. ProMetic’s former investment in an associate is deemed to have been disposed of for accounting
purposes. From May 8, 2014 onwards, the Corporation is consolidating the assets and liabilities of NantPro and its results of
operations for the period subsequent to the change in control.
This transaction qualifies as a business combination and was accounted for using the acquisition method of accounting.
To account for the transaction, the Corporation performed a business valuation of NantPro at the date of acquisition and a
purchase price allocation. The business valuation essentially values NantPro’s right to develop and sell IVIG in the US market.
The Corporation engaged an independent business valuator to assist with this work. The valuator was paid a fee which is not
contingent on the valuation provided.
These fair value assessments require management to make significant estimates and assumptions as well as applying
judgment in selecting the appropriate valuation techniques. Fair value estimates involve significant estimates and assumptions
regarding amongst others the risk regarding the protein not being approved for sale, cash flow projections, production
capacity, manufacturing costs, clinical trial costs, the IVIG output per litre of plasma, expected market penetration, economic
risk and weighted cost of capital rates.
This transaction was initially accounted for during the second quarter of 2014 based on a preliminary business valuation of
$99.5 million. As a result of this initial valuation, the Corporation recorded a gain on revaluation of $24.3 million and a gain on
a bargain purchase price of $8.1 million. During the fourth quarter, the business valuation of NantPro as well as the purchase
price allocation were finalized. The final value of NantPro as of the date of the transaction is evaluated to be $141 million. The
accounting impact of the transaction was adjusted during the fourth quarter to reflect the final valuation outcome.
The aggregate impact of the business combination on the consolidated statement of financial position and consolidated
statement of operations for the year ended December 31, 2014 was as follows:
A gain on revaluation of the 24.38% equity investment in the amount of $34.4 million, representing the difference
between the fair value and the carrying amount ($Nil) of ProMetic’s equity interest in NantPro just before the acquisition
was recognized;
From May 8, 2014 onwards, the Corporation is consolidating the assets and liabilities of NantPro and its results of
operations for the period subsequent to the change in control. This means that the operating expenses of NantPro
are included in the results and that the intangible assets recognized in the business combination are presented in the
consolidated statement of financial position;
NantPharma’s share in the net assets and results of NantPro are included in the non-controlling interests captions on the
consolidated statement of operations and the consolidated statement of financial position;
Service revenues and research and development rechargeable expenses that other subsidiaries of ProMetic invoice
to NantPro subsequent to May 8, 2014 are eliminated upon consolidation. As a result, revenues will no longer include
any new services billed to NantPro and the cost relating to providing those services will remain in research and
development expenses non-rechargeable;
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The Corporation recognised all of the identifiable net assets of NantPro at their acquisition date fair value which mainly
consisted of intangible assets of $141 million and a deferred income tax liabilities of $36.2 million. Also recorded was
the non controlling interest in NantPro of $49.1 million and a gain on a bargain purchase price of $14.8 million.
Further details on this transaction are provided in note 6 of the annual consolidated financial statements for the year ended
December 31, 2014.
The business valuation results confirm, in-line with the original announcement that the Corporation made a relatively small
investment of $6.6 million to acquire an additional 40.83% of NantPro, a business valued approximately at $141 million at the
time of the transaction took place. By obtaining control of Nantpro, ProMetic reacquired the right to sell IVIG into the US
market. At present the US market for IVIG accounts for around US$4 Billion in sales, approximately half of the global annual
IVIG sales of $8 Billion (source: The Worldwide Plasma Proteins Market 2012 Revised report, Marketing Research Bureau Inc.).
RESULTS OF OPERATIONS
The condensed consolidated statement of operations for the quarter and the year ended December 31, 2014 compared to the
same period in 2013 are presented in the following table.
Revenues
$
10,546)
$
5,078)
$
23,010)
$
20,644)
Quarter ended December 31,
Year ended December 31,
2014)
2013)
2014)
2013)
Expenses
Cost of goods sold
R&D expenses recharged
R&D expenses non-rechargeable
Administration, selling and marketing expenses
Gain on foreign exchange
Gain on recognition of loan receivable
Loss on extinguishment of debt
Finance costs
Fair value variation of warrant liability
Loss in an associate
Gain on revaluation of equity investment
Purchase gain on business combination
Gain on settlement of litigation
Net profit (loss) before income taxes
2,356)
326)
11,477)
5,022)
(112)
-)
-)
935)
2,933)
-)
(10,118)
(6,747)
(465)
4,939)
2,004)
(341)
6,710)
3,762)
(212)
(3,015)
-)
678)
2,863)
-)
-)
-)
-)
(7,371)
7,015)
3,053)
32,147)
12,905)
(102)
-)
-)
2,760)
15,365)
-)
(34,376)
(14,812)
(465)
6,671)
5,050)
13,728)
8,332)
(638)
(3,015)
423)
1,806)
5,485)
69)
-)
-)
-)
(480)
(17,267)
Income taxes expenses (recovery)
(3,556)
131)
(3,056)
131)
Net profit (loss)
$
8,495)
$
(7,502)
$
2,576)
$
(17,398)
Net profit (loss) attributable to:
Owners of the parent
Non-controlling interests
Earnings (loss) per share
Attributable to the owners of the parent
Basic
Diluted
9,222)
(727)
(7,010)
(492)
5,939)
(3,363)
(16,489)
(909)
$
8,495)
$
(7,502)
$
2,576)
$
(17,398)
$
$
0.02)
0.02)
$
$
(0.01)
(0.01)
$
$
0.01)
0.01)
$
$
(0.03)
(0.03)
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Revenues
Total revenues for the year ended December 31, 2014 were $23.0 million compared to $20.6 million during the comparative
period of 2013, representing an increase of $2.4 million. Total revenues for the quarter ended December 31, 2014 were
$10.5 million compared to $5.1 million in 2013 representing an increase of $5.5 million.
Revenues for the years ended December 31, 2014 and 2013 were derived from product sales, development service revenues
as well as milestone and licensing revenues. Revenues from each source may vary significantly from period to period. The
following table provides the breakdown of total revenues by source for the quarter and the year ended December 31, 2014
compared to the corresponding periods in 2013.
Revenues from the sale of goods
Revenues from the rendering of services
Milestone and Licensing revenues
Quarter ended December 31,
Year ended December 31,
$
2014
3,485
205
6,856
$
2013
2,761
1,277
1,040
$
2014
10,815
4,788
7,407
$
2013
9,531
8,538
2,575
$
10,546
$
5,078
$
23,010
$
20,644
Revenues from the sale of goods were $10.8 million for the year ended December 31, 2014 compared to $9.5 million during
the corresponding period of 2013, representing an increase of $1.3 million. The increase is principally attributable to exchange
rate movements, with similar quantities of product being sold in local currency year-over-year. Revenues from the sale of goods
were stronger during the fourth quarter of 2014 compared to the previous quarters. Sales were $3.5 million during the fourth
quarter of 2014 compared to $2.8 million for the corresponding period in 2013, representing an increase of $0.7 million. The
increase is mainly due to an increase in volume of product being sold compared to the previous period.
Service revenues were $4.8 million during the year ended December 31, 2014 compared to $8.5 million during the
corresponding period of 2013, representing a decrease of $3.8 million. Service revenues were $0.2 million for the fourth
quarter of 2014 compared to $1.3 million during the corresponding period of 2013, representing a decrease of $1.1 million.
Service revenues during 2013 and the beginning of 2014 mainly were derived from the services rendered to NantPro when it
was treated as an associate. The decrease in revenues for both of the 2014 periods over the same periods in 2013 are mainly
due to the fact that services revenues earned by PBT on providing services to NantPro since May 8, 2014 are no longer being
reflected in consolidated revenues. The Corporation is expecting revenues generated by rendering services to increase in
the upcoming quarters compared to the two last quarters of 2014 as a result of the services that will be provided under the
Generium agreement.
Milestone and licensing revenues were $7.4 million during the year ended December 31, 2014 compared to $2.6 million during
the corresponding period of 2013, representing an increase of $4.8 million. The milestone and licensing revenues increased
significantly during the fourth quarter of 2014 as a result of signing the Generium agreement in December which triggered
revenues of $6.9 million (US$6,000,000). The remainder of the milestone and licensing revenues in both periods result from
attaining milestones in regards to the Hematech licensing agreement.
The above revenues pertain to the Protein Technology segment. There were no significant revenues from the Therapeutics
segment.
Cost of goods sold
Cost of goods sold were $7.0 million during the year ended December 31, 2014 compared to 6.7 million during the
corresponding period in 2013, representing an increase of $0.3 million. The increase is due to the exchange rate movements
which was partially offset by a reduction in the cost of goods sold in local currency. Cost of goods sold were $2.4 million during
the fourth quarter of 2014 compared to $2.0 million for the corresponding period in 2013, representing an increase of
$0.4 million due mainly to the increase in sales volume compared to the previous period.
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Research and development expenses recharged
Research and development (“R&D”) expenses recharged were $3.1 million for the year ended December 31, 2014 compared
to $5.1 million for the corresponding period in 2013, representing a decrease of $2.0 million. Similarly to the service revenues,
the expenses under R&D recharged no longer includes the expenses incurred in performing services to NantPro since it is now
being consolidated and the costs are fully borne by the Corporation. This is the main reason for the decrease compared to the
2013 periods. Consequently, the expenses incurred in developing the IVIG protein for NantPro are now grouped in the R&D
non rechargeable line in the consolidated financial statements.
Research and development expenses – non-rechargeable
Non-rechargeable research and development expenses were $32.1 million for the year ended December 31, 2014 compared
to $13.7 million for the corresponding period in 2013, representing an increase of $18.4 million. Non rechargeable
research and development expenses were $11.5 million during the fourth quarter of 2014 compared to $6.7 million for the
corresponding period in 2013, representing an increase of $4.8 million. The increase is due in part to the inclusion of all the
IVIG development and related IND preparation expenses under this caption since the NantPro acquisition and the increase
in the IVIG development expense year over year in view of the preparation of the IND which was filed in December 2014. The
increase is also due to the overall increase in the other development activities the Corporation is pursuing compared to 2013.
This includes the operating costs relating to the Laval plasma purification facility in 2014 while at this point in 2013, ProMetic
was in amidst the construction of the facility. Protein Technology R&D costs have also increased resulting from the higher level
of research activities in PBT as a result of the Corporation’s work towards the filing, in September 2014, of the IND filing for
plasminogen.
R&D expenses in the Therapeutics segment also increased in 2014 compared to 2013, namely in regards to the PBI-4050
clinical program currently underway, as the Corporation worked on preparing several CTA and INDs, some of which were filed
during 2014 and others planned for 2015.
On a year-to-date basis, the total research and development expenses were $35.2 million compared to $18.8 million for the
corresponding period in 2013, representing an increase of $16.4 million. The overall increase is mainly due to an increase in the
headcount, the consulting fees, external analysis and the cost of plasma purification activities.
Administration, selling and marketing expenses
Administration, selling and marketing expenses were $12.9 million during the year ended December 31, 2014 compared to
$8.3 million for the corresponding period in 2013, representing an increase of $4.6 million. Administrative, selling and
marketing expenses were $5.0 million during the fourth quarter of 2014 compared to $3.8 million for the corresponding period
in 2013, representing an increase of $1.3 million. The increase is mainly attributable to the increase in compensation expense
resulting from an increase in headcount over the one year period, as well as an increase in share-based payment expenses and
professional fees.
Share-based payments
Share-based payments expense represents the expense recorded as a result of stock options and restricted stock units
(“RSU”) issued to employees and board members. This expense has been recorded under cost of goods sold, research and
development and administration, selling and marketing expenses as indicated in the following table:
Cost of goods sold
R & D expenses recharged
R & D expenses non-rechargeable
Administration, selling and marketing expenses
Quarter ended December 31,
Year ended December 31,
$
2014
67
59
547
1,864
$
2013
64
107
563
2,212
$
2014
123
121
1,216
3,676
$
2013
77
162
634
2,538
$
2,537
$
2,946
$
5,136
$
3,411
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Share-based payments were $5.1 million during the year ended December 31, 2014 compared to $3.4 million during the
corresponding period of 2013, representing an increase of $1.7 million. Share-based payments were $2.5 million during the
fourth quarter of 2014 compared to $2.9 million for the corresponding quarter in 2013, representing a decrease of $0.4 million.
The annual increase is due mainly to an increase of $1.0 million in the RSU expense in 2014 compared that of December 31, 2013
resulting mainly from the increase in the grant date fair value of the RSUs granted in 2014 compared to those granted in 2013.
The option expense makes up the remainder of the increase. This increase was due to the increase in the average grant date
fair value of the options over the last two years and was partially offset by the reduction in awards granted in 2014 compared
to 2013.
The RSU expense increased during the fourth quarter compared to the third quarter of 2014 as management’s assessment of
the probability of the objectives, underlying the RSU grant, being met improved. In comparison to the fourth quarter of 2013,
the RSU expense decreased principally due to the fact that the 2014-2016 RSU grants were made in April 2014 and the 2014
expense has been recognized over nine months whereas the 2013-2015 grants were made in December 2013 and were vested
in the same month which resulted in the entire year’s RSU expense being recognized in the fourth quarter of 2013.
Fair value variation of warrant liability
In September 2013, the Corporation completed a financing transaction with Thomvest Seed Capital Inc. in which the
Corporation issued long-term debt, warrants classified in equity and warrants that met the definition of a derivative liability
under IFRS. The details of this transaction and the accounting for it are provided in note 15 of the December 31, 2014 annual
consolidated financial statements. The warrants that are classified in the statement of financial position as a warrant liability,
namely the “Second Warrants”, are measured at their fair value at each reporting date. There is no future cash-disbursement
associated with the recorded liability on statement of financial position, however, if the warrants were to be exercised, the
holder would have to pay the exercise price to the Corporation, which would amount to $15.7 million. The fair value of the
warrant liability increased by $15.4 million during the year ended December 31, 2014 mainly due to an increase in the market
price of the Corporation’s shares from December 31, 2013 whereas the fair value of the warrant liability increased by $2.9
million during the fourth quarter of 2014 compared to the value at September 30, 2014 for the same reason. This resulted in a
loss of $15.4 million and a loss of $2.9 million in the statement of operations for the respective periods.
Gain on revaluation of equity investment
As a result of the NantPro business combination described previously, the Corporation recognized a gain on revaluation of
the equity investment of $34.4 million during the year ended December 31, 2014 representing the difference between the
fair value and the carrying amount ($Nil) of ProMetic’s equity interest in NantPro just before the acquisition. The gain was
recognized initially at $24.3 million during the second quarter of 2014 based on a preliminary business valuation and was
adjusted by $10.1 million in the fourth quarter in order to reflect the outcome of the final business valuation.
Purchase gain on business combination
The Corporation’s share in the net assets recognized in the consolidated statement of financial position as a result of the
acquisition exceeded the total consideration paid by the Corporation for its share in NantPro, giving rise to a purchase gain
of $14.8 million during the year ended December 31, 2014. The consideration paid for the Corporation’s share in NantPro
at the acquisition date of $41.0 million consists of the fair value of the Corporation’s 24.38% interest in NantPro before the
acquisition and the settlement of receivables for additional equity units. The Corporation’s share in the net assets represents
the intangibles recognized net of the non-controlling interest’s share in those identifiable assets and deferred tax liability.
The purchase gain was recognized initially at $8.1 million during the second quarter of 2014 based on a preliminary business
valuation and was adjusted by $6.7 million in the fourth quarter to reflect the outcome of the final business valuation.
Income taxes
The Corporation recorded an income tax recovery of $3.1 million during the year ended December 31, 2014 compared to an
income tax expense of $0.1 million for the corresponding period of 2013. The current year’s recovery is due to the recognition
of deferred tax assets pertaining to the unused tax losses attributable to ProMetic as a partner in NantPro. This recovery was
partially offset by the current tax expense.
Net profit (loss)
Net profit was $2.6 million during the year ended December 31, 2014 compared to a net loss of $17.4 million for the
corresponding period of 2013. The reasons for the variation are numerous as explained above but the most significant reasons
are the increase in profit due to the gains recognized as a result of the Nantpro business combination which were partially offset
by the loss recognized on the fair value variation of the warrant liability and the increase in research and development expenses.
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SEGMENTED INFORMATION ANALYSIS
For the years ended December 31, 2014 and 2013
The net profit (loss) before income taxes and the adjusted EBITDA for each segment and for the total Corporation for the
years ended December 31, 2014 and 2013 are presented in the following tables.
Year ended December 31, 2014
Revenues
Costs of goods sold
R&D expenses recharged
R&D expenses non-rechargeable
Administration and marketing expenses
Gain on settlement of litigation
Adjusted EBITDA
Depreciation and amortization
Share-based payments
Gain (loss) on foreign exchange
Finance costs
Fair value variation of warrant liability
Gain on revaluation of equity investment
Purchase gain on business combination
Protein)
Technologies)
Therapeutics)
Corporate)
$
$
$
$
22,997)
(6,754)
(2,772)
(23,771)
(5,048)
465)
(14,883)
(1,385)
(1,853)
(2,518)
(175)
-)
34,376)
14,812)
$
$
13)
-
-)
(5,828)
(1,880)
-)
(7,695)
(243)
(254)
3)
(15)
-)
-)
-)
$
$
-)
-)
-)
-)
(2,237)
-)
(2,237)
(66)
(3,029)
2,617
(2,570)
(15,365)
-)
-)
Total)
23,010)
(6,754)
(2,772)
(29,599)
(9,165)
465)
(24,815)
(1,694)
(5,136)
102)
(2,760)
(15,365)
34,376)
14,812)
Net profit (loss) before income taxes
$
28,374)
$
(8,204)
$
(20,650)
$
(480)
Year ended December 31, 2013
Revenues
Costs of goods sold
R&D expenses recharged
R&D expenses non-rechargeable
Administration and marketing expenses
Adjusted EBITDA
Depreciation and amortization
Share-based payments
Gain (loss) on foreign exchange
Gain on recognition of loan receivable
Loss on extinguishment of debt
Finance costs
Fair value variation of warrant liability
Loss in an associate
Protein)
Technologies)
Therapeutics)
Corporate)
$
$
$
$
20,630)
(6,441)
(4,888)
(8,279)
(3,072)
(2,050)
(642)
(1,069)
-)
-)
-)
(233)
-)
-)
$
$
14)
-)
-)
(4,122)
(2,289)
(6,397)
(205)
(421)
-)
-)
-)
-)
-)
-)
$
$
-)
-)
-)
-)
(410)
(410)
(22)
(1,921)
638)
3,015)
(423)
(1,573)
(5,485)
(69)
Total)
20,644)
(6,441)
(4,888)
(12,401)
(5,771)
(8,857)
(869)
(3,411)
638)
3,015)
(423)
(1,806)
(5,485)
(69)
Net loss before income taxes
$
(3,994)
$
(7,023)
$
(6,250)
$
(17,267)
Adjusted EBITDA is a non-GAAP measure that is not defined or standardized under IFRS and it is unlikely to be comparable
to similar measures presented by other companies. The Corporation believes that Adjusted EBITDA provides an additional
insight in regards to the cash used in operating activities on an on-going basis. It also reflects how management analyzes the
Corporation’s performance and compares that performance against other companies. In addition, we believe that Adjusted
EBITDA is a useful measure as some investors and analysts use EBITDA and similar measures to compare us against other
companies.
Adjusted EBITDA for the Protein technologies segment decreased by $12.8 million for the year ended December 31, 2014
compared to the corresponding period in 2013. The decrease is mainly due to the significant increase in non rechargeable
research and development expenditures over the year resulting from the heightened level of activities in 2014 as the
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Corporation prepared and filed the plasminogen and IVIG INDs, started preparation of the plasminogen clinical trials and due
to a full year of operations for the plasma purification facility in Laval which only commenced operations in December 2013.
This increase in expenditures was partially offset by an overall increase in revenues of $2.4 million resulting from an increase in
product sales and licensing and milestone revenues which more than offset the decline in services revenues compared to 2013
due to the fact that revenues from NantPro are no longer included in the consolidated revenues. Administration, selling and
marketing expenses increased in order to support the R&D activities but also as the segment increases its marketing efforts in
view of the eventual commercialisation of plasminogen and IVIG and continues its business development activities.
Net profit for the Protein technologies segment was $28.4 million for the year ended December 31, 2014 compared to a loss
of $4.0 million in the corresponding period of 2013. The increase of $32.4 million reflects the gains recognized as a result
of the Nantpro business combination which include the gain on revaluation of equity investment and the purchase gain on
business combination. Depreciation and amortization expenses increased compared to 2013 as the Corporation continues to
invest in its capital and intangible assets and as depreciation on the plasma purification facility was taken for a full year in 2014
compared to an insignificant amount recorded in 2013. Share-based payment expenses also increased in 2014 compared to
the previous year, negatively impacting the net profit.
