Novoheart Holdings Inc. (“Novoheart” or the “Company”) reports financial results for the three and six months ended June 30, 2020. Amounts, unless specified otherwise, are expressed in Canadian dollars and are in accordance with International Financial Reporting Standards (IFRS).

Business Highlights:

  • Patent application filed on next-generation “human heart-in-a-jar” bioreactor
  • Successful completion of a commercial contract with a top-20 pharmaceutical company
  • Assessed the cardiac safety of a proposed COVID-19 treatment
  • Soft opening of Novoheart’s newly renovated research lab and office in Hong Kong
  • Awarded the outstanding Biomedical Technology Award in the 2020 CAPITAL Outstanding Enterprise Awards

Patent application filed on next-generation “human heart-in-a-jar” bioreactor

In June 2020, the Company filed a US Provisional patent application on a next-generation bioreactor for the “human heart-in-a-jar” with multiple important new features that were not available in previous versions. With the new design, this next-generation bioreactor will provide finer control of mini-heart chamber properties, crucial for human models of cardiac diseases. The additional disease modelling capabilities will attract drug developers given the industry-wide demand for a reliable, human-specific model to test the safety and efficacy of new therapeutic candidates.   

Successful completion of a commercial contract with a top-20 pharmaceutical company

In April 2020, Novoheart completed its commercial agreement with a top-20 pharmaceutical company utilizing the company’s human ventricular Cardiac Tissue Strips (hvCTS) to study the effects of blinded drugs on cardiac contractility.

Assessed the cardiac safety of a proposed COVID-19 treatment on cardiac contractility and arrhythmogenicity

Novoheart completed a study in May 2020 using our human engineered cardiac constructs to investigate the effects of hydroxychloroquine and azithromycin on contractility and arrhythmogenicity in human hearts. Our engineered cardiac constructs provided a useful platform for screening cardiac safety and efficacy when developing therapeutics against COVID-19.

Soft opening of Novoheart’s newly renovated research lab and office in Hong Kong

On June 22, 2020, the Company had its soft launch opening of the newly renovated research lab and office in Hong Kong. The site houses the Company’s state-of-the-art research facility with a bigger office and laboratory. The facility will provide much-needed space to accommodate our growth and enables us to hire additional talent to continue to provide industry-leading service to our global clients. 

Awarded the outstanding Biomedical Technology Award in the 2020 CAPITAL Outstanding Enterprise Awards The CAPITAL Outstanding Enterprise Awards are one of the most recognized enterprise awards in Hong Kong, with the aim to acknowledge enterprises which have outstanding performance and achievement during the year. Novoheart was delighted that its revolutionary technologies had earned recognition among the Hong Kong business community.

Financial Results for the three and six months ended June 30, 2020

The Company recorded a net loss after tax of $1,901,944 (loss per share of $0.01) for the three months ended June 30, 2020 compared to a net loss after tax of $2,582,062 (loss per share of $0.03) for the three months ended June 30, 2019. On a year-to-date basis, the Company recorded a net loss of $4,738,984 (loss per share of $0.03) for the six months ended June 30, 2020 compare to a net loss of $3,761,260 (loss per share of $0.04) for the six months ended June 30, 2019.

Revenue and Cost of Sales

For the three months ended June 30, 2020, the Company recorded revenue of $39,662 and cost of sales of $17,683 compared to revenue of $51,821 and cost of sales of $24,620 for the three months ended June 30, 2019. The Company recorded revenue of $49,782 and cost of sales of $21,537 for the six months ended June 30, 2020 compared to revenue of $159,776 and cost of sales of $73,743 for the six months ended June 30, 2019. Starting in March 2020, COVID-19 has a global impact which impacted a number of the Company’s partners. The impact continued to be felt by Novoheart and its partners throughout Q2 2020, causing delays in communication and contract execution.