Adjusted EBITDA for the Therapeutics segment decreased by $1.3 million during the year ended December 31, 2014
compared to the corresponding period of 2013 mainly due to the higher level of research activities, namely in regards to the
PBI-4050 clinical program currently underway, as the Corporation prepared and filed the PBI-4050 CTA for Chronic Kidney
Disease in the later part of the year, started preparations for the clinical trials after receiving clearance from Health Canada and
continued development in view of identifying other potential indications. The net loss for the Therapeutics segment increased
by $1.2 million compared to the corresponding period of 2013 for the same reasons has the decrease in Adjusted EBITDA.
The Adjusted EBITDA for the corporate activities decreased by $1.8 million during the year ended December 31, 2014
compared to the corresponding period in 2013 mainly due to an increase in compensation expense as the headcount
supporting Corporate activities increased over the one year period as well as professional fees. The net loss for the Corporate
activities increased by $14.4 million compared to the corresponding period in 2013 in part for the above reasons but in
addition due to the significant loss recorded on the fair value variation of the warrant liability which was $9.9 million higher
than the previous year, the higher share-based payment expense and the increase in finance costs reflecting the issuance of
long-term debt in 2013 and 2014. Affecting the comparison is also the fact that in 2013, the Corporation had recognized a
$3.0 million gain on recognition of loan receivable which was not repeated in 2014.
Total Adjusted EBITDA for the Corporation decreased by $16.0 million for the year ended December 31, 2014 compared to
the corresponding period in 2013.
For the quarters ended December 31, 2014 and December 31, 2013
The net loss before income taxes and the adjusted EBITDA for each segment and for the total Corporation for the quarter
ended December 31, 2014 and 2013 are presented in the following tables.
Quarter ended December 31, 2014
Revenues
Costs of goods sold
R&D expenses recharged
R&D expenses non-rechargeable
Administration and marketing expenses
Gain on settlement of litigation
Adjusted EBITDA
Depreciation and amortization
Share-based payments
Gain (loss) on foreign exchange
Finance costs
Fair value variation of warrant liability
Gain on revaluation of equity investment
Purchase gain on business combination
Protein)
Technologies)
Therapeutics)
Corporate)
$
$
$
$
10,544)
(2,302)
(226)
(8,108)
(1,532)
465)
(1,159)
(414)
(919)
(2,170)
(44)
-)
10,118)
6,747)
$
$
2)
-)
-)
(2,368)
(626)
-)
(2,992)
(68)
(108)
(1)
3)
-)
-)
-)
$
$
-)
-)
-)
-)
(976)
-)
(976)
(24)
(1,510)
2,283)
(894)
(2,933)
-)
-)
Total)
10,546)
(2,302)
(226)
(10,476)
(3,134)
465)
(5,127)
(506)
(2,537)
112)
(935)
(2,933)
10,118)
6,747)
Net profit (loss) before income taxes
$
12,159)
$
(3,166)
$
(4,054)
$
4,939)
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Quarter ended December 31, 2013
Revenues
Costs of goods sold
R&D expenses recharged
R&D expenses non-rechargeable
Administration and marketing expenses
Adjusted EBITDA
Depreciation and amortization
Share-based payments
Gain (loss) on foreign exchange
Gain on recognition of loan receivable
Finance costs
Fair value variation of warrant liability
Protein)
Technologies)
Therapeutics)
Corporate)
$
$
$
$
5,074)
(1,900)
447)
(3,997)
(912)
(1,288)
(196)
(936)
-)
-)
(40)
-)
$
$
4)
-)
-)
(1,941)
(1,060)
(2,997)
(54)
(400)
-)
-)
-)
-)
$
$
-)
-)
-)
-)
434)
434)
(10)
(1,610)
212)
3,015)
(639)
(2,863)
Net loss before income taxes
$
(2,460)
$
(3,451)
$
(1,460)
$
Total)
5,078)
(1,900)
447)
(5,938)
(1,538)
(3,851)
(260)
(2,946)
212)
3,015)
(678)
(2,863)
(7,371)
Adjusted EBITDA for the Protein technologies remained essentially at the same level for the quarter ended December 31,
2014 compared to the corresponding period in 2013. This was due to the increase in research and development expenses
which was offset by an increase in revenues, notably the milestone and licensing revenues generated from the GENERIUM
agreement. During the quarter ended December 31, 2014, the segment recorded a net profit of $12.2 million compared to a
net loss of $2.5 million in the corresponding period of 2013. The profit reflects the adjustments made in the fourth quarter of
2014 to the gains recognized as a result of the Nantpro business combination which include the gain on revaluation of equity
investment and the purchase gain on business combination. The gains were partially offset by foreign exchange losses.
Adjusted EBITDA and the net loss for the Therapeutics segment for the quarter ended December 31, 2014 remained at the
essentially the same levels as the corresponding period in 2013 as the increase in research and development expenditures
were offset by a similar decrease in administration expenses.
Adjusted EBITDA for the corporate activities decreased by $1.4 million during the quarter ended December 31, 2014
compared to the corresponding period in 2013 due to the increase in headcount and due to the fact that the corporate
allocation to the segments was adjusted during the fourth quarter of 2013, resulting in a higher transfer of costs to the
segments and a credit in Corporate. The net loss for the Corporate activities increased by $2.6 million during the quarter
ended December 31, 2014 compared to the corresponding period in 2013 due to the increase in administration expenses
which offset by a foreign exchange gain. Also affecting the comparison is also the fact that during the fourth quarter of
2013, the Corporation had recognized a $3.0 million gain on recognition of loan receivable which was not repeated in the
corresponding period of 2014.
Total adjusted EBITDA for the Corporation decreased by $1.3 million for the quarter ended December 31, 2014 compared to
the corresponding period in 2013.
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FINANCIAL CONDITION
The condensed consolidated statements of financial position at December 31, 2014 and December 31, 2013 are presented in
the following table.
Total current assets
Other long-term assets
Capital assets
Intangible assets
Total assets
Total cash disbursing current liabilities
Non-cash disbursing current liabilities
Deferred revenues
Warrant liability
Deferred income tax liability
Long-term liabilities
Total liabilities
Share capital
Contributed Surplus
Warrants and future investment rights
Accumulated other comprehensive income
Deficit
Equity attributable to owners of the parent
Non-controlling interests
Total equity
Total liabilities and equity
$
$
$
$
$
2014)
43,320)
176)
13,784)
146,163)
203,443)
12,293)
1,041)
24,676)
37,198)
23,804)
99,012)
294,870)
10,923)
19,803)
226)
(255,856)
69,966)
34,465)
104,431)
$
$
$
$
$
2013)
35,410)
168)
9,631)
4,663)
49,872)
14,498)
984)
9,311)
-)
6,441)
31,234)
263,320)
6,319)
15,429)
122)
(264,858)
20,332)
(1,694)
18,638)
$
203,443)
$
49,872)
Current assets
Current assets increased by $7.9 million at December 31, 2014 compared to December 31, 2013. The increase is mainly due to
an increase in cash of $9.7 million which was partially offset by a decrease in accounts receivable of $2.3 million. The change
in cash is explained below in the cash flow section while the decrease in receivables is mainly due to the receipt of the InvHealth
loan included in the December 31, 2013 balance, and due to the absence of receivables from NantPro in the December 31, 2014
amounts as a result of the consolidation of NantPro. These reductions were partially offset by the increase in receivable resulting
from higher fourth quarter revenues in 2014 compared to 2013, particularly due to the license revenues generated from the
GENERIUM agreement.
Capital assets
Capital assets increased by $4.2 million during the year ended December 31, 2014 compared to December 31, 2013 mainly
due to the continuation of the investment in PBP’s plasma purification plant, investments made in PBL’s production facility
and to expand PBT’s research and development laboratory. These increases were partially offset by the depreciation expense
during the year ended December 31, 2014.
Intangible assets
Intangible assets increased by $141.5 million during the year ended December 31, 2014 compared to December 31, 2013
mainly due to the recognition of the NantPro intangible assets acquired in the business combination valued at $141 million.
The amortization of these intangibles has not commenced since they are not considered to be available for use until FDA
approval is received to sell the IVIG protein in the US market.
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Total cash disbursing current liabilities
The total cash disbursing current liabilities decreased by $2.2 million during the year ended December 31, 2014 compared to
December 31, 2013 mainly due to the reimbursement of the shareholder debt during the third quarter which was partially offset
by an increase in accounts payable.
Warrant liability
The warrant liability increased by $15.4 million during the year ended December 31, 2014 compared to December 31, 2013 mainly
due to the increase in the market price of the Corporation’s shares over the period. The variation in the fair value of the warrant
liability during the year ended December 31, 2014 was recorded as a loss in the statement of operations.
During the third quarter, the Corporation and the Second warrant holder agreed to modify the terms of the Second Warrants.
The objective of the modifications is to replace the formula that was being used to determine the number of shares that would
be issued upon exercise of the warrants with a fixed number of warrants, since this formula, although it was allowing a potentially
small variation in quantity, was causing the Second warrants to be treated as a derivative liability in the financial statements. As a
result of this accounting treatment and the significant increase in the Corporation’s share price since their issuance, a significant
liability and significant losses have been recognized in the consolidated financial statements. Pursuant to the modification, the
number of shares to be issued upon exercise would be fixed to 20,276,595 for an exercise price of $15,653. The ultimate expiry
date of the Second warrants would remain unchanged at September 10, 2021 and the potential trigger to shorten the expiry
date, the Market Capitalization Event, would be removed.
In accordance to the TSX rules, the modification must be approved by the Shareholders’ of the Corporation before they become
effective. In accordance with the terms of the agreement, these amendments must be approved no later than July 1, 2015
otherwise they will become null. Consequently, the Second warrants will continue to be accounted for as a derivative liability
with the variations of fair value recorded in the statement of operations until the amendments are approved. If and when these
amendments become effective, the Second Warrants would cease to be a derivative liability and would become an equity
instrument. The warrants would be recorded in equity at the fair value of the modified Second Warrants at the effective date.
Deferred income tax liability
The Corporation recognized a deferred tax liability of $37.2 million at December 31, 2014 mainly as a result of the recognition of
the intangibles acquired in the business combination. The deferred tax liability recognized on these intangible assets are based
on ProMetic’s share of the difference between the accounting and tax basis of the intangible assets at the tax rate that will be
applicable when the temporary differences are expected to reverse. This was partially offset by the deferred tax asset recorded in
regards to the income tax recovery of $3.1 million also recorded during the year ended December 31, 2014. Those deferred tax
assets pertain to the unused tax losses attributable to ProMetic as a partner in NantPro.
Long-term liabilities
Long-term liabilities increased by $17.4 million during the year ended December 31, 2014 compared to December 31, 2013
mainly due to the issuance of an Original Issue Discount loan on July 31, 2014 (discussed below) and interest accretion on the
outstanding OID loans during the year.
On July 31, 2014, the Corporation issued an OID loan and warrants for total proceeds of $20.0 million. The total proceeds were
allocated to the debt portion based on its fair value at the issue date and the residual amount was attributed to the warrants that
are classified as equity. Under the terms of the loan, the Corporation will repay the face value of the OID loan, in the amount of
$31.3 million at maturity, on July 31, 2019. The OID loan was recorded at its fair value at the transaction date less the associated
transaction costs for a net amount of $14.7 million. The warrants issued in this financing transaction (the “Third Warrants”), give
the holder the right to acquire one common share at an exercise price of $1.87 paid either in cash or in consideration of the
lender’s cancellation of an equivalent amount of the face value of the OID loan maturing on July 31, 2019. On March 31, 2015, the
OID loans were modified. Further details are provided in the Liquidity and Contractual Obligations section of this MD&A.
Share capital
Share capital increased by $31.6 million during the year ended December 31, 2014 compared to December 31, 2013 mainly due
to the issuance of 15,180,000 common shares following an offering by way of a prospectus for gross proceeds of
$28.8 million. Share capital also increased as certain warrants and options were exercised and shares were issued pursuant to the
restricted share unit plan.
Contributed surplus
Contributed surplus increased by $4.6 million during the year ended December 31, 2014 compared to December 31, 2013 due
to the recognition of share-based payment expense of $5.1 million which was partially offset by the reclassification of the value
recorded in contributed surplus in regards to the equity instruments exercised or released from contributed surplus to share capital.
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Warrants and future investment rights
Warrants and future investment rights increased by $4.4 million during the year ended December 31, 2014 compared to
December 31, 2013 mainly due to the issuance of the Third Warrants as part of the July 31, 2014 financing transaction,
recorded at an amount of $5.2 million. This increase was partially offset due to the reclassification of the value recorded in
regards to warrants exercised into share capital of $0.8 million.
Non-controlling interest (“NCI”)
The non-controlling interests increased significantly during the year ended December 31, 2014 as a result of the
recognition of the NCI in NantPro (please refer to note 6 of the annual consolidated financial statements for the year ended
December 31, 2014 for details of the transaction and how the initial non-controlling interest in NantPro was determined). The
NCI also increased due to the attribution of its share of ProMetic’s funding of NantPro. These increases were partially offset by
the non-controlling interests share in the net losses of the subsidiaries in which they have ownership during the period and the
effect of the decrease in NantPro’s non controlling interest ownership after the acquisition date.
The variation in the NCI between December 31, 2014 and December 31, 2013 is explained below:
NCI balance at December 31, 2013
NCI share in losses
NCI arising from the NantPro business combination
Effect of the change in the NantPro NCI as a result of the decrease
in the NCI’s interest in the partnership since the change in control
and the NCI’s interest in ProMetic’s funding
NCI balance at December 31, 2014
$
(1,694)
(3,363)
49,055)
(9,533)
$
34,465
CASH FLOW ANALYSIS
The condensed consolidated statements of cash flows from the year ended December 31, 2014 and the comparative period in
2013 are presented below.
Cash used in operating activities
Cash from financing activities
Cash flows used in investing activities
Net (decrease) increase in cash
Net effect of currency exchange rate on cash
Cash, beginning of the period
Quarter ended December 31,
Year ended Decembre 31,
$
2014)
(8,522)
27,171)
(2,049)
16,600)
119)
10,383)
$
2013)
(7,437)
21,201)
(4,200)
9,564)
(193)
8,025)
2014)
$ (25,954)
44,348)
(8,749)
9,645)
61)
17,396)
$
2013)
(17,005)
41,055)
(7,618)
16,432)
(241)
1,205)
Cash, end of the period
$
27,102)
$
17,396)
$
27,102)
$
17,396)
Cash flows used in operating activities increased by $8.9 million during the year ended December 31, 2014 compared to the
same period in 2013 due to the reduction in the Adjusted EBITDA for the Corporation in 2014. In 2013 however, the cash flows
used in operating activities were quite higher than the 2013 Adjusted EBITDA due to an unfavorable change in the non-cash
working capital items and this partially offset the impact of the decreased Adjusted EBITDA. Cash flows used in operating
activities during the quarter ended December 31, 2014 also increased in comparison to the corresponding period of 2013.
These increases reflect the higher level of activity across all functions and segments of ProMetic.
Cash flows from financing activities increased by $3.3 million during the year ended December 31, 2014 compared to the
same period in 2013 mainly due to the higher level of long-term debt issued during 2014 which was partially offset by lower
proceeds from share issuances. Cash flows from financing activities increased by $6.0 million during the quarter ended
December 31, 2014 compared to the corresponding period of 2013 mainly due to the higher proceeds from shares issuances.
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Cash flows used in investing activities increased by $1.1 million during the year ended December 31, 2014 compared to the
same period in 2013. Despite the lower capital assets expenditure in 2014, the cash outflows are higher in 2014 due to the
carry forward of payments made at the beginning of the year to suppliers and contractors for work performed and delivery
of equipment in regards to the Laval plasma purification plant during the last quarter of 2013. In addition, the investment
in intangible assets such as patents has increased slightly in 2014 compared to 2013. Cash flow used in investing activities
decreased during the quarter ended December 31, 2014 compared to the corresponding period of 2013 because of the high
investment in the plasma purification plant which occurred at that time.
LIQUIDITY AND CONTRACTUAL OBLIGATIONS
At December 31, 2014, the Corporation’s position in regards to total cash generating current assets, including cash, net of total
cash disbursing current liabilities is a surplus of $30.1 million. The Corporation expects that considering its planned activities
for 2015 and its financial position at December 31, 2014, it will be able to meet its contractual obligation over the next year.
Financial obligations
The timing and expected contractual outflows required to settle the financial obligations of the Corporation recognized in the
consolidated statement of financial position at December 31, 2014 in addition to the operating leases are presented in the
table below:
At December 31, 2014
Trade and other payables
Advance on revenues
from a supply agreement
Long-term debt *
Operating leases
Contractual Cash flows
Carrying
amount
Payable
within 1 year
2 -3 years
4 -5 years
More than
5 years
Total
$
9,102
$
9,102
$
-
$
-
$
-
$
9,102
3,191
23,244
-
3,246
-
2,917
-
-
5,928
-
46,959
5,216
-
-
11,757
3,246
46,959
25,818
$
35,537
$
15,265
$
5,928
$
52,175
$
11,757
$
85,125
* Under the terms of the long-term debt, the holder of Second and Third Warrants may decide to cancel a portion of the face
values of the OID loans as payment on the exercise of these warrants. The maximum repayment due on these loans has been
included in the above table.
Subsequent events
On March 27, 2015, the Corporation and Octapharma who is party to the advance on revenues from a supply agreement
(see note 14 to the consolidated financial statements for the year ended December 31, 2014) amended the loan agreement
further extending the maturity date of the unpaid balance of the advance, if any, to April 30, 2018.
On March 31, 2015, the Corporation and Structured Alpha LP, assignee of Thomvest Seed Capital Inc. and the holder of the
long-term debt, amended the terms of the two Original Issue Discount (“OID”) loans (refer to note 16 to the consolidated
financial statements for the year ended December 31, 2014) by extending the maturity dates of the loans to July 31, 2022
without changing their face values, modifying certain terms and conditions, including affirmative and negative covenants,
and including a right of repayment of the OID loans commencing on September 13, 2018. In consideration of the above
modifications, ProMetic has issued seven million warrants to purchase common shares of the Corporation at an exercise
price of $3.00 per common share. The warrants expire on July 31, 2022. The Corporation also granted a pre-emptive right to
the debt holder to participate in any future public offering or private placement of ProMetic’s common shares or securities
convertible or exchangeable into common shares. The Corporation is currently assessing the accounting treatment for these
modifications.
The modifications to the advance on revenues from a supply agreement and the OID loans have not been reflected in the
above contractual obligation table.
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Off balance sheet commitments (excluding leases)
In April 2006, the Corporation paid the American Red Cross an amount of US$1,000,000 for an exclusive license for access
to and use of intellectual property rights for the Plasma Protein Purification System (“PPPS”). ProMetic will collect revenues
derived from any licensing activities, such as royalties on net sales, lump sum amounts and/or milestone payments. ProMetic
will pay a royalty to the American Red Cross of 12% of all revenues derived from sales of products to third parties. Also, every
year, an annual minimum royalty of US$30,000 is payable.
An officer of the Corporation is entitled to receive royalties based on the sales of certain products made available to ProMetic
before joining the Corporation. These royalties are 0.5% of net sales or 3% of revenues received by the Corporation. This
employee also has the exclusive right to commercialize these products should ProMetic decide to stop developing and/or
commercializing them, subject to mutually acceptable terms and conditions. To date, no royalties have been accrued or paid.
In the normal course of business, the Corporation enters into license agreements for the market launching or
commercialization of products. Under these licenses, including those mentioned above, the Corporation has committed to
pay royalties ranging generally between 0.5% and 15.5% of net sales from products it commercializes.
SELECTED ANNUAL INFORMATION
The following table presents selected audited annual information for the years ended December 31, 2014, 2013 and 2012.
Revenues
Net profit (loss) attributable to owners
of the parent
Net profit (loss) per share attributable to
owners of the parent (basic and diluted)
Total assets
Total non-current financial liabilities
2014)
2013)
2012)
$
23,010)
$
20,644)
$
23,321)
5,939)
(16,489)
0.01)
203,443)
23,244)
$
(0.03)
49,872)
6,217)
$
$
234)
-)
22,991)
3,875)
The mix and the amounts generated from the three main sources of revenues of the Corporation, namely revenues from the sale
of goods, revenues from rendering services and milestone and license revenues has changed significantly over the last three years.
Revenues from the sales of goods declined by $2.0 million in 2013 compared to 2012 whereas they have increased by $1.3 million
during the last year. Service revenues increased from $5.3 million in 2012 to $8.5 million in 2013 to then decrease to $4.8 million in
2014. The changes over the three years reflect the level of revenues earned from NantPro that get reflected in the consolidated
financial statements. Finally, milestone and licensing revenues declined over 2012 to 2013 while the Corporation did not sign any
licensing agreements in 2013 whereas it increased again in 2014, primarily due to the licensing agreement with GENERIUM.
The net loss attributable to the owners of the parent increased significantly in 2013 from 2012 due to several factors including
the increase in share-based payment expense as a result of RSU grants and vesting thereof, the loss recognized on the fair value
variation of the warrant liability and the important increase in non-rechargeable research and development as the Corporation
increased its investment in both the Protein technology segment and the Therapeutic segment. During 2014, the Corporation
reported a net profit attributable to the owners of the parent of $5.9 million. The increase in profit was due principally to the
gains recognized as a result of the Nantpro business combination which include the gain on revaluation of equity investment
and the purchase gain on business combination amounting in aggregate to $49.2 million. These gains were partially offset by the
loss recorded on the fair value variation of the warrant liability in the amount of $15.4 million. Total R&D expenses increased by
$16.4 million in 2014 compared to 2013.
The net loss per share on a basic and diluted basis varied consistently with the net profit or loss.
The total assets increased from year to year as the Corporation’s financial situation has improved reflecting its increased ability to
obtain financing. During the 3 years, the amount of cash held at December 31 of each year has increased. The Corporation has also
continued investing in capital assets, especially in 2013 with the start-up of the plasma purification plant. In 2014, as a result of the
NantPro business combination, the Corporation recorded the intangible assets acquired in the transaction valued at $141 million
which explains the significant increase in total assets over 2013.
Non-current financial liabilities remained at similar levels in 2012 and 2013 whereas they increased by $17.0 million in 2014 mainly
due to the issuance of additional long-term debt during the year.
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SUMMARY OF QUARTERLY RESULTS
The following table presents selected quarterly financial information for the last eight quarters.
Quarter ended
December 31, 2014
September 30, 2014
June 30, 2014
March 31, 2014
December 31, 2013
September 30, 2013
June 30, 2013
March 31, 2013
Net profit (loss) attributable to the owners of the parent
$
Revenues
10,546
2,315
4,411
5,738
5,078
5,960
5,161
4,445
$
Total)
9,222)
(19,279)
23,959)
(7,963)
(7,010)
(5,257)
(2,450)
(1,771)
$
Per share)
Basic)
Per share)
Diluted)
$
0.02)
(0.04)
0.05)
(0.02)
(0.01)
(0.01)
(0.01)
0.00)
0.02)
(0.04)
0.04)
(0.02)
(0.01)
(0.01)
(0.01)
0.00)
Revenues from period to period vary significantly as these are affected by the timing of orders for goods and the shipment of
the orders, the achievement of milestones, the conclusion of licensing arrangements and depend on the timing and the level
of service agreements. The timing of the recognition of these revenues and the timing of the recognized expense will cause
significant variability in the results from quarter to quarter.
In addition to the variability in the results mentioned above, the following elements have had an important impact on the
results in a given quarter. For the quarters ending in September and December 2013, the loss increased as a result of the loss
on the fair value variation of the warrant liability and the increase in investment in non-rechargeable R&D expenses, notably
the investment in the Laval plant and PBI-4050. In the quarter ending on December 31, 2013, the Corporation recorded a
gain as the result of the recognition of a loan receivable which partially offset the increase in share-based payment expenses
recorded in that period.
During the quarter ending March 31, 2014, the Corporation continued to recognize a loss on the fair value of the warrant
liability of $3.8 million. Non-rechargeable R&D expenses decreased slightly compared to the previous quarter but remained
high as the Corporation continued working towards the filing of three INDs in 2014.
In the second quarter of 2014, the results of operations were significantly impacted in several ways by the NantPro business
combination. The key impacts were a $24.3 million gain on revaluation of the interest held in NantPro prior to the business
combination, an $8.1 million purchase gain recorded on the business combination, the consolidation of NantPro which
resulted in an increase to research and development expenses non-rechargeable from May 8, 2014 and onwards and the
discontinuation of sales and profit being recorded on services provided to NantPro from that same date. During this quarter
the Corporation recognized a gain on the fair value variation of the warrant liability of $1.8 million. The quarter ended in a net
profit and as a result, the outstanding dilutive equity instruments were considered in the computation of diluted EPS whereas
previously they were anti-dilutive.
Research and development expenses during the quarter ended September 30, 2014 were high in comparison to previous
quarters due to an increase in activities as the Corporation advances the filings of IND for several products and since the
revenues relating to NantPro are eliminated on consolidation since the acquisition completed in the previous quarter.
Administration, selling and marketing expenses increased as the general level of activities increased and due to higher share-
based payment expenses. Finally the loss was significantly impacted by the loss of $10.4 million recorded on the warrant
liability reflecting the increase in the Corporation’s share price during the quarter.
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During the quarter ended December 31, 2014, the Corporation recorded an adjustment of the gain on revaluation of the
interest held in NantPro prior to the business combination as well as an adjustment on the purchase gain of $10.1 million and
$6.7 million respectively in the fourth quarter to reflect the outcome of the final business valuation. The Corporation’s revenues
were strong during the period, mainly due to the recognition of significant milestone and licensing revenues. Overall R&D and
administration, selling and marketing expenditures increased reflecting the high level of activities with two INDs being filed
during the quarter.
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OUTSTANDING SHARE DATA
The Corporation is authorized to issue an unlimited number of common shares. At March 30, 2015, 554,185,470 common
shares, 11,736,284 options to purchase common shares, 6,500,000 restricted share units and 82,791,890 warrants and rights to
purchase common shares were issued and outstanding. The number of warrants excludes the seven million warrants issued on
March 31, 2015 (see subsequent events disclosure in the liquidity and obligation section).
TRANSACTIONS BETWEEN RELATED PARTIES
Balances and transactions between the Corporation and its subsidiaries, which are related parties of the Corporation, have
been eliminated on consolidation. Details of the other transactions between the Corporation and related parties are disclosed
below.
Following a consulting agreement entered into with a director of the Corporation in 2012, success fees of 5% of the relevant
proceeds received by the Corporation, for a total of $600, were payable to the director. As at December 31, 2014, $Nil
remained unpaid ($250 at December 31, 2013).
During the year ended December 31, 2014, interest revenues in the amount of $19 ($16 for the year ended December 31, 2013)
were recorded on the share purchase loan to an officer and included in the advance to an officer.
At December 31, 2014, an officer of the Corporation owed to ProMetic $80 under an advance, $450 as a share purchase loan
and $34 in interest due on the loan.
SIGNIFICANT JUDGMENTS AND CRITICAL ACCOUNTING ESTIMATES
The preparation of the consolidated financial statements requires the use of judgments, estimates and assumptions that affect
the reported amounts of revenues, expenses, assets and liabilities and the accompanying disclosures. The uncertainty that
is often inherent in estimates and assumptions could result in material adjustments to assets or liabilities affected in future
periods. The significant accounting judgments and critical accounting estimates applied by the Corporation are as follows:
Significant judgments
Revenue recognition – The Corporation does at times enter into revenue agreements which provide, among other payments,
for upfront payments in exchange for licenses and other access to intellectual property. Management applies its judgment to
assess whether these payments were received in exchange for the provision of goods or services which have stand-alone value
to the customer.
Determining the level of influence the Corporation has over an investment in an entity – In determining the level of
influence the Corporation has over an investment in an entity, resulting either in control or significant influence over the
investment, consideration is given to the composition of the entity’s board of directors and the manner in which key operating
and financing decisions are made. A conclusion that the Corporation controls the investment leads to the consolidation of the
assets and liabilities and results of operations of the investment with those of the Corporation, along with the elimination of all
inter-company transactions. A conclusion that the Corporation has significant influence over the investment will result in that
investment being accounted for as an associate.
Functional currency – The functional currency of foreign subsidiaries is reviewed on an ongoing basis to assess if changes
in the underlying transactions, events and conditions have resulted in a change. During the year ended December 31, 2014
and 2013, no changes were deemed necessary. This assessment is also performed for new subsidiaries. When assessing
the functional currency of a foreign subsidiary, management’s judgment is applied in order to determine amongst others
the primary economic environment in which an entity operates, the currency in which funds the activities and the degree
of autonomy of the foreign subsidiary from the reporting entity in its operations and financially. Judgment is also applied
in determining whether the inter-company loans denominated in foreign currencies form part of the parent Corporation’s
net investment in the foreign subsidiary. Considering such loans as part of the net investment in the foreign subsidiary
results in foreign currency translation gains or losses resulting from the translation of these loans being recorded in other
comprehensive loss instead of the statement of operations.
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Determining whether assets acquired constitute a business – In determining whether the acquisition of an additional equity
interest in NantPro BioSciences, LLC fell within the scope of IFRS 3, Business Combination, management evaluated whether
NantPro represented an integrated set of activities and assets capable of being conducted and managed for the purpose
of providing a return in the form of dividends, lower cost or other economic benefits directly to investors or other owners,
members or participants. In making this evaluation, management considered whether NantPro had inputs, processes and
other elements making it a business. Although businesses usually have outputs, outputs are not required for an integrated
set to qualify as a business. The key elements taken into consideration include the fact that NantPro has licenses to use
ProMetic’s technology and intellectual property, to develop and manufacture the intravenous immunoglobulin or IVIG, and the
exclusive right to market, sell and distribute the licensed product in the United States. In addition NantPro has manufacturing
and service development contracts with ProMetic under which it has the ability to access qualified resources, production
capacity and the ProMetic affinity resins used in the production process, and to follow documented standards and protocols.
Furthermore, NantPro also has the non-exclusive right to manufacture or have manufactured by another third party should
ProMetic not wish or be able to manufacture all of NantPro’s commercial requirements of IVIG.
Although NantPro is a development stage entity, management concluded that it had inputs, processes and other elements
making it a business and therefore accounted for the acquisition as a business combination. If management had made a
different determination, it would have accounted for the transaction as an asset acquisition and consequently the transaction
would have been accounted for differently such as there would not have been a purchase price gain recorded in the
consolidated statement of operations and the net asset acquired would have been recorded on a cost basis instead of fair
value.
Assets arising from a business combination - The Corporation acquired a business in May 2014. The cost of the acquisition
must be allocated to the underlying net assets acquired based on their estimated fair values calculated in accordance with the
requirements of IFRS 3, Business Combinations. As NantPro assets consist mainly of intangible assets in the form of rights and
licenses contributed by ProMetic when the partnership was created, the assets acquired generally represent reacquired rights.
Management concluded that the contracts giving rise to the reacquired rights were neither favorable or unfavorable relative
to the terms of current market transactions for the same or similar items and consequently no settlement gain or loss was
recognized based on their respective estimated fair values.
As part of this allocation process, the Corporation must identify and attribute values and estimated lives to the identifiable
assets acquired. These determinations involve significant estimates and assumptions regarding cash flow projections, the risk
regarding the protein not being approved for sale, economic risk, weighted average cost of capital rates, expected market
penetration, terminal values and manufacturing costs. These estimates and assumptions determine the amount allocated to
the identifiable intangible assets and the amortization period for identifiable intangible assets with finite lives. If future events
or results differ from these estimates and assumptions, the Corporation could record increased amortization or impairment
charges in the future.
Determining the fair value of a business – In order to account for the business combination, the Corporation must
determine the value of the business acquired which in turn affects the values used in determining the fair value of the equity
investment, an investment in an associate (at the acquisition date), the gain on revaluation of the equity investment, the
purchase gain recognized on the business combination and the purchase price allocation. In determining the fair value of the
business, the same significant estimates and assumptions as those involved in attributing values to the identifiable assets,
discussed above are used. If different estimates and assumptions were made, the amounts recorded for intangibles assets,
non controlling interest, the purchase gain on a business combination, the gain on the revaluation of equity investment and
the deferred tax liability might have been significantly different.
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Estimates and assumptions
Expense recognition of restricted stock units – The expense recognized in regards to the restricted stock units for which
the performance conditions have not been met is based on an estimation of the probability of the successful achievement of
a number of performance conditions, as well as the timing of their achievement. The final expense is only determinable when
the outcome is known.
Accounting for loan modifications – When the terms of a loan are modified, management must evaluate whether the
modification should be accounted for as a derecognition of the carrying value of the pre-modified loan and the recognition
of a new loan at the then fair value or as a modification with no accounting impact. When the determination of the fair value
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of the new loan is required, the Corporation uses discounted cash flow techniques which includes inputs that are not based
on observable market data and inputs that are derived from observable market data. When determining the appropriate
discount rates to use, the Corporation seeks comparable interest rates where available. If unavailable, it uses those considered
appropriate for the risk profile of a corporation in the industry.
Fair value of financial instruments – The individual fair values attributed to the different components of a financing
transaction, notably warrants and debts issued concurrently, are determined using valuation techniques. The Corporation
uses judgment to select the methods used to make certain assumptions and in performing the fair value calculations in
order to determine 1) the values attributed to each component of a transaction at the time of their issuance, 2) the fair value
measurements for certain instruments that require subsequent measurement at fair value on a recurring basis and 3) for
disclosing the fair value of financial instruments subsequently carried at amortized cost. These valuation estimates also require
that management make estimates and applies its judgment in determining certain assumptions. The fair value estimates could
be significantly different because of the use of judgment and the inherent uncertainty in estimating the fair value of these
instruments that are not quoted in an active market. The assumptions regarding the warrant liability and the long-term debt
issued during the year are disclosed in notes 15 and 16 respectively to the consolidated financial statements.
Valuation of deferred income tax assets – To determine the extent to which deferred income tax assets can be recognized,
management estimates the amount of probable future taxable profits that will be available against which deductible
temporary differences and unused tax losses can be utilized. Management exercises judgment to determine the extent to
which realization of future taxable benefits is probable, considering the history of taxable profits, budgets and forecasts and
availability of tax strategies.
CHANGES IN ACCOUNTING POLICIES
On January 1, 2014, a number of new accounting standards became effective. Information on the new standard that was
relevant to the Corporation is presented below:
IFRIC 21, Levies
IFRIC 21, Levies sets out the accounting for an obligation to pay a levy that is not income tax. The interpretation addresses
what an obligating event is that gives rise to pay a levy and when should a liability be recognized. This interpretation
is effective for annual periods beginning on or after January 1, 2014, and is applied retroactively. The adoption of this
interpretation did not have a significant impact on the Corporation’s financial statements.
NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
Standards and interpretations issued but not yet effective up to the date of the Corporation’s consolidated financial
statements are listed below. This listing of standards and interpretations issued are those that the Corporation reasonably
expects to have an impact on disclosures, financial position or performance when applied at a future date. The Corporation
intends to adopt these standards when they become effective.
IFRS 15, Revenue from contracts with customers
In May 2014, the IASB issued IFRS 15, Revenue from Contracts with Customers, a new standard that specifies the steps and
timing for issuers to recognize revenue as well as requiring them to provide more informative, relevant disclosures. IFRS 15
supersedes IAS 11, Construction Contracts, and IAS 18, Revenue and related interpretations. Adoption of IFRS 15 is mandatory
and will be effective for the Corporation’s fiscal years beginning on January 1, 2017, with earlier adoption permitted. The
Corporation is currently assessing the impact of adopting this standard on its consolidated financial statements.
IFRS 9, Financial Instruments – Recognition and Measurement
In July 2014, the IASB issued the final version of IFRS 9, Financial Instruments with a mandatory effective date of January 1, 2018.
The new standard brings together the classification and measurements, impairment and hedge accounting phases of the
IASB’s project to replace IAS 39, Financial Instruments: Recognition and Measurement. In addition to the new requirements
for classification and measurement of financial assets, a new general hedge accounting model and other amendments issued
in previous versions of IFRS 9, the standard also introduces new impairment requirements that are based on a forward-
looking expected credit loss model. Management anticipates that the standard will be adopted in the consolidated financial
statements for the annual period beginning January 1, 2018. The extent of the impact of the adoption of IFRS 9 has not yet
been determined.
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FINANCIAL INSTRUMENTS
Use of financial instruments
The financial instruments that are used by the Corporation result from its operating and investing activities, namely in the
form of accounts receivables and payables, and from its financing activities resulting usually in the issuance of long term
debt. The Corporation does not use financial instruments for speculative purposes and has not issued or acquired derivative
financial instruments for hedging purposes. The following table presents the carrying amounts of the Corporation’s financial
instruments at December 31, 2014 and 2013.
Financial assets
Cash
Restricted cash
Trade receivables, loan to a Corporation, advance and
interest receivable from an officer and other
Share purchase loan to an officer
Other investments
Financial liabilities
Accounts payable and accrued liabilities
Debt provided by shareholders and other debt
Advance on revenues from a supply agreement
Warrant liability
Long-term debt
2014
2013
$
27,102
151
$
8,633
450
25
9,102
-
3,191
24,676
23,244
17,396
139
11,709
450
29
7,877
3,040
3,447
9,311
6,217
Warrant liability
In September 2013, the Corporation completed a financing transaction with Thomvest Seed Capital Inc. in which the
Corporation issued long-term debt, warrants classified in equity and warrants that met the definition of a derivative liability
under IFRS. The details of this transaction and the accounting for it are provided in note 15 and 16 to the December 31, 2014
annual consolidated financial statements. The warrants that are classified in the statement of financial position as a warrant
liability, namely the “Second Warrants”, are measured at their fair value at each reporting date. The variation in the fair value
of the warrant liability between reporting periods is recorded as a gain or a loss under the caption Fair value variation of
warrant liability in the statement of operations. There is no future cash disbursement associated with the recorded liability
on the balance sheet, however, if the warrants were to be exercised, the holder would have to pay the exercise price to
the Corporation, which would amount to $15.7 million or could request that the OID loan maturing in September 2018 be
cancelled in consideration for the exercise amount. The fair value of the Second Warrants has and may continue to change
significantly from period to period mainly due to the underlying change in the Corporation’s share price. If the conversion
option is not exercised prior to maturity, the warrants’ fair value will be zero when it expires.
During the third quarter, the Corporation and the Second warrant holder agreed to modify the terms of the Second Warrants.
The objective of the modifications is to replace the formula that was being used to determine the number of shares that would
be issued upon exercise of the warrants with a fixed number of warrants, since this formula, although it was allowing a potentially
small variation in quantity, was causing the Second warrants to be treated as a derivative liability. As a result of this treatment and
the significant increase in the Corporation’s share price since their issuance, a significant liability and significant losses have been
recognized in the financial statements. Pursuant to the modification, the number of shares to be issued upon exercise would be
fixed to 20,276,595 for an exercise price of $15.7 million. The ultimate expiry date of the Second warrants would remain unchanged
at September 10, 2021 and the potential trigger to shorten the expiry date, the Market Capitalization Event, would be removed.
In accordance to the TSX rules, the modification must be approved by the Shareholders’ of the Corporation before they become
effective. In accordance with the terms of the agreement, these amendments must be approved no later than July 1, 2015
otherwise they will become null. Consequently, the Second warrants will continue to be accounted for as a derivative liability
with the variations of fair value recorded in the statement of operations until the amendments are approved. If and when these
amendments become effective, the Second Warrants would cease to be a derivative liability and would become an equity
instrument, similarly to the other warrants issued by the Corporation. The warrants would be recorded in equity at the fair value of
the modified Second Warrants at the effective date.
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Impact of financial instruments in the consolidated statements of operations
In addition to the fair value variation of the warrant liability discussed above, the following line items in the consolidated
statement of operations for the year ended December 31, 2014 include income, expense, gains and losses relating to financial
instruments:
finance costs;
foreign exchange gains and losses.
Financial risk management
The Corporation has exposure to credit risk, liquidity risk and market risk. The Corporation’s Board of Directors has the overall
responsibility for the oversight of these risks and reviews the Corporation’s policies on an ongoing basis to ensure that these
risks are appropriately managed.
i. Credit risk:
Credit risk is the risk of financial loss to the Corporation if a customer, partner or counterparty to a financial instrument
fails to meet its contractual obligations, and arises principally from the Corporation’s cash, investments, receivables
and share purchase loan to an officer. The carrying amount of the financial assets represents the maximum credit
exposure.
The Corporation reviews a new customer’s credit history before extending credit and conducts regular reviews of its
existing customers’ credit performance. The Corporation evaluates accounts receivable balances based on the age of
the receivable, credit history of the customers and past collection experience.
ii. Liquidity risk:
Liquidity risk is the risk that the Corporation will not be able to meet its financial obligations as they come due. The
Corporation manages its liquidity risk by continuously monitoring forecasts and actual cash flows.
iii. Market risk:
Market risk is the risk that changes in market prices, such as interest rates and foreign exchange rates, will affect the
Corporation’s income or the value of its financial instruments.
a.
Interest risk:
The majority of the Corporation’s debt is at a fixed rate, therefore there is limited exposure to changes in interest
payments as a result interest rate risk.
b. Foreign exchange risk:
The Corporation is exposed to the financial risk related to the fluctuation of foreign exchange rates. The
Corporation operates in the United Kingdom and in the United States and a portion of its expenses incurred are
in U.S dollars and in Great British Pounds (“GBP”). The majority of the Corporation’s revenues are in U.S. dollars
and in GBP which serve to mitigate a portion of the foreign exchange risk relating to the expenditures. Financial
instruments potentially exposing the Corporation to foreign exchange risk consist principally of cash, receivables,
trade and other payables, and advance on revenues from a supply agreement. The Corporation manages foreign
exchange risk by holding foreign currencies to support forecasted cash outflows in foreign currencies.