Operating Expenses

Operating expenses decreased from $2,611,560 for the three months ended June 30, 2019 to $2,411,107 for the three months ended June 30, 2020. The decrease in operating expenses primarily relates to depreciation expense, share-based compensation expense, general and administration expense, and marketing expense. The decrease was offset by increases in research and development expense, and intellectual and patent expenses.

During the three months ended June 30, 2020, depreciation expense decreased due to the write-off of leasehold improvements capitalized in Phase 3 of Hong Kong Science Park; previously capitalized leasehold improvements were removed in order to convert the space into a GMP facility. Share-based compensation expense decreased because most of the Company’s options were vested and recognized in previous periods. General and administrative expenses decreased mainly due to expenses incurred in the comparative quarter which were not in the current quarter; specifically, bonuses to personnel and professional fees related to the acquisition of Xellera Therapeutics Limited (the “Acquisition”) in June 2019. Marketing expenses decreased primarily due to the termination of the Company’s former Senior Vice President of Commercial Operations.

For the three months ended June 30, 2020 research and development expenses increased primarily due to the expansion of the Company’s scientific team and the Acquisition which was completed in June 2019. Intellectual property and patent expense increased due to filing of new patents as well as licensing agreements signed with Harvard University effective November 2019.

Operating expenses increased from $4,351,365 for the six months ended June 30, 2019 to $5,059,344 for the six months ended June 30, 2020. The increases in operating expenses is primarily related to general and administrative expense, research and development, and intellectual and patent expenses as compared to the six months ended June 30, 2019. The increase was offset by decreases in depreciation expense, share-based compensation expense, and marketing expense.

The increase in general and administrative expense for the six months ended June 30, 2020 is primarily due to increases in occupancy cost as a result of the lab and office expense and build-out of the GMP facility. Research and development expense and intellectual property and patent expense increased during the six months ended June 30, 2020 for the same reasons noted above for the three months ended June 30, 2020.

The primary reasons for decreases in depreciation expense, share-based compensation expense, and marketing expenses for the six months ended June 30, 2020 are the same reasons noted above for the three months ended June 30, 2020.

Liquidity and Outstanding Share Capital

As at June 30, 2020, the Company had cash and cash equivalents of $13,236,527. As at August 31, 2020, there were 188,640,774 common shares issued and outstanding, and 8,272,373 common shares issuable upon the exercise of outstanding stock options at an exercise price range from $0.32 to $0.50 per share.

Departure of Chief Scientific Officer of Xellera Therapeutics Limited

During Q2 2020, Dr. Roger Hajjar resigned as Chief Scientific Officer of Xellera Therapeutics Limited to take up a position with a private equity-owned business focusing on clinical research. Dr. Hajjar as CSO of XT contributed significantly to the directions of clinical translation during the early planning stage, particularly in the space of gene therapy, as the foundation of XT. In the coming months, the focus will be on the build out and regulatory licenses. Any scientific matters will be shared by the cofounders Drs. Godfrey Chan and Ronald Li with inputs from the Scientific Advisory Board co-chairs Drs. Marc Turner and Paul Tam. The Company would like to thank Dr. Hajjar for his contributions during his tenure and wishes him success in the future.

Departure of Chief Research Development Officer of Novoheart

Effective July 31, 2020, Dr. Bernard Fermini, the Company’s Chief Research & Development Officer, tenured his resignation. Dr. Fermini was recruited to assist the Scientific Co-Founders Drs. Kevin Costa and Ronald Li in research and development. His responsibilities have been transitioned to and handled in part by Drs. Costa and Li who are also the Company’s Chief Scientific Officer and Chief Executive Officer, respectively. The Company would like to thank Dr. Fermini for his contributions while serving as Chief Research & Development Officer.

ABOUT NOVOHEART HOLDINGS INC.