RISK FACTORS
For a detailed discussion of risk factors which could impact the Corporation’s results of operations and financial position, other
than those risks pertaining to the financial instruments, please refer to the Corporation’s Annual Information Form filed on
www.sedar.com
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DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER FINANCIAL REPORTING
The Corporation’s disclosure controls and procedures are designed by or under the supervision of the Chief Executive Officer
(CEO) and Chief Financial Officer (CFO) to ensure that all important information about ProMetic, including operating and
financial activities, is communicated fully, accurately and in a timely way to them and that information required to be disclosed
by the issuer in its annual and interim filings and other reports is reported within the time periods specified in securities
legislation.
Internal controls over financial reporting are designed by or under the supervision of the CEO and CFO to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with IFRS. Due to its inherent limitation, the internal controls may not to prevent and detect all misstatements due
to error or fraud.
The Corporation’s CEO and CFO have certified that the disclosure controls and procedures and the internal controls over
financial reporting were designed to meet the objectives described above as of December 31, 2014. They have evaluated
the effectiveness of the disclosure controls and procedures as well as the internal controls over financial reporting as of
December 31, 2014 and concluded that these controls were operating effectively. The Corporation did not make any material
changes in the internal controls over financial reporting that materially affected or are reasonably likely to materially affect the
Corporation’s internal control over financial reporting during the quarter ended December 31, 2014.
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ANNUAL CONSOLIDATED FINANCIAL STATEMENTS OF
PROMETIC LIFE SCIENCES INC.
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
INDEPENDENT AUDITORS’ REPORT
To the shareholders of ProMetic Life Sciences Inc.
We have audited the accompanying consolidated financial statements of ProMetic Life Sciences Inc. (the “Corporation”),
which comprise the consolidated statements of financial position as at December 31, 2014 and 2013, and the consolidated
statements of operations, comprehensive (loss), changes in 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 audits 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 auditors’ 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 auditors consider 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 ProMetic
Life Sciences Inc. as at December 31, 2014 and 2013, and its financial performance and its cash flows for the years then ended
in accordance with International Financial Reporting Standards.
Montreal, Canada
March 31, 2015
1 CPA auditor, CA public accountancy permit no. A120254
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CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(IN THOUSANDS OF CANADIAN DOLLARS)
At December 31
ASSETS
Current assets
Cash (NOTE 7)
Accounts receivable (NOTE 8)
Income tax receivable
Inventories (NOTE 9)
Total cash generating current assets
Prepaid expenses
Total current assets
Restricted cash (NOTE 7)
Other investment
Capital assets (NOTE 11)
Intangible assets (NOTE 12)
Total assets
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued liabilities
Income tax payable
Debt provided by shareholders and other debt (NOTE 13)
Advance on revenues from a supply agreement (NOTE 14)
Total cash disbursing current liabilities
Deferred revenues
Warrant liability (NOTE 15)
Total current liabilities
Deferred tax liabilities (NOTE 25)
Long-term portion of lease inducements
Long-term debt (NOTE 16)
Total liabilities
EQUITY
Share capital (NOTE 17)
Contributed surplus
Warrants and future investment rights (NOTE 17)
Accumulated other comprehensive income
Deficit
Equity attributable to owners of the parent
Non-controlling interests (NOTE 18)
Total equity
Total liabilities and equity
Contingencies and commitments (NOTES 30 AND 31)
Subsequent events (NOTE 34)
2014)
2013)
$
27,102)
11,850)
901)
2,586)
42,439)
881)
43,320)
151)
25)
13,784)
146,163)
$
17,396)
14,172)
-)
2,979)
34,547)
863)
35,410)
139)
29)
9,631)
4,663)
$
203,443)
$
49,872)
$
9,102)
-)
-)
3,191)
12,293)
1,041)
24,676)
38,010)
37,198)
560)
23,244)
$
7,877)
134)
3,040)
3,447)
14,498)
984)
9,311)
24,793)
-)
224)
6,217)
$
99,012)
$
31,234)
294,870)
10,923)
19,803)
226)
(255,856)
69,966)
34,465)
104,431)
263,320)
6,319)
15,429)
122)
(264,858)
20,332)
(1,694)
18,638)
$
203,443)
$
49,872)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.
On behalf of the Board
Director
Director
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CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF CANADIAN DOLLARS EXCEPT FOR PER SHARE AMOUNTS)
Years ended December 31
2014)
2013)
Revenues (NOTE 20)
$
23,010)
$
20,644)
Expenses (NOTE 21)
Cost of goods sold (NOTE 9)
Research and development expenses recharged
Research and development expenses non-rechargeable
Administration, selling and marketing expenses
Gain on foreign exchange
Gain on recognition of loan receivable (NOTE 8)
Loss on extinguishment of debt (NOTE 13)
Finance costs (NOTE 21)
Fair value variation of warrant liability (NOTE 15)
Loss in an associate (NOTE 10)
Gain on revaluation of equity investment (NOTE 10)
Purchase gain on business combination (NOTE 6)
Gain on settlement of litigation (NOTE 24)
Net profit (loss) before income taxes
Income taxes expense (recovery) (NOTE 25)
Net profit (loss)
Net profit (loss) attributable to:
Owners of the parent
Non-controlling interests (NOTE 18)
Earnings (loss) per share (NOTE 26)
Attributable to the owners of the parent
Basic
Diluted
7,015)
3,053)
32,147)
12,905)
(102)
- )
- )
2,760)
15,365)
-)
(34,376)
(14,812)
(465)
(480)
(3,056)
6,671)
5,050)
13,728)
8,332)
(638)
(3,015)
423)
1,806)
5,485)
69)
-)
-)
-)
(17,267)
131)
$
2,576)
$
(17,398)
5,939)
(3,363)
(16,489)
(909)
$
2,576)
$
(17,398)
$
0.01)
0.01)
$
(0.03)
(0.03)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(IN THOUSANDS OF CANADIAN DOLLARS)
Years ended December 31
2014)
2013)
Net profit (loss)
$
2,576)
$
(17,398)
Other comprehensive income (loss)
Items that may be subsequently reclassified to profit and loss:
Change in unrealized exchange differences on translation
of financial statements of foreign subsidiaries
Total comprehensive income (loss)
Total comprehensive income (loss) attributable to:
Owners of the parent
Non-controlling interests
104)
(85)
$
2,680)
$
(17,483)
6,043)
(3,363)
(16,574)
(909)
$
2,680)
$
(17,483)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.
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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(IN THOUSANDS OF CANADIAN DOLLARS)
Equity attributable to owners of the parent
Warrants)
and future)
Share) Contributed) investment)
rights)
surplus)
capital)
$)
$)
$)
Foreign)
currency)
translation)
reserve)
$)
Non-)
Controlling)
Deficit)
$)
Total)
$)
interests) Total equity)
$)
$)
234,563)
-)
3,216)
-)
15,088)
-)
207)
-)
(246,470)
(16,489)
6,604)
(16,489)
(785)
(909)
5,819)
(17,398)
-)
-)
-)
-)
-)
3,411)
-)
-)
-)
490)
-)
915)
284)
1,294)
2,702)
23,987)
-)
-)
(308)
-)
-)
-)
-)
-)
(784)
-)
210)
-)
-)
-)
-)
-)
-)
-)
-)
(85)
-)
(85)
(1,899)
-)
(1,899)
3,411)
-)
-)
-)
(85)
(1,899)
3,411)
-)
1,405)
-)
1,405)
-)
-)
-)
-)
-)
284)
986)
1,918)
23,987)
210)
-)
-)
-)
-)
-)
284)
986)
1,918)
23,987)
210)
Balance at January 1, 2013
Net loss
Foreign currency
translation reserve
Share and warrant
issue expenses (NOTE 17)
Share-based payments (NOTE 17)
Issuance in relation to debt
renegotiation (NOTE 13)
Issuance in payment of
expenses (NOTE 17)
Exercise of options (NOTE 17)
Exercise of warrants (NOTE 17)
Issuance of shares (NOTE 17)
Issuance of warrants (NOTE 17)
Balance at December 31, 2013
263,320)
6,319)
15,429)
122) (264,858)
20,332)
(1,694)
18,638)
Net profit (loss)
Foreign currency
translation reserve
Non-controlling interest
arising from a business
combination (NOTE 6)
Effect of changes in the
ownership of a subsidiary
and funding arrangements
on non-controlling interest
(NOTE 18)
Share and warrant issue
expenses (NOTE 17)
Share-based payments (NOTE 17)
Exercise of options (NOTE 17)
Shares issued pursuant to
restricted share unit plan
(NOTE 17)
Exercise of warrants (NOTE 17)
Issuance of shares (NOTE 17)
Issuance of warrants (NOTE 17)
-)
-)
-)
-)
-)
-)
5,939)
5,939)
(3,363)
2,576)
-)
104)
-)
104)
-)
104)
-)
-)
-)
-)
-)
-)
49,055)
49,055)
-)
-)
-)
-)
933)
-)
5,136)
(314)
-)
-)
-)
-)
218)
1,557)
28,842)
-)
(218)
-)
-)
-)
-)
(805)
-)
5,179)
-)
5,213)
5,213)
(9,533)
(4,320)
-)
-)
-)
-)
-)
-)
-)
(2,150)
-)
-)
(2,150)
5,136)
619)
-)
-)
-)
-)
-)
752)
28,842)
5,179)
-)
-)
-)
-)
-)
-)
-)
(2,150)
5,136)
619)
-)
752)
28,842)
5,179)
Balance at December 31, 2014
294,870)
10,923)
19,803)
226) (255,856)
69,966)
34,465) 104,431)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF CANADIAN DOLLARS)
Years ended December 31
2014)
2013)
Cash flows used in operating activities
Net profit (loss) for the year
Adjustments to reconcile net profit (loss) to cash flows
used in operating activities
Expenses paid with shares
Net loss in an associate
Finance costs
Change in lease inducements
Carrying value of capital and intangibles assets disposed
Fair value variation of warrant liability
Gain on revaluation of equity investment (NOTE 10)
Purchase gain on business combination (NOTE 6)
Loss on extinguishment of debt (NOTE 13)
Deferred tax liability recovery
Share-based payments (NOTE 17)
Depreciation of capital assets (NOTE 11)
Amortization intangible assets (NOTE 12)
Change in non-cash working capital items
Cash flows from financing activities
Proceeds from share issuances (NOTE 17)
Proceeds from debt and warrant issuances (NOTE 17)
Exercise of options
Exercise of warrants
Debt, share and warrant issue expenses
Repayment of a repayable government grant and other debt
Repayment of debt provided by shareholders (NOTE 13)
Repayment of bank loan and other loan
Interest paid
Cash flows used in investing activities
Additions to capital assets
Additions to intangible assets
Interest received
Net change in cash during the year
Net effect of currency exchange rate on cash
Cash, beginning of year
$
2,576)
$
(17,398)
-)
-)
2,569)
336)
112)
15,365)
(34,376)
(14,812)
-)
(3,271)
5,136)
1,205)
489)
(24,671)
(1,283)
6)
69)
1,716)
(2)
68)
5,485)
- )
- )
423)
- )
3,411)
351)
518)
(5,353)
(11,652)
$
(25,954)
$
(17,005)
28,842)
20,010)
619)
752)
(2,243)
(14)
(3,550)
-)
(68)
33,894)
10,010)
986)
1,918)
(2,268)
(796)
(900)
(1,636)
(153)
$
44,348)
$
41,055)
(7,964)
(1,059)
274)
(6,930)
(711)
23)
$
(8,749)
$
(7 618)
9,645)
61)
17,396)
16,432)
(241)
1,205)
Cash, end of the year
$
27,102)
$
17,396)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED ON DECEMBER 31, 2014 AND 2013
(IN THOUSANDS OF CANADIAN DOLLARS)
1. NATURE OF OPERATIONS
ProMetic Life Sciences Inc. (“ProMetic” or the “Corporation”), incorporated under the Canada Business Corporations
Act, is a long-established, publicly traded (TSX symbol: PLI) (OTCQX symbol: PFSCF), biopharmaceutical Corporation
with globally recognized expertise in bioseparations, plasma-derived therapeutics and small-molecule drug
development. ProMetic is focused on bringing safer, cost-effective and more convenient products to both existing and
emerging markets. ProMetic offers its exclusive technology platform for large-scale drug purification of biologics, drug
development, proteomics and the elimination of pathogens to a growing base of industry leaders and uses its own affinity
technology that provides for efficient extraction and purification of therapeutic proteins from human plasma in order to
develop therapeutics and orphan drugs. ProMetic is also active in developing its own novel small molecule therapeutic
products targeting unmet medical needs in the field of fibrosis, autoimmune disease/inflammation and cancer.
The Corporation’s head office is located at 440, Boul. Armand-Frappier, suite 300, Laval, Québec, Canada, H7V 4B4.
ProMetic has Research and development (“R&D”) facilities in the UK, the U.S. and Canada, manufacturing facilities in the
Isle of Man and Canada and business development activities in the U.S., Europe and Asia.
2. SIGNIFICANT ACCOUNTING POLICIES
a) Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting Standards Board and were authorized for issue by the Board of
Directors on March 31, 2015.
b) Basis of measurement
The consolidated financial statements have been prepared on a historical cost basis, except for cash, restricted cash and
the warrant liability which have been measured at fair value.
c) Functional and presentation currency
The consolidated financial statements are presented in Canadian dollars, which is also the parent Corporation’s functional
currency.
d) Basis of consolidation
The consolidated financial statements include the accounts of ProMetic Life Sciences Inc., and those of its subsidiaries.
The Group’s material subsidiaries at the end of the year are as follows:
Name of subsidiary
Segment activity
Place of incorporation
and operation
Proportion of ownership
interest held by the group
ProMetic BioSciences Inc.
ProMetic BioProduction Inc.
ProMetic Biosciences (USA), Inc.
ProMetic BioSciences Ltd
ProMetic BioTherapeutics Inc.
ProMetic BioTherapeutics Ltd.
ProMetic Manufacturing Inc.
Pathogen Removal and Diagnostic
Technologies Inc. (“PRDT”)
NantPro BioSciences, LLC
Therapeutics
Protein Technology
Protein Technology
Protein Technology
Protein Technology
Protein Technology
Protein Technology
Protein Technology
Protein Technology
Quebec, Canada
Quebec, Canada
Maryland, U.S.A
United Kingdom
Delaware, U.S.A
United Kingdom
Quebec, Canada
Delaware, U.S.A
Delaware, U.S.A
2014
100%
87%
100%
100%
100%
100%
100%
77%
73%
2013
100%
87%
100%
100%
100%
100%
100%
77%
30%
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The Corporation consolidates investees when, based on the evaluation of the substance of the relationship with the
Corporation, it concludes that it controls the investees. The Corporation controls an investee when it is exposed, or has
rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its
power over the investee. The financial statements of the subsidiaries are prepared for the same reporting period as the
parent corporation, using consistent accounting policies. All intra-group transactions, balances, income and expenses are
eliminated in full upon consolidation.
When a subsidiary is not owned at 100% the Corporation recognizes the non-controlling interests’ share of the net assets
and results of operations in the subsidiary. When the proportion of the equity held by non-controlling interests’ changes
without resulting in a change of control, the carrying amount of the controlling and non-controlling interest are adjusted
to reflect the changes in their relative interests in the subsidiary. In these situations, the Corporation recognizes directly
in equity the effect of the change in ownership of a subsidiary on the non-controlling interests. Similarly, after picking up
its share of the operating losses, the non-controlling interest is adjusted for its share of the equity contribution made by
ProMetic that does not modify the interest held by either party. The offset to this adjustment is recorded in the deficit. The
effect of these transactions are presented in the statement of changes in equity for the year ended December 31, 2014.
e)
Investment in an associate
Investments in associates are accounted for using the equity method. An associate is an entity over which the Corporation
has significant influence. Under the equity method, the investment in the associate is carried on the consolidated
statement of financial position at cost plus post acquisition changes in the Corporation’s share of net assets of the
associate.
The consolidated statement of operations reflect the Corporation’s share of the results of operations of the associate.
When there has been a change recognised directly in the equity of the associate, the Corporation recognises its share of
any change. Profits and losses resulting from transactions between the Corporation and the associate are recognized in
the Corporation’s consolidated financial statements only to the extent of the unrelated investors’ interests in the associate.
If the Corporation’s share of cumulative losses of an associate equals or exceeds its interest in the associate, the
Corporation discontinues recognising its share of further losses. After the interest in an associate is reduced to zero,
additional losses are provided for, and a liability is recognised, only to the extent that the Corporation has incurred legal
or constructive obligations or made payments on behalf of the associate. If the associate subsequently reports profits, the
Corporation resumes recognising its share of those profits only after its share of the profits equals the share of losses not
recognised.
When the level of influence over an associate changes either following a loss of significant influence over the associate
or the obtaining of control over the associate, the Corporation measures and recognises any retaining investment at its
fair value. Any difference between the carrying amount of the associate at the time of the change in influence and the fair
value of the retained investment and proceeds from disposal is recognised in profit or loss.
f) Financial instruments
Financial instruments are initially measured at fair value. They are subsequently measured in accordance to their
classification as described below:
Financial assets and financial liabilities at fair value through profit and loss
Cash, restricted cash and the warrant liability are respectively classified as fair value through profit and loss. They are
measured at fair value and changes in fair value are recognized in the consolidated statements of operations. Directly
related transaction costs are recognized in the consolidated statements of operations.
Loans and receivables
Trade accounts receivable, loan to a Corporation, wholly-owned by an officer of the Corporation, advance to an officer
and other receivables are classified as loans and receivables. They are initially recognized at fair value and subsequently
carried at amortized cost using the effective interest method.
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Financial liabilities
Accounts payable and accrued liabilities, long-term debt provided by shareholders and other debt, advance on revenues
from a supply agreement and long-term debt are classified as other financial liabilities. They are measured at amortized
cost using the effective interest method.
Impairment of investments
When, in management’s opinion, there has been a significant or prolonged decline in the value of an investment,
the investment is written down to recognize the loss. In determining the estimated realizable value of its investment,
management relies on its judgment and knowledge of each investment as well as on assumptions about general business
and economic conditions that prevail or are expected to prevail.
g)
Inventories
Inventories of raw materials, work in progress and finished goods are valued at the lower of cost and net realizable value.
Cost is determined on a first in, first out basis.
h) Capital assets
Capital assets are recorded at cost less any government assistance, accumulated depreciation and accumulated
impairment losses, if any. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets, as
described below.
Capital asset
Leasehold improvements
Equipment and tools
Office equipment and furniture
Computer equipment
Period
The lower of the lease term and the useful life
5 - 15 years
5 - 10 years
3 - 5 years
The estimated useful lives, residual values and depreciation method are reviewed annually with the effect of any changes
in estimates accounted for on a prospective basis. The gain or loss arising on the disposal or retirement of a capital asset
is determined as the difference between the sales proceeds and its carrying amount and is recognized in profit or loss.
i) Government assistance
Government assistance programs, including investment tax credits on research and development expenses, are
reflected as reductions to the cost of the assets or to the expenses to which they relate and are recognized when there
is reasonable assurance that the assistance will be received and all attached conditions are complied with. Where
government assistance is received in the form of a repayable working capital grant, it is recorded as a liability.
j)
Intangible Assets
Intangible assets include acquired rights as well as licenses for product manufacturing and marketing, external patent
costs and software costs. They are carried at cost less accumulated amortization. Amortization is calculated over the
estimated useful lives of the intangible assets acquired using the straight-line method over a period not exceeding
30 years for licenses, 20 years for patents and 5 years for software costs and amortization commences when the intangible
asset is available for use. The estimated useful lives and amortization method are reviewed annually, with the effect of
any changes in estimates being accounted for on a prospective basis. The amortization expense is recognized in the
consolidated statements of operations in the expense category consistent with the function of the intangible assets.
Expenditure on research activities is recognized as an expense in the period during which it is incurred.
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An internally generated intangible asset arising from development (or from the development phase of an internal project)
is recognized if, and only if, all of the following have been demonstrated:
the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits;
the availability of adequate technical, financial and other resources to complete the development and to use or sell
the intangible asset; and
the ability to measure reliably the expenditure attributable to the intangible asset during its development.
To date, the Corporation has not capitalized any development costs.
k)
Impairment of capital and intangible assets
At the end of each reporting period, the Corporation reviews the carrying amounts of its tangible and intangible assets
to determine whether there is any indication that those assets have suffered an impairment loss. If impairment indicators
exist, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any.
For intangible assets not available for use, an impairment test is performed annually at November 30 until amortization
commences, whether or not there are impairment indicators. When it is not possible to estimate the recoverable amount
of an individual asset, the Corporation estimates the recoverable amount of the cash-generating unit (CGU) which
represents the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash
inflows from other assets, groups of assets or CGUs to which the asset belongs. Where a reasonable and consistent basis
of allocation can be identified, the corporate assets are also allocated to individual CGUs, or otherwise they are allocated
to the smallest group of CGUs for which a reasonable and consistent allocation basis can be identified.
The recoverable amount is the higher of the fair value less costs to sell and value in use. 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 for which the estimates of future cash flows
have not been adjusted.
An impairment loss is recognized when the carrying amount of an asset or a CGU exceeds its recoverable amount by the
amount of this excess. An impairment loss is recognized immediately in profit or loss in the period during which the loss
is incurred. Where an impairment loss subsequently reverses, the carrying amount of the asset or CGU is increased to the
revised estimate of its recoverable amount; on reversal of an impairment loss, the increased carrying amount does not
exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or
CGU in prior periods. A reversal of an impairment loss is recognized immediately in profit or loss.
l) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated
customer returns and other similar allowances.
The Corporation earns revenues from research and development services, license and milestone fees and sale of goods,
which may include multiple elements. The individual elements of each agreement are divided into separate units of
accounting, if certain criteria are met. The applicable revenue recognition method is then applied to each unit. Otherwise,
the applicable revenue recognition criteria are applied to combined elements as a single unit of accounting.
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Rendering of services
Revenues from research and development services are recognized using the proportional performance method. Under
this method, revenues are recognized proportionally with the degree of completion of the services under the contract
when it is probable that the economic benefits will flow to the Corporation and revenue and costs associated with the
transaction can be measured reliably.
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Licensing fees and milestone payments
Certain license fees are comprised of up-front fees and milestone payments. Up-front fees are recognized over the
estimated term during which the Corporation maintains substantive obligations. Milestone payments are recognized
as revenue when the milestone is achieved, customer acceptance is obtained and the customer is obligated to make
performance payments. Certain license arrangements require no continuing involvement by the Corporation.
Non-refundable license fees are recognized as revenue when the Corporation has no further involvement or obligation to
perform under the arrangement, the fee is fixed or determinable and collection of the amount is reasonably assured.
Sale of goods
Revenue from the sale of goods is recognized when all the following conditions are satisfied:
the Corporation has transferred to the buyer the significant risks and rewards of ownership of the goods;
the Corporation retains neither continuing managerial involvement to the degree usually associated with
ownership nor effective control over the goods sold;
the amount of revenue can be measured reliably;
it is probable that the economic benefits associated with the transaction will flow to the entity; and;
the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Amounts received in advance of meeting the revenue recognition criteria are recorded as deferred revenue on the
consolidated statements of financial position.
m) Foreign currency translation
The Corporation’s consolidated financial statements are presented in Canadian dollars, which is also the Corporation’s
functional currency.
i) Transactions and balances
Transactions in foreign currencies are initially recorded by the Corporation and its entities at their respective functional
currency rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies
are retranslated at the functional currency spot rate of exchange at the reporting date. All differences are taken to the
consolidated statements of operations. Non-monetary items that are measured in terms of historical cost in a foreign
currency are translated using the exchange rates at the dates when the initial transactions took place.
ii) Group companies
The assets and liabilities of foreign operations are translated into Canadian dollars at the rate of exchange prevailing
at the reporting date and their statements of operations are translated at exchange rates prevailing at the dates of
the transactions. The exchange differences arising on the translation are recognised in other comprehensive loss. On
disposal of a foreign operation, the component of other comprehensive loss relating to that particular foreign operation is
recognised in the consolidated statement of operations and comprehensive loss.
n)
Income taxes
The Corporation uses the liability method of accounting for income taxes. Deferred income tax assets and liabilities are
recognized in the consolidated statement of financial position for the future tax consequences attributable to differences
between the consolidated financial statements carrying values of existing assets and liabilities and their respective income
tax bases. Deferred income tax assets and liabilities are measured using income tax rates expected to apply when the
assets are realized or the liabilities are settled. The effect of a change in income tax rates is recognized in the year during
which these rates change. Deferred income tax assets are recognized to the extent that it is probable that future tax
profits will allow the deferred tax assets to be recovered.
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o) Share-based payments
The Corporation has a stock option plan and a restricted share unit plan. The fair value of stock options granted is
determined at the grant date using the Black-Scholes option pricing model, and is expensed over the vesting period
of the options. Awards with graded vesting are considered to be multiple awards for fair value measurement. The fair
value of restricted stock units is determined using the market value of the Corporation’s shares on the grant date. In
determining the expense to recognize over the vesting period, the Corporation will, in the case of restricted share
units and stock options for which vesting is dependent on meeting performance targets, estimate the outcome of the
performance targets and revise those estimates until the final outcome is determined. An estimate of the number of
awards that are expected to be forfeited is also made at the time of grant and revised periodically if actual forfeitures
differ from those estimates. The Corporation’s policy is to issue new shares upon the exercise of stock options and when
the shares earned under the restricted share unit plan are issued.
p) Earnings per share (EPS)
Basic EPS is calculated by dividing the profit or loss attributable to common shareholders of the Corporation by the
weighted average number of common shares outstanding during the period. Diluted EPS is determined by adjusting the
profit or loss attributable to common shareholders and the weighted average number of common shares outstanding,
adjusted for the effects of all dilutive potential common shares, which comprise warrants, stock options and restricted
share units.
q) Share and warrant issue expenses
The Corporation records share and warrant issue expenses as an increase to the deficit.
r) Statement of financial position presentation
Following the issuance by the Corporation in September 2013 of a warrant liability, that entails no future cash
disbursement by the Corporation and is presented as a current liability, the Corporation decided that it is relevant to
the understanding of the entity’s financial position to present sub-totals within current assets and current liabilities,
representing the carrying value of those items that will generate or require future cash flows. Management uses these
measures, amongst others, in assessing its short-term liquidity needs.
3. SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATION UNCERTAINTY
The preparation of these consolidated financial statements requires the use of judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and liabilities and the accompanying disclosures. The
uncertainty that is often inherent in estimates and assumptions could result in material adjustments to assets or liabilities
affected in future periods.
Significant judgments
Revenue recognition – The Corporation does at times enter into revenue agreements which provide, among other
payments, for upfront payments in exchange for licenses and other access to intellectual property. Management applies
its judgment to assess whether these payments were received in exchange for the provision of goods or services which
have stand-alone value to the customer.
Determining the level of influence the Corporation has over an investment in an entity – In determining the level of
influence the Corporation has over an investment in an entity, resulting either in control or significant influence over the
investment, consideration is given to the composition of the entity’s board of directors and the manner in which key
operating and financing decisions are made. A conclusion that the Corporation controls the investment leads to the
consolidation of the assets and liabilities and results of operations of the investment with those of the Corporation, along
with the elimination of all inter-company transactions. A conclusion that the Corporation has significant influence over the
investment will result in that investment being accounted for as an associate.
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Functional currency – The functional currency of foreign subsidiaries is reviewed on an ongoing basis to assess if changes
in the underlying transactions, events and conditions have resulted in a change. During the years ended December 31, 2014
and 2013, no changes were deemed necessary. This assessment is also performed for new subsidiaries. When assessing
the functional currency of a foreign subsidiary, management’s judgment is applied in order to determine amongst others
the primary economic environment in which an entity operates, the currency in which funds the activities and the degree
of autonomy of the foreign subsidiary from the reporting entity in its operations and financially. Judgment is also applied
in determining whether the inter-company loans denominated in foreign currencies form part of the parent Corporation’s
net investment in the foreign subsidiary. Considering such loans as part of the net investment in the foreign subsidiary
results in foreign currency translation gains or losses resulting from the translation of these loans being recorded in other
comprehensive loss instead of the statement of operations.
Determining whether assets acquired constitute a business – In determining whether the acquisition of an additional
equity interest in NantPro BioSciences, LLC (“NantPro”) (see note 6) fell within the scope of IFRS 3, Business Combination,
management evaluated whether NantPro represented an integrated set of activities and assets capable of being
conducted and managed for the purpose of providing a return in the form of dividends, lower cost or other economic
benefits directly to investors or other owners, members or participants. In making this evaluation, management
considered whether NantPro had inputs, processes and other elements making it a business. Although businesses
usually have outputs, outputs are not required for an integrated set to qualify as a business. The key elements taken
into consideration include the fact that NantPro has licences to use ProMetic’s technology and intellectual property, to
develop and manufacture the intravenous immunoglobulin or IVIG, and the exclusive right to market, sell and distribute
the licenced product in the United States. In addition NantPro has manufacturing and service development services
contracts under which it has the ability to access qualified resources, production capacity and the ProMetic affinity resins
used in the production process, and to follow documented standards and protocols. Furthermore, NantPro also has the
non-exclusive right to manufacture or have manufactured by another third party should ProMetic not wish or be able to
manufacture all of NantPro’s commercial requirements of IVIG.
Although NantPro is a development stage entity, management concluded that it had inputs, processes and other
elements making it a business and therefore accounted for the acquisition as a business combination. If management had
made a different determination, it would have accounted for the transaction as an asset acquisition and consequently the
transaction would have been accounted for differently such as there would not have been a purchase price gain recorded
in the consolidated statement of operations and the net asset acquired would have been recorded on a cost basis instead
of fair value.
Assets arising from a business combination - The Corporation acquired a business in May 2014 (refer to note 6). The cost
of the acquisition must be allocated to the underlying net assets acquired based on their estimated fair values calculated
in accordance with the requirements of IFRS 3, Business Combinations. As NantPro assets consist mainly of intangible
assets in the form of rights and licenses contributed by ProMetic when the partnership was created, the assets acquired
generally represent reacquired rights. Management concluded that the contracts giving rise to the reacquired rights were
neither favorable nor unfavorable relative to the terms of current market transactions for the same or similar items and
consequently no settlement gain or loss was recognized based on their respective estimated fair values.
As part of this allocation process, the Corporation must identify and attribute values and estimated lives to the identifiable
assets acquired. These determinations involve significant estimates and assumptions regarding cash flow projections, the
risk regarding the protein not being approved for sale, economic risk, weighted average cost of capital rates, expected
market penetration, terminal values and manufacturing costs. These estimates and assumptions determine the amount
allocated to the identifiable intangible assets and the amortization period for identifiable intangible assets with finite
lives. If future events or results differ from these estimates and assumptions, the Corporation could record increased
amortization or impairment charges in the future.
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Determining the fair value of a business – In order to account for the business combination described in note 6, the
Corporation must determine the value of the business acquired which in turn affects the values used in determining the
fair value of the equity investment, an investment in an associate (at the acquisition date), the gain on revaluation of
the equity investment, the purchase gain recognized on the business combination and the purchase price allocation. In
determining the fair value of the business, the same significant estimates and assumptions as those involved in attributing
values to the identifiable assets, discussed above are used. If different estimates and assumptions were made, the
amounts recorded for intangibles assets, non controlling interest, the purchase gain on a business combination and the
gain on the revaluation of equity investment might have been significantly different.
Estimates and assumptions
Expense recognition of restricted stock units – The expense recognized in regards to the restricted stock units for which
the performance conditions have not been met is based on an estimation of the probability of the successful achievement
of a number of performance conditions, as well as the timing of their achievement. The final expense is only determinable
when the outcome is known.
Accounting for loan modifications – When the terms of a loan are modified, management must evaluate whether
the modification should be accounted for as a derecognition of the carrying value of the pre-modified loan and the
recognition of a new loan at the then fair value or as a modification with no accounting impact. When the determination
of the fair value of the new loan is required, the Corporation uses discounted cash flow techniques which includes
inputs that are not based on observable market data and inputs that are derived from observable market data. When
determining the appropriate discount rates to use, the Corporation seeks comparable interest rates where available. If
unavailable, it uses those considered appropriate for the risk profile of a corporation in the industry.
Fair value of financial instruments – The individual fair values attributed to the different components of a financing
transaction, notably warrants and debts issued concurrently, are determined using valuation techniques. The Corporation
uses judgment to select the methods used to make certain assumptions and in performing the fair value calculations in
order to determine 1) the values attributed to each component of a transaction at the time of their issuance, 2) the fair
value measurements for certain instruments that require subsequent measurement at fair value on a recurring basis and 3)
for disclosing the fair value of financial instruments subsequently carried at amortized cost. These valuation estimates also
require that management make estimates and applies its judgment in determining certain assumptions. The fair value
estimates could be significantly different because of the use of judgment and the inherent uncertainty in estimating the
fair value of these instruments that are not quoted in an active market. The assumptions regarding the warrant liability and
the long-term debt issued during the year are disclosed in notes 15 and 16 respectively.
Valuation of deferred income tax assets – To determine the extent to which deferred income tax assets can be
recognized, management estimates the amount of probable future taxable profits that will be available against which
deductible temporary differences and unused tax losses can be utilized. Management exercises judgment to determine
the extent to which realization of future taxable benefits is probable, considering the history of taxable profits, budgets
and forecasts and availability of tax strategies.
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4. ADOPTION OF NEW ACCOUNTING STANDARDS
On January 1, 2014, a number of new accounting standards became effective. Information on the new standard that was
relevant to the Corporation is presented below:
IFRIC 21, Levies
IFRIC 21, Levies sets out the accounting for an obligation to pay a levy that is not income tax. The interpretation addresses
what an obligating event is that gives rise to pay a levy and when should a liability be recognized. This interpretation
is effective for annual periods beginning on or after January 1, 2014, and is applied retroactively. The adoption of this
interpretation did not have a significant impact on the Corporation’s financial statements.
5. NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
Standards and interpretations issued but not yet effective up to the date of the Corporation’s consolidated financial
statements are listed below. This listing of standards and interpretations issued are those that the Corporation reasonably
expects to have an impact on disclosures, financial position or performance when applied at a future date. The
Corporation intends to adopt these standards when they become effective.
IFRS 15, Revenue from contracts with customers
In May 2014, the IASB issued IFRS 15, Revenue from Contracts with Customers, a new standard that specifies the steps
and timing for issuers to recognize revenue as well as requiring them to provide more informative, relevant disclosures.
IFRS 15 supersedes IAS 11, Construction Contracts, and IAS 18, Revenue and related interpretations. Adoption of IFRS
15 is mandatory and will be effective for the Corporation’s fiscal years beginning on January 1, 2017, with earlier adoption
permitted. The Corporation is currently assessing the impact of adopting this standard on its consolidated financial
statements.
IFRS 9, Financial Instruments – Recognition and Measurement
In July 2014, the IASB issued the final version of IFRS 9, Financial Instruments with a mandatory effective date of
January 1, 2018. The new standard brings together the classification and measurements, impairment and hedge
accounting phases of the IASB’s project to replace IAS 39, Financial Instruments: Recognition and Measurement. In
addition to the new requirements for classification and measurement of financial assets, a new general hedge accounting
model and other amendments issued in previous versions of IFRS 9, the standard also introduces new impairment
requirements that are based on a forward-looking expected credit loss model. Management anticipates that the standard
will be adopted in the consolidated financial statements for the annual period beginning January 1, 2018. The extent of
the impact of the adoption of IFRS 9 has not yet been determined.
6. BUSINESS COMBINATION
On May 8, 2014 (“date of acquisition”), the Corporation and NantPharma, LLC (“NantPharma”) amended the terms of
their partnership in NantPro BioSciences, LLC (“NantPro”). Prior to the transaction, the Corporation’s equity position in
NantPro was 24.38% (NantPharma’s equity position in NantPro was 75.62%), following the payment by NantPharma of an
outstanding capital contribution amounting to $857 (US$801,367) which was converted into units of Nantpro at a rate of
US$131,579 per 1% of ownership, as defined in the original terms of the partnership agreement for NantPro and equated
to 6.09% of additional ownership for NantPharma. In accordance with the terms of the transaction, $6,607 (US$6,085,998)
of accounts receivable due from NantPro to ProMetic, which normally would have been paid by NantPro with the
NantPharma funding, was invested by ProMetic in order to obtain an additional 40.83% of equity units in NantPro. After
consideration of the above investments by the partners, ProMetic owned 65.21% and NantPharma owned 34.79% of the
equity units respectively on May 8, 2014. From the date of acquisition onwards, NantPro is entirely funded by ProMetic
and as a result, ProMetic continued to acquire equity units in NantPro until it reached the maximum of 73% allowed in
accordance with the agreement, while NantPharma’s ownership has been reduced to 27%. At December 31, 2014, the
Corporation held 73% of the equity units of the partnership.
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This issuance of units combined with the amendments to the terms of the partnership, including providing ProMetic
with three out of five board seats, resulted in ProMetic obtaining control over NantPro, and NantPro being considered a
subsidiary from the date of acquisition. ProMetic’s former investment in an associate is deemed to have been disposed
of for accounting purposes (refer to note 10 for the accounting impact of the revaluation of the equity investment). From
May 8, 2014 onwards, the Corporation is consolidating the assets and liabilities of NantPro and its results of operations for
the period subsequent to the change in control.
This transaction qualifies as a business combination and was accounted for using the acquisition method of accounting.
To account for the transaction, the Corporation has performed a business valuation of NantPro at the date of acquisition
and a purchase price allocation. These fair value assessments require management to make significant estimates and
assumptions as well as applying judgment in selecting the appropriate valuation techniques.
The Corporation recognised all of the identifiable net assets of the partnership at their acquisition date fair values and the
resulting deferred income tax liabilities, non-controlling interest in NantPro and purchase gain on a business combination
as follows:
Settlement of receivables for additional equity units
Acquisition date fair value of the previously held equity (NOTE 10)
Total consideration
Net identifiable assets acquired:
Intangible assets
Deferred tax liability
Non-controlling interest
Net assets
Purchase gain on business combination
$
6,607)
34,376)
40,983)
141,000)
(36,150)
104,850)
(49,055)
55,795)
$
(14,812)
The Corporation elected to measure the non-controlling interest in NantPro using the proportionate share of its interest in
NantPro’s identifiable net assets as per applicable IFRS guidelines.
The parties to this transaction applied the terms of the partnership agreement which established the amount of funding
required to acquire 1% of the partnership prior to the clinical trials phase. The additional units were only earned when
the cash injection was made. Under the service agreement, ProMetic is performing the requested development work
and subsequently invoicing these services to NantPro. Upon acknowledgment of the invoice, NantPharma was to fund
NantPro and at the same time earn the additional equity units in NantPro. In June 2013, NantPharma advised ProMetic
of its interest to renegotiate the agreement, to potentially reduce or stop its funding of future development work. While
discussions where ongoing, ProMetic continued to provide services to NantPro pursuant to the service agreement.
The parties finalized the negotiations in May 2014 with the result that $6,607 (US$6,085,998) of accounts receivable due
from NantPro was invested by ProMetic in order to obtain an additional 40.83% of equity units in NantPro. The parties
agreed that the terms of the original funding agreement should apply to ProMetic’s funding since June 2013. As a result
of the ongoing development work, the value of the business increased over time and the values attributed to the funding
requirements to acquire 1% of the partnership for either pre-clinical or development phases is no longer representative of
the value of 1% of the business. This has resulted in the recognition of a purchase gain in the consolidated statement of
operations in regards to the additional 40.83% of equity acquired in NantPro.
The Corporation will be recognising NantPharma’s (the “non-controlling interest”) share in the net assets and results of
NantPro. Service revenues and research and development rechargeable expenses that other subsidiaries of ProMetic
invoice to NantPro subsequent to May 8, 2014 will be eliminated upon consolidation. Certain materials, previously
presented as inventories in the consolidated statement of financial position, will no longer generate product sales or
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service revenues on a consolidated basis and therefore no longer qualify to be presented as inventories. These inventories
held as of the date of the transaction have been expensed in the consolidated statement of operation as research and
development expenses non-rechargeable while future purchase of these materials will be expensed as those materials are
received, regardless of whether they have been consumed.
7. CASH AND RESTRICTED CASH
Cash consists of cash balances with banks. Restricted cash is composed of a guaranteed investment certificate, bearing
interest at 0.35% per annum (one guaranteed investment certificate at December 31, 2013, bearing interest at 0.35%),
pledged as collateral for a letter of credit to a landlord in the amount of $130 as at December 31, 2014 and 2013 which
automatically renews until the end of the lease.
8. ACCOUNTS RECEIVABLE
Trade receivables
Loan to a Corporation, wholly-owned
by an officer of the Corporation
Tax credits and government grants receivable
Sales taxes receivable
Advance to an officer
Interest receivable from loan to an officer
Other receivables
2014
$
8,448
$
-
2,654
563
80
34
71
2013
8,519
3,015
1,422
1,041
82
-
93
$
11,850
$
14,172
Loan to a Corporation, wholly-owned by an officer of the Corporation
During the fourth quarter of 2013, the Corporation recognized in the consolidated statement of financial position the
loan to a corporation wholly-owned by an officer of the Corporation. The loan payments, made between 2008 and 2010
in relation to a loan guarantee provided by the Corporation, had originally been expensed as “Charges related to a
guarantee” since the collectability of the loan was not reasonably assured at the time. The principal of the loan in the
amount of USD 2,011,000 bore interest at 10% per annum and was secured by a pledge in favor of the Corporation by
Invhealth Capital Inc. (a wholly-owned subsidiary of a senior officer of the Corporation) of all of its shares in Invhealth
Holding Inc. and by a pledge in favor of the Corporation by the senior officer of the Corporation of all of his shares of
Invhealth Capital Inc. As a result of these pledges, the loan was ultimately secured by 9,500,000 shares of the Corporation.
The loan was originally due for repayment no later than March 31, 2013 but the loan agreement was amended during
2013 and the reimbursement period was extended to March 31, 2016. Furthermore, should certain stock price thresholds
be reached, the Corporation may have required the borrower to pay the outstanding balance of the loan.
The loan principal as well as the accumulated interest earned as of December 31, 2013, for an aggregate amount of
$3,015, was recognized since the collectability of the loan was reasonably assured as a result of the increase in value of
the assets guaranteeing the loan and an equivalent gain on recognition of loan receivable has been recorded in the
consolidated statement of operations. In March 2014, the full amount of the loan was repaid to the Corporation.
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9.
INVENTORIES
Raw materials
Work in progress and finished goods
2014
1,129
1,457
2,586
$
$
2013
1,971
1,008
2,979
$
$
As a result of the NantPro BioSciences, LLC (“NantPro”) business combination and the consolidation of NantPro as
a subsidiary, inventories held by certain subsidiaries to perform rechargeable research and development services to
NantPro when it was an associate no longer qualify to be presented as inventories as of May 8, 2014, the date NantPro is
included in the consolidation perimeter. This is because on a consolidated basis, intercompany revenues are eliminated
and as such, the materials will not generate product sales nor rechargeable research and development revenues in the
foreseeable future.
During the year ended December 31, 2014, total inventories in the amount of $6,341 ($6,518 for the year ended
December 31, 2013) were recognized as cost of goods sold.
10. INVESTMENT IN AN ASSOCIATE
On May 8, 2014, the Corporation and the other partner in the NantPro partnership, NantPharma, amended the
partnership agreement and the Corporation increased its investment in NantPro (note 6). As a result of the amendment,
the Corporation obtained control over NantPro, and as of the acquisition date, its investment in NantPro represents an
investment in a subsidiary. Further details regarding this transaction are provided in note 6. For accounting purposes, the
investment in the associate, 24.38% of NantPro’s equity units at the transaction date, is deemed to have been disposed
of on the date of change of control and is revalued at fair value. Consequently, the Corporation has recognized a gain on
revaluation of the equity investment of $34.4 million representing the difference between the fair value and the carrying
amount ($Nil) of ProMetic’s equity interest in NantPro just before the transaction.
Up to May 8, 2014, the investment in NantPro was still accounted for as an investment in an associate and consequently
the Corporation recognized revenues from the rendering of services to NantPro of $3,665 for the year ended
December 31, 2014 ($6,978 for the year ended December 31, 2013). No revenues have been recorded since May 8, 2014.
The Corporation’s share of the associate’s losses and the net loss in the associate up to May 8, 2014 with the comparative
figures, are as follows:
Loss and comprehensive loss of an associate
$
(3,811)
$
(6,134)
2014)
2013)
The Corporation’s share of the loss and comprehensive loss of the associate
Dilution gain
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Net loss in an associate
Unrecorded portion of losses
Net loss in an associate recognized in consolidated financial statements
(1,161)
195)
(966)
966)
-)
$
$
(2,574)
1,305)
(1,269)
1,200)
(69)
$
$
The accumulated balance of unrecorded losses at May 8, 2014 was $2,374 ($1,482 at December 31, 2013).
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11. CAPITAL ASSETS
Leasehold)
improvements)
Production)
and laboratory)
equipment)
Office)
equipment)
and furniture)
Computer)
equipment)
Cost
Balance at January 1, 2013
Additions
Disposals
Effect of foreign exchange differences
Balance at December 31, 2013
Additions 1
Disposals
Effect of foreign exchange differences
Balance at December 31, 2014
Accumulated depreciation
Balance at January 1, 2013
Depreciation expense
Disposals
Effect of foreign exchange differences
Balance at December 31, 2013
Depreciation expense
Disposals
Effect of foreign exchange differences
Balance at December 31, 2014
$)
$)
2,441)
3,795)
(480)
190)
5,946)
1,784)
-)
48)
7,778)
2,256)
72)
(480)
138)
1,986)
349)
-)
43)
2,378)
3,734)
4,493)
(431)
155)
7,951)
3,279)
(78)
44)
11,196)
2,928)
192)
(409)
120)
2,831)
697)
(67)
35)
3,496)
Carrying amounts
At December 31, 2014
At December 31, 2013
5,400)
3,960)
7,700)
5,120)
$)
576)
189)
(70)
22)
717)
109)
(242)
5)
589)
509)
35)
(70)
18)
492)
64)
(242)
3)
317)
272)
225)
$)
382)
304)
(94)
13)
605)
181)
(77)
5)
714)
322)
42)
(92)
7)
279)
95)
(75)
3)
302)
Total)
$)
7,133)
8,781)
(1,075)
380)
15,219)
5,353)
(397)
102)
20,277)
6,015)
341)
(1,051)
283)
5,588)
1,205)
(384)
84)
6,493)
412)
326)
13,784)
9,631)
1 As at December 31, 2014, included in additions to Production and laboratory equipment is $631 ($Nil for the year ended
December 31, 2013) of production equipment under construction net of government grants. The depreciation of these
assets has not commenced since they are not considered to be available for use.
Certain investments in equipment are eligible for reimbursable investment tax credits or government grants (refer to
note 23). The tax credits receivable and the government grants are recorded in the same period as the eligible additions
and are credited against the capital asset addition. During the year ended December 31, 2014, the Corporation
recognized $148 ($380 during the year ended 2013) in investment tax credits related to equipment purchases and $529
($83 during the year ended 2013) in government grants.
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12. INTANGIBLE ASSETS
Cost
Balance at January 1, 2013
Additions
Disposals
Effect of foreign exchange differences
Balance at December 31, 2013
Additions
Acquired in a business combination 1
Disposals
Effect of foreign exchange differences
Balance at December 31, 2014
Accumulated amortization
Balance at January 1, 2013
Amortization expense
Disposals
Effect of foreign exchange differences
Balance at December 31, 2013
Amortization expense
Disposals
Effect of foreign exchange differences
Balance at December 31, 2014
Carrying amounts
At December 31, 2014
At December 31, 2013
Licenses
Patents)
Software)
$
3,850
-
-
40
3,890
-
141,000
-
11
144,901
2,698
231
-
20
2,949
81
-
26
3,056
$)
4,123)
745)
(51)
187)
5,004)
678)
-)
(178)
59)
5,563)
1,023)
287)
(7)
54)
1,357)
367)
(79)
16)
1,661)
$)
295)
77)
(93)
5)
284)
381)
-)
-)
1)
666
285)
10)
(93)
7)
209)
41)
-)
-)
250)
Total)
$)
8,268)
822)
(144)
232)
9,178)
1,059)
141,000)
(178)
71)
151,130)
4,006)
528)
(100)
81)
4,515)
489)
(79)
42)
4,967)
141,845
941
3,902)
3,647)
416)
75)
146,163)
4,663)
1 On May 8, 2014, the Corporation completed a business combination in which intangible assets, valued at
$141 million, were acquired (note 6). The intangible assets have an estimated useful life of 30 years. The amortization
of these intangibles has not commenced since they are not considered to be available for use. At November 30, 2014,
the Corporation performed an impairment test on the intangible assets not available for use and concluded that no
impairment was required.
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13. DEBT PROVIDED BY SHAREHOLDERS AND OTHER DEBT
The balance of the debt provided by shareholders and other debt comprises of the following:
Loans having the following principal balances as of December 31
In the amount of $800
In the amount of $375
In the amount of $375
In the amount of $2,000
Other debt
2014
-
-
-
-
-
-
$
$
2013
682
320
320
1,705
13
3,040
$
$
Loan in the amount of $800 at December 31, 2013, secured by hypothecs granted by the Corporation and a subsidiary on
the universality of their movable property (*).
On February 20, 2013, the Corporation and the lender renegotiated the payment terms to extend the maturity date from
July 1, 2013 to July 1, 2014 and the Corporation agreed to issue to the lender 260,869 fully paid common shares and
188,679 warrants with an exercise price of $0.53 per share, exercisable for a period of two years. As per the agreement,
no cash interest was charged to the Corporation for this extension. The loan bears no stated interest (the effective
interest rate, taking into account the shares and warrants issued as consideration for the renegotiation, is 37.50%). The
renegotiation was accounted for as a debt extinguishment for accounting purposes in February 2013 and resulted in a
loss on modification of debt of $105. The new loan was remeasured at its fair value on the date of the modification with
an effective interest rate of 37.5%. The fair value of $649 of the loan was estimated using discounted future cash flows and
the residual value between the principal amount of the loan and the fair value was allocated to the warrants and shares in
the amounts of $229 and $123, respectively. In September 2013, the Corporation reimbursed $200 of the loan, reducing
the principal balance to $800. The carrying value of the loan as at December 31, 2013 was $682. A payment of $800 was
made in August 2014 in settlement of the loan.
Loan of $375 at December 31, 2013, secured by hypothecs granted by the Corporation and a subsidiary on the universality
of their movable property (*).
On February 20, 2013, the Corporation and the lender renegotiated the payment terms to extend the maturity date from
July 1, 2013 to July 1, 2014 and the Corporation agreed to issue to the lender 130,434 fully paid common shares and
94,340 warrants with an exercise price of $0.53 per share, exercisable for a period of two years. As per the agreement,
no cash interest was charged to the Corporation for this extension. The loan bears no stated interest (the effective
interest rate, taking into account the shares and warrants issued as consideration for the renegotiation, is 37.50%). The
renegotiation was also accounted for as a debt extinguishment in 2013. Consequently, the loan was derecognized and a
new loan recognized at fair value, resulting in a loss on extinguishment of debt of $53. The new loan was remeasured at
its fair value on the date of the modification with an effective interest rate of 37.5%. The fair value of $324 was estimated
using discounted future cash flows, and the difference between the fair value and the principal amount was allocated to
the warrants and shares in the amounts of $115 and $61, respectively. In October 2013, the Corporation repaid $125 of the
loan, reducing the principal balance to $375. The carrying value of the loan as at December 31, 2013 was $320. In March
2014 and in August 2014 the Corporation paid $50 and $325 respectively in settlement of the loan.
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Loan of $375 at December 31, 2013, secured by hypothecs granted by the Corporation and a subsidiary on the universality
of their movable property (*).
On February 20, 2013, the Corporation and the lender renegotiated the payment terms to extend the maturity date from
July 1, 2013 to July 1, 2014 and the Corporation agreed to issue to the lender 130,435 fully paid common shares and
94,339 warrants with an exercise price of $0.53 per share, exercisable for a period of two years. As per the new agreement,
no cash interest was charged to the Corporation for this extension. The loan bears no stated interest (the effective
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interest rate, taking into account the shares and warrants issued as consideration for the renegotiation, is 37.50%). The
renegotiation was also accounted for as a debt extinguishment in 2013. Consequently, the loan was derecognized and a
new loan recognized at fair value, resulting in a loss on extinguishment of debt of $53. The new loan was remeasured at
its fair value on the date of the modification with an effective interest rate of 37.5%. The fair value of $324 was estimated
using discounted future cash flows, and the difference between the fair value and the principal amount was allocated
to the warrants and shares in the amounts of $115 and $61, respectively. In October 2013, the Corporation repaid $125
of the loan, reducing the principal balance to $375. The carrying value of the loan as at December 31, 2013 was $320. In
March 2014 and in August 2014 the Corporation paid $50 and $325 respectively in settlement of the loan.
Loans of $2,000 at December 31, 2013, secured by hypothecs granted by the Corporation and a subsidiary on the
universality of their movable property (*).
On February 20, 2013, the Corporation and the lender renegotiated the payment terms to extend the maturity date
from July 1, 2013 to July 1, 2014 and the Corporation agreed to issue to the lender 521,738 fully paid common shares
and 377,357 warrants with an exercise price of $0.53 per share, exercisable for a period of two years. As per the new
agreement, no cash interest was charged to the Corporation for this extension. The loan bears no stated interest (the
effective interest rate, taking into account the shares and warrants issued as consideration for the renegotiation, is
37.50%). The renegotiation was also accounted for as a debt extinguishment in 2013. Consequently, the loans were
derecognized and new loans were recognized at fair value, resulting in a loss on extinguishment of debt of $212. The new
loan was remeasured at its fair value on the date of the modification with an effective interest rate of 37.5%. The fair values
of $1,298 were estimated using discounted future cash flows, and the difference between the fair values and the principal
amounts was allocated to the warrants and shares in the amounts of $457 and $245, respectively. The carrying value of the
loan as at December 31, 2013 was $1,705. A payment of $2,000 was made in August 2014 in settlement of the loan.
(*) During 2013, the securities given under the above loans were modified from a first ranking hypothec on all moveable
property to second ranking hypothecs on all moveable property, excluding intellectual property.
As a result of the above loans being recorded at amounts which differs from the principal amounts of the loans, an interest
accretion expense was recognized over the duration of the loans in order that the carrying value of the loans at maturity
equals the principal amounts due.
14. ADVANCE ON REVENUES FROM A SUPPLY AGREEMENT
In 2009, the Corporation entered into a loan agreement with a customer whereby it received an advance on revenues relating
to a supply agreement between the parties amounting to $3,400 (GBP 2,000,000). The advance bears interest at a rate of 5%
per annum. The advance was being repaid as products were supplied and revenues received under the supply agreement,
until both parties agreed to a moratorium on repayments. In May 2014, the Corporation and the customer amended the loan
agreement, extending the maturity date from September 2014 to April 1, 2015. Since then, the two parties have agreed to lift
the moratorium on repayments and the Corporation has resumed making payments. On March 27, 2015, the loan agreement
was amended further extending the maturity date April 30, 2018 (note 34 subsequent events).
15. WARRANT LIABILITY
The warrants issued in a financing transaction in September 2013 (note 16), namely the “Second Warrants”, give the
holder the right to acquire common shares, the number of which is based on a formula, in exchange for $15,653 paid
either in cash or in consideration of the lender’s cancellation of the Original Discount Issue (“OID”) loan maturing
on September 10, 2018. The maximum number of shares that can be issued under the warrants is 20,276,595 and
consequently the effective exercise price cannot fall below $0.77 per share. The Second Warrants expire on
September 10, 2021, however the maturity period is shortened upon occurrence of a Market Capitalization Event whereby
the market capitalization of the Corporation is greater than $1.5 billion for 60 consecutive days. If such an event was to
occur before September 10, 2018, the Second Warrants would expire on September 10, 2018. If a Market Capitalization
Event occurred after September 10, 2018, the warrants would expire within 90 days after the said event.
The Second warrants are presented in the consolidated statement of financial position as a derivative financial liability
which is required to be carried at fair value at each reporting date; the variations in fair value are recorded in the
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consolidated statement of operations in the period they occur. There is no future cash-payment associated with the
recognized liability. However, if the warrants were to be exercised, the holder would have to pay the exercise price to
the Corporation.
The fair value of the Second Warrants may change significantly from period to period mainly due to the underlying
change in the Corporation’s share price. If the conversion option is not exercised prior to maturity, the Second Warrants’
fair value will be zero when it expires. The fair value of these warrants is determined using in combination; i) a Monte Carlo
simulation in order to take into consideration the Market Capitalization Event barrier and ii) a binomial model to compute
the warrant valuation for each path obtained in the Monte Carlo simulation and arrive to an overall fair value for the
warrants. This measurement is considered a Level III fair value measurement. Assessment of the significance of a particular
input of the fair value measurement requires judgment and may affect the placement within the fair value hierarchy level.
The fair value of the Second Warrants is estimated at $24,676 at December 31, 2014 ($9,311 at December 31, 2013)
resulting in a loss of $15,365 for the year recorded in the consolidated statement of operations ($5,485 loss during the
year ended December 31, 2013).
The following assumptions were used in determining the fair value of the warrants on December 31, 2014 and 2013:
Volatility
Marketability discount
Risk-free interest rate range
Potential life range in years
Expected dividend rate
2014%
2013%
63%
35%
1.64% - 1.96%
3.69 - 6.69%
-%
62%
35%
2.29% - 2.90%
4.69 - 7.69%
-%
The effect of a change in the marketability discount and the volatility assumptions, which are the significant unobservable
inputs used in the fair value estimate, by 10% at December 31, 2014 would have the following effect on the consolidated
financial statements:
Assumption changed
Volatility
Marketability discount
Increase (decrease) in fair value of the warrant
liability resulting from
a 10% increase
a 10% decrease)
$
534)
(520)
$
(548)
534)
Concurrently with the July 31, 2014 debt modification described in note 16, the Corporation and the Second Warrant
holder agreed to modify the terms of the Second Warrants. The objective of the modification is to replace the formula
that is being used to determine the number of shares that would be issued upon exercise of the warrants with a fixed
number of shares, since this formula, although it is allowing a potentially small variation in quantity, is causing the
Second Warrants to be treated as a derivative liability. As a result of this treatment and the significant increase in the
Corporation’s share price since their issuance, a significant liability and significant losses have been recognized in the
consolidated financial statements. Pursuant to the modification, the number of shares to be issued upon exercise would
be fixed to 20,276,595 for an exercise price of $15,653. The expiry date of the Second Warrants would remain unchanged
at September 10, 2021 and the potential trigger to shorten the expiry date, the Market Capitalization Event, would be
removed.
In accordance with the TSX rules, the modification must be approved by the Shareholders of the Corporation before
they become effective. In accordance with the terms of the agreement, these amendments must be approved no later
than July 1, 2015 otherwise they will become null. Consequently, the Second Warrants will continue to be accounted
for as a derivative liability until the amendments are approved. If and when these amendments become effective, the
Second Warrants would cease to be a derivative liability and would become an equity instrument. The warrants would be
recorded in equity at the fair value of the modified Second Warrants at the effective date.
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16. LONG-TERM DEBT
The carrying value of the long-term debt at December 31, 2014 and 2013 consists of the following:
OID loan having a face value of $15,653 maturing
on September 10, 2018 with an effective interest rate of 21.8%
OID loan having a face value of $31,306 maturing
on July 31, 2019 with an effective interest rate of 16.3%
2014
$
7,558
15,686
$
23,244
2013
6,217
-
6,217
$
$
On July 31, 2014, the Corporation issued an Original Issue Discount loan and warrants (the “Third Warrants”) for total
proceeds of $20,010. The total proceeds were allocated to the debt based on its fair value at the issue date and the
residual amount was attributed to the warrants that are classified as equity. Further details concerning the warrants are
provided in note 17. Under the terms of the loan, the Corporation will repay the face value of the OID loan, in the amount
of $31,306 at maturity on July 31, 2019. The loan is secured by all the assets of the Corporation excluding patents and
requires that certain covenants be respected including maintaining an adjusted working capital ratio. The OID loan was
recorded at its fair value at the transaction date less the associated transaction costs of $117 for a net amount of $14,713.
The fair value of the loan was determined using a discounted cash flow model for the debt instrument with a market
interest rate of 16.11%.
Concurrently, with the above transaction, the Corporation modified certain of the terms pertaining to the loan issued in
September 2013. This loan has been modified from a loan with a principal of $10,000 bearing interest at a rate of 9% per
annum, compounding monthly, to be paid on maturity of the loan together with the principal on September 10, 2018, to
an OID loan having a face value of $15,653 maturing on the same date. These amendments were accounted for as a debt
modification with no accounting impact to recognize on the date of the revised agreement. As well, the Corporation and
the holder of the OID loans who in addition holds the Second Warrants also agreed to modify the terms of the Second
Warrants. Further details regarding the proposed modifications are provided in note 15 – Warrant liability.
The loans are secured by all the assets of the Corporation, excluding patents. At December 31, 2014, the Corporation was
in compliance with covenants for both loans.
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17. SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS
a) Share capital
Authorized and without par value:
Unlimited number of common shares, participating, carrying one vote per share, entitled to dividends.
Unlimited number of preferred shares, no par value, issuable in one or more series.
2014
Number
Amount)
Number
Issued and fully paid common shares
Share purchase loan to an officer 1
547,627,835
-
$
295,320)
(450)
523,168,666
-
Balance - end of year
547,627,835
$
294,870)
523,168,666
2013
$
$
Amount)
263,770)
(450)
263,320)
1 The share purchase loan to an officer in the amount of $450, bears interest at prime plus 1%, and matures on
March 31, 2016. However, if ProMetic’s shares trade for a price per share equal or higher than $2.00 for 10 consecutive
days, the Corporation may request a repayment of the loan.
Changes in the issued and outstanding common shares during the years ended December 31, 2014 and 2013 were as
follows:
Issued and fully paid shares
Number
Amount
Number
2014
Balance - beginning of year
Issued for cash
Issued in relation to debt renegotiation
Reimbursement of loans from a director
Exercise of warrants
Exercise of options
Shares issued under restricted share units plan
Payment of expenses
523,168,666
15,180,000
-
-
4,652,587
3,380,332
1,246,250
-
$
263,320
28,842
-
-
1,557
933
218
-
432,531,873
74,798,453
1,043,476
539,383
10,900,833
3,118,138
-
236,510
2013
$
Amount
224,742
33,808
490
194
2,702
1,294
-
90
Balance - end of year
547,627,835
$
294,870
523,168,666
$
263,320
2014
During the year ended December 31, 2014, the Corporation issued 15,180,000 common shares following an offering by
way of a prospectus for gross proceeds of $28,842. The related issuance costs in the amount of $2,039 were recorded
against the deficit.
2013
During the year ended December 31, 2013, the Corporation issued 48,147,053 common shares pursuant to a share
subscription for a private placement agreement with a strategic investor entered into on October 15, 2012, for net
proceeds of $9,907 and 26,651,400 common shares following an offering by way of a prospectus, for gross proceeds of
$23,986 ($22,115 net of share issuance cost of $1,871). Also, 1,043,476 common shares for a total of $490 were issued
following the renegotiation with the lenders to extend the maturity dates of the loans as described in note 13.
The Corporation also issued 539,383 shares for the reimbursement of principal and interest related to loans from a
director for a total $194 and a total of 236,510 shares in payment of $90 of other expenses.
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b) Warrants and future investment rights (“rights”)
The warrants and future investment rights issued by the Corporation provide essentially the same rights to the holders.
The following table summarizes the changes in the number of warrants and rights outstanding during the years ended
December 31, 2014 and 2013:
Balance - beginning of year
Issued for cash
Issued in relation to debt renegotiation
Exercised
Number)
53,341,645)
16,723,807)
-)
(4,652,587)
2014
Weighted
average
exercise price
$
0.43
1.87
-
0.16
0.82
Number)
62,487,763)
1,000,000)
754,715)
(10,900,833)
2013
Weighted
average
exercise price
$
0.38
0.52
0.53
0.19
0.43
Balance - end of year
65,412,865)
$
53,341,645)
$
2014
On July 31, 2014, the Corporation issued an original issue discount loan and warrants for an aggregate cash consideration
of $20,010. Details regarding the loan issued are provided in note 16. As part of this financing transaction, the Corporation
issued 16,723,807 Third Warrants, each giving the holder the right to acquire one common share at an exercise price
of $1.87 paid either in cash or in consideration of the lender’s cancellation of an equivalent amount of the face value of
the OID loan maturing on July 31, 2019 (see note 16). The warrants expire on July 31, 2022. The value of the proceeds
attributed to the Third Warrants was $5,179. The issuance costs related to the warrants, in the amount of $96, has been
recorded against the deficit. During the year ended December 31, 2014, 4,652,587 warrants were exercised resulting in
cash proceeds of $752 and a transfer from warrants to share capital of $805.
2013
During the year ended December 31, 2013, 754,715 warrants with an estimated value of $915 were issued in relation to the
renegotiation of the loans and 10,900,833 warrants were exercised resulting in cash proceeds of $1,918 and a transfer from
contributed surplus to share capital of $784.
On September 10, 2013, the Corporation issued a secured loan and warrants for a cash consideration of $10,010 (refer
to note 16 for details of the financing transaction and the modification to the debt during 2014). The Corporation issued
1,000,000 First Warrants, each one giving the right to the holder to acquire one common share at an exercise price of
$0.52. The warrants expire on September 10, 2021. The value attributed to the warrants was $210. The Corporation also
issued Second Warrants which are described in note 15 and are presented as a current liability.
As at December 31, 2014, the following warrants and rights, classified as equity, to acquire shares were outstanding:
Number
Expiry date
Exercise price
2,142,855
754,715
44,791,488
1,000,000
16,723,807
65,412,865
February 2015
February 2015
February 2017
September 2021
July 2022
$
$
0.14
0.53
0.47
0.52
1.87
0.82
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c) Share-based payments
Stock options
The Corporation has established a stock option plan for its directors, officers and employees and service providers. The
plan provides that the aggregate number of shares reserved for issuance at any time under the plan may not exceed
24,336,349 common shares and the maximum number of common shares, which may be reserved for issuance to any
individual, may not exceed 5% of the outstanding common shares. The new options issued under the plan may be
exercised over a period not exceeding five years from the date they were granted. The vesting period of the options
varies from immediate vesting to vesting over a period not exceeding 5 years. In some circumstances, the vesting of
options is conditional to attaining performance conditions. The vesting conditions are established by the Board of
Directors on the grant date. The exercise price is based on the weighted average share price for the five business days
prior to the grant.
Changes in the number of stock options outstanding during the years ended December 31, 2014 and 2013 were as
follows:
Balance - beginning of year
Granted
Forfeited
Exercised
Expired
Number)
12,744,400)
2,742,281)
(104,500)
(3,380,332)
(51,050)
2014
Weighted
average
exercise price
$
0.22
1.20
1.08
0.18
0.17
0.45
Number)
12,274,538)
4,095,250)
(507,250)
(3,118,138)
-)
2013
Weighted
average
exercise price
$
0.19
0.38
0.25
0.32
-
0.22
Balance - end of year
11,950,799)
$
12,744,400)
$
During the year ended December 31, 2014, 3,380,332 options were exercised resulting in cash proceeds of $619 and a
transfer from contributed surplus to share capital of $314. During the year ended December 31, 2013, 3,118,138 options
were exercised resulting in cash proceeds of $986 and a transfer from contributed surplus to share capital of $308. The
weighted average share price on the date of exercise of the options during the year ended December 31, 2014 was $1.44
($0.58 for the year ended December 31, 2013).
At December 31, 2014, options issued and outstanding by range of exercise price are as follows:
Range of
exercise price
$0.12 - $0.40
$0.88 - $1.59
$2.10
Number
outstanding
9,168,974
2,605,769
176,056
11,950,799
Weighted average
remaining
contractual life
(in years)
Weighted
average
exercise price
2.5
4.4
4.9
2.9
$
$
0.22
1.12
2.10
0.45
Number
exercisable
6,703,855
479,348
25,278
7,208,481
Weighted
average
exercise price
$
$
0.21
1.12
2.10
0.28
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The Corporation uses the Black-Scholes option pricing model to calculate the fair value of options at the date of grant.
The weighted average inputs into the model and the resulting grant date fair values were as follows:
Expected dividend rate
Expected volatility of share price
Risk-free interest rate
Expected life in years
Weighted average grant date fair value
2014
-
74.35%
1.49%
4.7
$ 0.76
2013
-
88.55%
1.31%
5.0
$ 0.26
The expected volatility was mainly based on historical volatility of the common shares while the expected life was based
on the historical holding patterns. The fair value of the grants is expensed over the vesting period on the assumption
between 2.8% to 5.0% (5.6% in 2013) of the unvested options will be forfeited annually over the service period as
employees leave the Corporation.
A share-based payment compensation expense of $1,314 was recorded for the options for the year ended
December 31, 2014 ($607 for the year ended December 31, 2013).
Restricted share units (“RSU”)
The Corporation has established an equity-settled restricted share units (“RSUs”) plan for executive officers of the
Corporation, as part of its incentive program designed to align the interests of its executives with those of its
shareholders, and in accordance with its Long Term Incentive Plan (“LTIP”). The RSUs only vest upon achievement of
various important corporate and commercial objectives that would create significant shareholder value. The vesting
conditions are established by the Board of Directors on the grant date and must generally be met within 3 years.
During the year ended December 31, 2014, 1,246,250 vested RSU were released and an equivalent number of shares were
issued out of treasury. The Corporation granted 6,500,000 RSU to management (the “2014-2016 RSU”). The grant date fair
value of a 2014-2016 RSU is $1.23. The RSU will only vest if the service and performance conditions set out are achieved.
The expense is determined taking into account management’s best estimate of whether or not the particular vesting
conditions will be met as well as, in the case of those RSU that are expected to vest, the period it will take to meet the
vesting requirements. These estimates are reviewed on an ongoing basis. A share-based payment compensation
expense of $3,822 was recorded during the year ended December 31, 2014 ($2,803 for the year ended December 31, 2013).
At December 31, 2014, 5,298,439 vested RSU and 4,621,561 unvested RSU were outstanding (4,666,250 vested as at
December 31, 2013).
In 2011 and in 2013, the Corporation granted 3,200,000 and 3,800,000 RSUs respectively, of which 4,666,250 vested in
2013. The price of the shares on the grant dates were $0.175 and $0.83 in 2011 and 2013 respectively. All of the non-
vested RSUs were cancelled in December 2013.
Share-based payment expense
The total share-based payment expense has been included in the consolidated statements of operations as indicated in
the following table:
Cost of goods sold
Research and development expenses recharged
Research and development expenses non-rechargeable
Administration and marketing expenses
2014
123
121
1,216
3,676
5,136
$
$
$
2013
77
162
634
2,538
$
3,411
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18. NON-CONTROLLING INTERESTS
The shares of three of the Corporation’s subsidiaries are partially held by non-controlling interests. These are ProMetic
BioProduction Inc. (“PBP”), Pathogen Removal and Diagnostic Technologies Inc. (“PRDT”) and since May 8, 2014,
NantPro. The Corporation holds on December 31, 2014, 87.0%, 77.0% and 73.0% (on December 31, 2013, 87.0%, 77.0%
and 30.47%) of the ownership interests respectively.
Summarized financial information for PBP, PRDT and NantPro, which are considered to have a material non-controlling
interest, for the years ended December 31, 2014 and 2013 is provided in the following tables. This information is based on
amounts before inter-company eliminations.
2014
Summarized statements of financial position
Investment tax credits and other receivables (current)
Inventories and other current assets
Fixed and intangible assets (non-current)
Trade and other payables (current)
Intercompany loans (non-current)
Total equity
Attributable to non-controlling interests
Summarized statements of operations
Revenues or services rendered to other members of the group
Research and development activities recharged
Research and development activities non-rechargeable
Adminstration and other expenses
Net loss and comprehensive loss
Attributable to non-controlling interests
PBP)
1,359)
157)
9,071)
(1,285)
(21,806)
(12,504)
(117)
PBP)
4,092)
(9,736)
(745)
(2,513)
(8,902)
(1,157)
$
$
$
$
$
$
PRDT)
NantPro)
$
$
$
$
$
$
-)
4)
676)
(320)
(12,744)
(12,384)
(3,488)
PRDT)
675)
-)
(424)
(1,604)
(1,353)
(755)
$
$
$
$
$
$
-)
-)
141,000)
-)
-)
141,000)
38,070)
NantPro)
-)
-)
(8,836)
(141)
(8,977)
(1,451)
During the year ended December 31, 2014, PBP used $9,693 and $2,408 in cash for its operating and investing activities
respectively and received $12,177 from financing activities.
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2013
Summarized statements of financial position
Investment tax credits and other receivables (current)
Inventories and other current assets
Fixed and intangible assets (non-current)
Trade and other payables (current)
Intercompany loans (non-current)
Total equity
Attributable to non-controlling interests
Summarized statements of operations
Revenues or services rendered to other members of the group
Research and development activities recharged
Research and development activities non-rechargeable
Adminstration and other expenses
Net loss and comprehensive loss
Attributable to non-controlling interests
PBP)
1,221)
680)
7,208)
(3,240)
(9,471)
(3,602)
1,041)
PBP)
690)
(281)
(2,235)
(1,335)
(3,161)
(337)
$
$
$
$
$
$
PRDT)
- )
- )
579 )
(370)
(10,980)
(10,771)
(2,735)
PRDT)
949 )
- )
(164)
(1,652)
(867)
(572)
$
$
$
$
$
$
During the year ended December 31, 2013, PBP used $2,037 and $7,530 in cash for its operating and investing activities
respectively and received $9,564 from financing activities.)
The losses allocated to the non-controlling interests and the carrying amount of the non-controlling interest on the
consolidated statement of financial position, per subsidiary are as follows:
In the consolidated statements of financial position
PBP
PRDT
NantPro
Total non-controlling interests
2014)
2013)
$
(117)
(3,488)
38,070)
$
34,465)
$
$
1,041)
(2,735)
- )
(1,694)
.
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In the consolidated statements of operations
PBP
PRDT
NantPro
Total non-controlling interests
$
2014)
(1,157)
(755)
(1,451)
$
(3,363)
$
$
2013)
(337)
(572)
- )
(909)
Between the date of acquisition of NantPro and December 31, 2014, the Corporation increased by 7.79% its interest in
NantPro and consequently decreased the ownership of the non-controlling interest by the same, as a result of funding
NantPro’s activities and obtaining additional units during this period. The Corporation currently owns 73% of the equity
units thus the maximum ownership it may acquire.
19. CAPITAL DISCLOSURES
Warrant liability
Debt provided by shareholders and other debt
Long-term debt
Shareholders’ equity
Cash
Total Capital
$
2014)
24,676)
-)
23,244)
104,431)
(27,102)
$
2013)
9,311)
3,040)
6,217)
18,638)
(17,396)
$
125,249)
$
19,810)
The Corporation’s objective in managing capital is to ensure sufficient liquidity to finance its research and development
activities, administration and marketing expenses, working capital and overall expenditures on capital and intangible
assets. The Corporation makes every effort to manage its liquidity to minimize dilution to its shareholders, whenever
possible. The Corporation is subject to one externally imposed capital requirement (refer to note 16) and the
Corporation’s overall strategy with respect to capital risk management remains unchanged from the year ended
December 31, 2013.
20. REVENUES
Revenues from the sale of goods
Revenues from the rendering of services
Milestone and licensing revenues
$
2014)
10,815)
4,788)
7,407)
$
23,010)
2013)
9,531)
8,538)
2,575)
20,644)
$
$
.
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21. INFORMATION INCLUDED IN THE CONSOLIDATED STATEMENTS OF OPERATIONS
a) Government assistance included in research and development
Gross research and development expenses
Research and development tax credits
b) Finance costs
Interest on long-term debt
Other interest expense, transaction and bank fees
Interest income
c) Wages and salaries
Wages and salaries
Employer’s benefits
Share-based payments
Total employee benefit expense
22. PENSION PLAN
2014)
2013)
$
$
$
36,635)
(1,435)
35,200)
3,011)
59)
(310)
$
2,760)
$
16,339)
3,698)
5,136)
$
25,173)
$
$
$
$
$
$
19,738)
(960)
18,778)
1,683)
165)
(42)
1,806)
11,537)
1,522)
3,411)
16,470)
The Corporation contributes to a defined contribution pension plan for all of its permanent employees. The Corporation
matches most employees’ contributions up to 5% (5% in 2013) of their annual salary. The Corporation’s contributions for
the year ended December 31, 2014 amounted to $956 ($461 in 2013).
23. GOVERNMENT ASSISTANCE
The Corporation has received government grants from the Isle of Man Government relating to operating and capital
expenditures to be incurred by the Corporation and are disbursed to the Corporation when such expenditures are made.
The Isle of Man Government reserves the right to reclaim in part or all of the grants received should the Corporation leave
the Isle of Man according to the following schedule – 100% repayment within five years of receipt, then a sliding scale
after that for the next 5 years – 6 years 80%, 7 years 60%, 8 years 40%, 9 years 20%, 10 years 0%.
If the Corporation were to cease operations in the Isle of Man as December 31, 2014, it would be required to repay $403
in relation to past grants amounting to $598. No provision has been made in these consolidated financial statements for
any future repayment relating to the above agreement.
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24. GAIN ON SETTLEMENT OF LITIGATION
As a result of a settlement of the litigation with a third party supplier, ProMetic Biosciences Limited recovered during 2014,
$375 related to lost profits in 2012 when a supplier incorrectly labelled raw materials which resulted in lost sales to a third
party. In addition to this, the Corporation also received compensation for other expenses incurred in the amount of $90
resulting in the recognition of a gain on settlement of litigation totaling $465.
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25. INCOME TAXES
The income tax expense (recovery) reported in the consolidated statement of operations for the years ended
December 31, 2014 and 2013 are as follows:
Current income taxes
Deferred income taxes
2014)
215)
(3,271)
(3,056)
$
$
$
$
2013)
131)
-)
131)
The following table provides a reconciliation of the income tax expense (recovery) calculated at the combined statutory
income tax rate to the income tax expense (recovery).
Net profit (loss)
Combined Canadian statutory income tax rate
Income tax at combined income tax rate
Decrease (increase) in income taxes resulting from:
Unrecorded potential tax benefit arising from current-period losses
and other deductible temporary differences
Effect of tax rate differences in foreign subsidiaries
Non-deductible or taxable items
Gain on investment in an associate
Gain on acquisition of additional interest in NantPro
Other
$
$
2014)
(480)
26.9%)
(129)
6,385)
(1,124)
5,046)
(9,247)
(3,984)
(3)
$
(3,056)
$
2013)
(17,267)
26.9%)
(4,645)
1,414)
(24)
3,398)
-)
-)
(12)
131)
The following table presents the nature of the deferred tax assets and liabilities that make up the deferred tax liability
balance at December 31, 2014 and 2013.
As at January 1, 2013
Charged (credited) to profit or loss
As at December 31, 2013
Charged (credited) to profit or loss
Acquired in business combination
Recognized in equity
Intagible)
assets)
Capital)
assets)
$)
-(
-(
-)
-)
36,150)
4,319)
$)
119)
49)
168)
1,110)
-)
-)
)
Losses)
$)
(208)
(239)
(447)
(5,380)
-)
-)
Other)
Total)
$)
89)
190)
279)
999)
-)
-)
$)
-)
-)
-)
(3,270)
36,150)
4,319)
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As at December 31, 2014
40,469)
1,278)
(5,827)
1,278)
37,199)
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Available temporary differences not recognized at the reporting date are as follows:
Tax losses (non capital)
Tax losses (capital)
Unused research and development expenses
Undeducted financing expenses
Interest expenses carried forward
Capital assets
Intangible assets
Start-up expense
Other
$
2014)
131,327)
37,546)
29,109)
3,385)
6,009)
1,490)
2,310)
6,191)
696)
$
2013)
111,624)
37,203)
28,128)
2,229)
5,391)
292)
1,852)
6,128)
143)
$
218,063)
$
192,990)
At December 31, 2014, the Corporation has non-capital losses of $146,758, of which $131,327 are available to reduce
future taxable income for which the benefits have not been recognized. These losses expire at various dates from 2015 to
2034. The Corporation also has capital losses of $37,546 and unused research and development expenses of $29,109 that
are available to reduce future taxable income for which the benefits have not been recognized. These tax attributes can
be carried forward indefinitely.
If the Corporation were to recognize all deferred tax assets, profit would increase by $62,181.
At December 31, 2014, the Corporation also had unused federal tax credits available to reduce future income tax in the
amount of $7,455 expiring between 2020 and 2034. Those tax credits have not been recorded and no deferred income tax
assets have been recorded in respect to those tax credits.
The unused non-capital losses expire as indicated in the table below:
At December 31, 2014
Losses carried forward expiring in:
2015
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
Canada
------------------------------------------------------------------------------------------------
Provincial
Federal
Foreign
Countries
$
832
-
-
-
-
5,642
5,914
8,245
3,151
3,681
4,463
3,923
8,065
18,458
$
-
-
-
-
-
5,008
4,772
6,918
2,099
2,511
4,393
3,102
7,454
18,302
$
-
1,682
2,734
3,676
2,873
2,762
9,564
9,911
3,866
9,213
8,737
1,645
451
10,913
$
62,374
$
54,559
$
68,030
At December 31, 2014, the Corporation also has tax losses which arose in the United Kingdom of $16,354 that are available to
reduce future taxable income for which benefits have not been recognized. These tax attributes can be carried forward
indefinitely.
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26. DILUTED EARNINGS (LOSS) PER SHARE
The diluted earnings (loss) per share calculation assumes the conversion of the warrant liability, warrants and rights, stock
options and RSU only when their individual effect is dilutive. In the periods where the Corporation incurred net losses,
these instruments are anti-dilutive.
The denominators used to calculate diluted earnings (loss) per share for the years presented were calculated as follows:
Denominator
Weighted average number of shares outstanding - basic
Adjusted for the assumed exercise of:
Warrants and rights
Stock options
Restricted stock units
2014
2013
530,422,168
485,102,588
34,566,304
9,564,174
3,542,918
-
-
-
Weighted average number of shares outstanding - diluted
578,095,564
485,102,588
No adjustments were required to the numerators.
27. SEGMENTED INFORMATION
The Corporation has two operating segments which are Therapeutics and Protein Technology.
Therapeutics: This operating segment is a small molecule drug discovery business. It has lead compounds, namely
PBI-4050 which target unmet medical needs such as the treatment of fibrosis in patients with chronic kidney diseases and
certain cancers, and the side effects associated with chemotherapy.
Protein Technology: This operating segment contains the financial information of the following activities:
BioTherapeutics: The developer of a unique, validated, state-of-the-art solution for plasma fractionation, the Plasma
Protein Purification System (PPPSTM).
Bioseparation: Develops and markets bioseparation products based on applications of its patented Mimetic LigandTM
technology.
Prion Capture/Pathogen Removal: Provides a technology platform that improves the safety profile of blood products and
blood derived therapeutics.
Corporate: The Corporate results include the activities and the related expenses pertaining to public entity reporting
obligations, investor relations, financing and other corporate office activities.
The accounting policies for the segments are the same as those outlined in note 2. During the quarter ended
September 30, 2014, ProMetic modified the presentation of the segmented information by reflecting in the segments the
allocation of administrative support expenses from Corporate to the Therapeutics and Protein Technology segments. This
change has been applied retrospectively for all the periods presented.
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The operating expenses for NantPro are included in the Protein Technology segment since May 8, 2014. When it was
accounted for as an associate, the net loss in an associate was presented under Corporate.
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a) Revenues and expenses by operating segments
For the year ended December 31, 2014
Therapeutics)
Protein)
Technology)
Corporate)
Total)
Revenues
$
13)
$
22,997)
$
Cost of goods sold
Research and development expenses
recharged
Research and development expenses
non-rechargeable
Administration, selling and marketing
expenses
Loss (gain) on foreign exchange
Finance costs
Fair value variation of warrant liability
Gain on revaluation of equity investment
Purchase gain on business combination
Gain on settlement of litigation
-)
-)
6,325)
1,880)
(3)
15)
-)
-)
-)
-)
7,015)
3,053)
25,822)
5,693)
2,518)
175)
-)
(34,376)
(14,812)
(465)
`
-)
-)
-)
-)
5,332)
(2,617)
2,570)
15,365)
-)
-)
-)
$
23,010)
7,015)
3,053)
32,147)
12,905)
(102)
2,760)
15,365)
(34,376)
(14,812)
(465)
Net profit (loss) before income taxes
$
(8,204)
$
28,374)
$
(20,650)
$
(480)
For the year ended December 31, 2013
Therapeutics)
Protein))
Technology))
Corporate)
Total)
Revenues
$
14)
$
20,630)
$
Costs of goods sold
Research and development expenses
recharged
Research and development expenses
non-rechargeable
Administration, selling and marketing
expenses
Loss on foreign exchange
Gain on recognition of loan receivable
Loss on extinguishment of debt
Finance costs
Fair value variation of warrant liability
Loss in an associate
-)
-)
4,748)
2,289)
-)
-)
-)
-)
-)
-)
6,671)
5,050)
8,980)
3,690)
-)
-)
-)
233)
-)
-)
-)
-)
-)
-)
2,353)
(638)
(3,015)
423)
1,573)
5,485)
69)
$
20,644)
6,671)
5,050)
13,728)
8,332)
(638)
(3,015)
423)
1,806)
5,485)
69)
Net loss before income taxes
$
(7,023)
$
(3,994)
$
(6,250)
$
(17,267)
Segmented information by operating segment
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b) Total assets by operating segment
Therapeutics
Protein Technology
Corporate
$
2014
3,351
172,965
27,127
$
203,443
$
$
2013
3,157
28,757
17,958
49,872
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c) Capital and intangible assets by operating segment
Therapeutics
Protein Technology
Corporate
d) Acquisition of capital and intangible assets by operating segment
Therapeutics
Protein Technology 1
Corporate
$
2014
2,492
156,986
469
$
159,947
$
2014
600
146,470
342
$
147,412
$
$
$
$
2013
2,160
11,941
193
14,294
2013
549
8,870
184
9,603
1 On May 8, 2014, the Corporation completed a business combination in which intangible assets, valued at $141 million
were acquired (note 6).
e) Total liabilities by operating segment
Therapeutics
Protein Technology
Corporate
Information by geographic area
f) Total assets by geographic area
Canada
United States
United Kingdom
g) Capital and intangible assets by geographic area
Canada
United States
United Kingdom
$
2014
1,849
47,372
49,791
$
99,012
$
2014
41,419
151,479
10,545
$
203,443
$
2014
12,198
144,283
3,466
$
159,947
$
$
$
$
$
$
2013
597
10,551
20,086
31,234
2013
30,491
8,829
10,552
49,872
2013
9,652
2,312
2,330
14,294
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h) Acquisition of capital and intangible assets by geographic area
Canada
United States
United Kingdom
i) Revenues by location
Russia
Austria
United States
Switzerland
Netherlands
Taiwan
United Kingdom
Other countries
$
$
$
$
2014
3,510
142,321
1,581
$
147,412
$
2014
6,856
5,465
5,126
3,795
981
551
71
165
2013
7,943
944
716
9,603
2013
-
7,663
8,594
1,013
142
2,575
490
167
$
23,010
$
20,644
Revenues are attributed to countries based on the location of customers or the licensees.
The Corporation derives significant revenues from certain customers. During the year ended December 31, 2014, there
were three customers (one of them being NantPro) who accounted for 69% (16%, 23% and 30% respectively) of total
revenues in the Protein Technologies segment. For the year ended December 31, 2013, there were three customers (one
of them being NantPro) who accounted for 83% (12%, 34% and 37% respectively) of total revenues, also in the Protein
Technologies segment.
28. RELATED PARTY TRANSACTIONS
Balances and transactions between the Corporation and its subsidiaries, which are related parties of the Corporation,
have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Corporation
and other related parties are disclosed below, and in other notes accordingly to the nature of the transactions.
Following a consulting agreement entered into with a director of the Corporation in 2012, success fees of 5% of the
relevant proceeds received by the Corporation, for a total of $600, were payable to the director. As at December 31, 2014,
$Nil remained unpaid ($250 at December 31, 2013).
During the year ended December 31, 2014, interest revenues in the amount of $19 ($16 for the year ended
December 31, 2013) were recorded on the share purchase loan to an officer and included in the advance to an officer.
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29. COMPENSATION OF KEY MANAGEMENT PERSONNEL
The Corporation’s key management personnel comprises the external directors and the majority of the management
team. The remuneration of the key management personnel during the years ended December 31, 2014 and 2013 was as
follows:
Short-term employee benefits 1
Pension costs
Share-based payments
2014
3,292
115
4,455
7,862
$
$
$
$
2013
2,650
95
2,822
5,567
1 Short-term employee benefits include all fees paid to directors and to certain senior management employees such as
salaries, bonuses and the cost of other employee benefits.
30. CONTINGENCIES
During the year ended December 31, 2012, the Corporation was served with a lawsuit in the Federal Court of Canada
(Court) relating to a claim for infringement of two Canadian issued patents (numbers CA 2,394,369 and CA 2,392,811) held
by a third party plaintiff, GE Healthcare Biosciences AB. The Corporation instructed outside legal counsel to prepare,
serve and file a statement of defence on the infringement claims, in addition to a counterclaim requesting that the Court
declare both patents invalid and unenforceable. The statement of defence was filed in August 2012. The Corporation
received a reply and defence to its counterclaim from the plaintiff in November 2012. The proceedings are following their
normal course and a court hearing is scheduled for November 2016. Since the plaintiff has claimed unspecified damages
and none of the allegations in the claim provide any information as to the basis upon which the plaintiff would be claiming
monetary compensation and on the basis that the Corporation does not believe that this claim will be successful, the
Corporation has not taken a provision in the consolidated financial statements.
31. COMMITMENTS
a) The Corporation has total commitments in the amount of $25,818 under various operating leases for the rental of offices,
production plant, and laboratory space and office equipment. The payments for the coming years and thereafter are as
follows:
2015
2016
2017
2018
2019 and thereafter
$
$
2,917
2,985
2,943
2,690
14,283
25,818
The total rental expenses for the year ended December 31, 2014 amounted to $2,398 ($1,590 for the year ended
December 31, 2013).
b)
In April 2006, the Corporation paid the American Red Cross an amount of US$1,000,000 for an exclusive license for
access to and use of intellectual property rights for the Plasma Protein Purification System (“PPPS”). ProMetic will collect
revenues derived from any licensing activities, such as royalties on net sales, lump sum amounts and/or milestone
payments. ProMetic will pay a royalty to the American Red Cross of 12% of all revenues derived from sales of products to
third parties. Also, every year, an annual minimum royalty of US$30,000 is payable.
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c) An officer of the Corporation is entitled to receive royalties based on the sales of certain products made available
to ProMetic before joining the Corporation. These royalties are 0.5% of net sales or 3% of revenues received by the
Corporation. This employee also has the exclusive right to commercialize these products should ProMetic decide to stop
developing and/or commercializing them, subject to mutually acceptable terms and conditions. To date, no royalties have
been accrued or paid.
d)
In the normal course of business, the Corporation enters into license agreements for the market launching or
commercialization of products. Under these licenses, including those mentioned above, the Corporation has committed
to pay royalties ranging generally between 0.5% and 15.5% of net sales from products it commercializes.
32. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
a) Fair value
The fair values of financial assets and financial liabilities for which fair value disclosure is required, together with the
carrying amounts included in the statement of financial position, are as follows:
Financial assets
Cash
Restricted cash
Financial liabilities
Warrant liability
Long-term debt
2014
Carrying
amount
Fair
value
Carrying
amount
Fair
value
2013
$
27,102
151
$
27,102
151
$
17,396
139
$
17,396
139
24,676
23,244
24,676
24,633
9,311
6,217
9,311
6,829
The warrant liability is carried at fair value and the methodology used is discussed in note 15. The fair value of the
long-term debt at December 31, 2014 is $15,992 for the OID loan maturing on July 31, 2019 and $8,641 for the OID loan
maturing on September 10, 2018 and was calculated using the same methodology as disclosed in note 16 and a market
interest rate of 15.58% and 14.31%. This amount differs from the carrying value of the long-term debt of $23,244 which is
carried at amortized cost.
Fair value hierarchy
Financial instruments recorded at fair value on the consolidated statements of financial position 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 – valuation based on quoted prices observed in active markets for identical assets or liabilities.
Level 2 – 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.
Level 3 – 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. Cash and restricted cash are considered to be level 1 fair value measurements, the long-term debt a
level 2 measurement whereas the warrant liability is considered a level 3 measurement.
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b) Financial risk management
The Corporation has exposure to credit risk, liquidity risk and market risk.
The Corporation’s Board of Directors has the overall responsibility for the oversight of these risks and reviews the
Corporation’s policies on an ongoing basis to ensure that these risks are appropriately managed.
i) Credit risk:
Credit risk is the risk of financial loss to the Corporation if a customer, partner or counterparty to a financial instrument fails
to meet its contractual obligations, and arises principally from the Corporation’s cash, investments, receivables and share
purchase loan to an officer. The carrying amount of the financial assets represents the maximum credit exposure.
The Corporation reviews a new customer’s credit history before extending credit and conducts regular reviews of its
existing customers’ credit performance.
The Corporation evaluates accounts receivable balances based on the age of the receivable, credit history of the
customers and past collection experience. As at December 31, 2013, there were doubtful amounts related to past due
accounts as indicated in the following table:
Trade receivables
Current and not impaired
Past due in the following periods:
31 to 60 days
61 to 90 days
Over 90 days
Allowance for doubtful accounts - over 90 days
2014
2013)
$
8,121
$
3,410)
167
11
149
-
$
8,448
$
293)
2,177)
2,899)
(260)
8,519)
Trade receivables included amounts from two customers which represent approximately 93% (11% and 82% respectively)
of the Corporation’s total trade accounts receivable as at December 31, 2014 and three customers which represent
approximately 93% (16%, 31%, 46%, respectively) of total trade receivables as at December 31, 2013.
ii) Liquidity risk:
Liquidity risk is the risk that the Corporation will not be able to meet its financial obligations as they come due. The
Corporation manages its liquidity risk by continuously monitoring forecasts and actual cash flows.
The following table presents the contractual maturities of the financial liabilities as of December 31, 2014.
At December 31, 2014
Trade and other payables
Advance on revenues
from a supply agreement
Long-term debt *
Contractual Cash flows
Carrying
amount
Payable
within 1 year
4 -5 years
Total
$
9,102
$
9,102
$
-
$
9,102
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3,191
23,244
3,246
-
-
46,959
$
35,537
$
12,348
$
46,959
$
3,246
46,959
59,307
* Under the terms of the long-term debt, the holder of Second and Third Warrants (see notes 15 and 16) may decide
to cancel a portion of the face values of the OID loans as payment on the exercise of these warrants. The maximum
repayment due on these loans has been included in the above table.
This table only covers liabilities and obligations, and does not anticipate any of the income associated with assets or rights.
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iii) Market risk:
Market risk is the risk that changes in market prices, such as interest rates and foreign exchange rates, will affect the
Corporation’s income or the value of its financial instruments.
a)
Interest risk
The majority of the Corporation’s debt is at a fixed rate, therefore there is limited exposure to changes in interest
payments as a result of interest rate risk.
b) Foreign exchange risk:
The Corporation is exposed to the financial risk related to the fluctuation of foreign exchange rates. The Corporation
operates in the United Kingdom and in the United States and a portion of its expenses incurred are in U.S dollars and in
Great British Pounds (“GBP”). The majority of the Corporation’s revenues are in U.S. dollars and in GBP which serve to
mitigate a portion of the foreign exchange risk relating to the expenditures. Financial instruments potentially exposing
the Corporation to foreign exchange risk consist principally of cash, receivables, trade and other payables, and advance
on revenues from a supply agreement. The Corporation manages foreign exchange risk by holding foreign currencies to
support forecasted cash outflows in foreign currencies.
As at December 31, 2014 and 2013, the Corporation was exposed to currency risk through the following assets and
liabilities denominated respectively in U.S. dollars and GBP:
-----------------------------------------------
Exposure in US dollars
Cash
Accounts receivable
Trade and other payables
Net exposure
Amount due)
in US dollar)
2014---------------------- 2013----------------------
Equivalent in)
full CDN dollar)
Equivalent in)
full CDN dollar)
Amount due)
in US dollar)
605,507)
6,798,339)
(2,443,195)
702,449)
7,886,753)
(2,834,350)
54,198)
8,222,171)
(1,622,841)
57,644)
8,745,102)
(1,726,054)
4,960,652)
5,754,852)
6,653,528)
7,076,692)
Exposure in GBP
Amount)
due in GBP)
2014----------------------
Equivalent in)
full CDN dollar)
Amount)
due in GBP)
2013-----------------------
Equivalent in)
full CDN dollar)
Cash
Accounts receivable
Trade and other payables
Advance on revenues from a supply agreement
138,845)
1,358,577)
(913,105)
(1,766,372)
250,907)
2,455,084)
(1,650,072)
(3,192,010)
450,725)
1,082,650)
(806,450)
(1,955,527)
794,492)
1,908,388)
(1,421,530)
(3,447,007)
Net exposure
(1,182,055)
(2,136,091)
(1,228,602)
(2,165,657)
Based on the above net exposures as at December 31, 2014, and assuming that all other variables remain constant, a 10 %
depreciation or appreciation of the Canadian dollar against the U.S. dollar would result in a decrease or an increase of the
consolidated net profit of approximately $575.
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A 10 % depreciation or appreciation of the Canadian dollar against the GBP would result in a decrease or an increase of
the accumulated other comprehensive income of approximately $213. The Corporation has not hedged its exposure to
currency fluctuations.
33. COMPARATIVE INFORMATION
Certain of the December 31, 2013 figures have been reclassified to conform to the current year’s presentation.
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34. SUBSEQUENT EVENTS
On March 27, 2015, the Corporation and the customer who is party to the advance on revenues from a supply agreement
disclosed in note 14, amended the loan agreement further extending the maturity date of the unpaid balance of the
advance, if any, to April 30, 2018.
On March 31, 2015, the Corporation and the holder of the long-term debt disclosed in note 16 amended the terms of the
two OID loans by extending the maturity dates of the loans to July 31, 2022 without changing the face values of the loans,
modifying certain terms and conditions including affirmative and negative covenants, and including a right of repayment
of the OID loans commencing on September 13, 2018. In consideration of the above modifications, the Corporation has
issued seven million warrants to purchase common shares of the Corporation. The exercise price for a warrant shall be the
greater of (i) $3.00 per common share and (ii) the volume weighted average trading price of the common shares on the
TSX for the five trading day-period following the date of release of the annual financial statements of the Corporation for
the period ended December 31, 2014. The warrants expire on July 31, 2022. The Corporation also granted a pre-emptive
right to the debt holder to participate in any future public offering or private placement of ProMetic’s common shares
or securities convertible or exchangeable into common shares. The Corporation is currently assessing the accounting
treatment for these modifications.
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MANAGEMENT TEAM
BOARD OF DIRECTORS
Positions – Committees
1 Audit & Risk Committee
Paul Mesburis (Chair)
Simon Best
Nancy Orr
Benjamin Wygodny
2 HR & Compensation Committee
Nancy Orr (Chair)
Simon Best
Raymond Hakim
Louise Ménard
3 Corporate Governance Committee
Louise Ménard (Chair)
Simon Best
Raymond Hakim
Benjamin Wygodny
Simon Best 1, 2, 3
Chairman of the Board
ProMetic Life Sciences Inc.
Chairman of
Edinburgh Bioquarter
Stefan Clulow
Chief Investment Officer &
Managing Director
Thomvest Asset Management Inc.
Raymond Hakim 2, 3
Clinical Professor of Medicine
Vanderbilt University Medical Centre
Charles Kenworthy
Executive Vice-President,
Corporate Strategy
NantWorks LLC
Pierre Laurin
President & Chief Executive Officer
ProMetic Life Sciences Inc.
Louise Ménard 2, 3
President
Groupe Méfor Inc.
Paul Mesburis 1
Chartered Professional Accountant
John Moran 2
Chief Medical Officer
ProMetic Life Sciences Inc.
Nancy Orr 1, 2
Consultant
Bruce Wendel 3
Acting Chief Executive Officer
Scientific Protein Laboratories LLC
Chief Strategy Officer
Hepalink USA
(formerly H3 Life Science)
Benjamin Wygodny 1, 3
President
Angus Partnership Inc
and 3188795 Canada Inc.
Pierre Laurin, B.Sc.Pharm., M.Sc.
President & Chief Executive Officer
ProMetic Life Sciences Inc.
Bruce Pritchard, BA, CA, MloD.
Chief Operating Officer &
Chief Financial Officer
ProMetic Life Sciences Inc.
Patrick Sartore, B.Sc., LLB
General Counsel &
Corporate Secretary
ProMetic Life Sciences Inc.
Dwun-Hou (Tom) Chen, Ph.D.
Senior Vice-President of
Product and Asia-Pacific Development
ProMetic BioTherapeutics, Inc.
John Moran, MD
Chief Medical Officer
ProMetic Life Sciences Inc.
Frédéric Dumais, B.Com., LLB
Director, Communications
and Investor relations
ProMetic Life Sciences Inc.
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CORPORATE INFORMATION
HEADQUARTERS
ProMetic Life Sciences Inc.
(Canada)
440 Armand-Frappier Blvd, Suite 300
Laval, Quebec H7V 4B4
Canada
+450.781.0115
Tel.:
+450.781.4477
Fax:
Email:
info@prometic.com
Web: www.prometic.com
Investor Relations
Frédéric Dumais, B. Comm., L.L.B.
Tel.:
Email:
Email:
+450.781.0115 ext. 2234
f.dumais@prometic.com
investor@prometic.com
THERAPEUTICS
ProMetic BioSciences Inc.
(Canada)
500 Cartier Blvd. West, Suite 150
Laval, Quebec H7V 5B7
Canada
Tel.:
Fax:
Email:
+450.781.0115
+450.781.1403
info@prometic.com
BIOSEPARATION TECHNOLOGIES
AND PLASMA-DERIVED
THERAPEUTICS (BIOLOGICALS)
ProMetic BioSciences Ltd
(United Kingdom)
R&D
Unit 1, Horizon Park
Barton Road, Comberton
Cambridge CB23 7AJ
United Kingdom
Tel.:
Fax:
Email: sales-pbl@prometic.com
+44(0)1223.420.300
+44(0)1223.420.270
Manufacturing
(United Kingdom)
Freeport
Ballasalla, Isle of Man
IM9 2AP
British Isles
Tel.:
Fax:
Email: sales-pbl@prometic.com
+44(0)1624.821.450
+44(0)1624.821.451
North American Sales Office
Tel.: +301.251.8821
Fax: +301.251.8826
Email: sales-pbl@prometic.com
Manufacturing
(Canada)
531 des Prairies Blvd, Bldg. 15
Laval, Quebec H7V 1B7
Canada
+450.781.0115
Tel.:
Fax:
+450.781.4477
Email: sales-pbl@prometic.com
ProMetic BioTherapeutics, Inc.
(United States)
1330 Piccard Drive, Suite 201
Rockville, Maryland 20850
USA
Tel.:
Fax:
Email:
+301.917.6320
+301.838.9023
info@prometic.com
Auditors
Ernst & Young LLP
800 René-Lévesque Blvd. W., Suite 1900
Montreal, Quebec H3B 1X9
Canada
Transfer Agent and Registrar
Computershare Trust Company
of Canada
1500 Robert-Bourassa Blvd, Suite 700
Montreal, Quebec H3A 3S8
Canada
Listing: Toronto Stock Exchange
Symbol: PLI
Outstanding shares as of
December 31, 2014:
547,627,835
OTCQX
Symbol: PFSCF
Annual Meeting of Shareholders
Wednesday, May 13, 2015 at 10:30 (AM)
Montreal Stock Exchange Tower
800 Square-Victoria Street
Montreal, Quebec H3C 1E8
Canada
Annual Information Form
The 2014 Annual Information Form
of ProMetic Life Sciences Inc. is
available upon request from the
Company’s Head Office or by accessing
the SEDAR (System for Electronic
Document Analysis and Retrieval) site,
www.sedar.com.
On peut se procurer la version
française du présent rapport annuel
en s’adressant au service des relations
avec les investisseurs de ProMetic
Sciences de la Vie inc. ou sur notre site
internet à l’adresse www.prometic.com.
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www.prometic.com