Novoheart is a global stem cell biotechnology company that pioneers an array of next-generation human heart tissue prototypes. It is the first company in the world to have engineered miniature living human heart pumps that can revolutionize drug discovery, helping to save time and money for developing new therapeutics. Also known as 'human heart-in-a-jar', Novoheart’s bio-artificial human heart constructs are created using state-of-the-art and proprietary stem cell and bioengineering approaches and are utilized by drug developers for accurate preclinical testing as to the effectiveness and safety of new drugs, maximizing the successes in drug discovery while minimizing costs and harm caused to patients. With the acquisition of Xellera Therapeutics Limited for manufacturing Good Manufacturing Product (GMP)-grade clinical materials, Novoheart is now developing gene- and cell-based therapies as well as other next-generation therapeutics for cardiac repair or regeneration.

Common shares of Novoheart are traded on the TSX Venture Exchange under the symbol “NVH”.

For further information please contact:

Novoheart Holdings Inc.Suite 2600, 595 Burrard StreetVancouver, British ColumbiaV7X 1L3

Ronald LiChief Executive Officer

(604) 398-3170info@novoheart.com

Cautionary Note Regarding Forward-Looking Statements

Information set forth in this news release may involve forward-looking statements under applicable securities laws. Forward-looking statements are statements that relate to future, not past, events. In this context, forward-looking statements often address expected future business and financial performance, and often contain words such as "anticipate", "believe", "plan", "estimate", "expect", and "intend", statements that an action or event "may", "might", "could", "should", or "will" be taken or occur, or other similar expressions. All statements, other than statements of historical fact, included herein including, without limitation; statements about the Company’s future plans, its goals and expectations, and the potential applications its MyHeart™ platform are forward-looking statements. By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the risks identified in the management discussion and analysis section of Novoheart Holdings Inc.’s interim and most recent annual financial statement or other reports and filings with the TSX Venture Exchange and applicable Canadian securities regulators. Forward-looking statements are made based on management's beliefs, estimates and opinions on the date that statements are made and the respective companies undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change, except as required by applicable securities laws. Investors are cautioned against attributing undue certainty to forward-looking statements.

NOVOHEART HOLDINGS INC.Condensed Consolidated Interim Statements of Financial Position (unaudited)(Expressed in Canadian dollars)

      June 30,2020     December 31,2019  
           
ASSETS          
           
Current          
Cash and cash equivalents   $ 13,236,527   $ 12,167,583  
Pledged bank deposit     -     5,004,000  
Accounts and other receivables     82,236     317,819  
Prepaid expenses and deposits     311,392     475,638  
      13,630,155     17,965,040  
           
Property and equipment, net     691,083     532,589  
Right-of-use assets     6,570,247     6,996,852  
Intangible assets, net     199,599     231,052  
Construction in progress     774,800     -  
Goodwill     8,806,998     8,806,998  
           
    $ 30,672,882   $ 34,532,531  
           
LIABILITIES AND SHAREHOLDERS' EQUITY        
         
Current        
Accounts payable and accrued liabilities   $ 833,339   $ 921,672  
Lease liabilities – current     1,298,489     1,124,678  
Contract liabilities     34,130     22,549  
Deferred government grants     58,265     8,253  
Due to related parties     -     32,835  
      2,224,223     2,109,987  
           
Lease liabilities – non-current     5,036,241     5,555,838  
Restoration provision     476,323     451,937  
Long-term license payable     -     24,238  
           
      7,736,787     8,142,000  
           
Shareholders' Equity          
Share capital     52,179,118     52,179,118  
Contributed surplus     2,237,675     1,888,156  
Accumulated other comprehensive income     1,247,656     312,627  
Accumulated deficit     (32,728,354 )   (27,989,370 )
      22,936,095     26,390,531  
           
    $ 30,672,882   $ 34,532,531  

NOVOHEART HOLDINGS INC.

Condensed Consolidated Interim Statements of Loss and Comprehensive Loss (unaudited)(Expressed in Canadian dollars, except number of common shares)

                              Three months ended                             Six months ended
      June 30, 2020     June 30, 2019     June 30, 2020     June 30, 2019  
             
Revenue   $              39,662   $              51,821   $             49,782   $               159,776  
Cost of sales     17,683     24,620     21,537     73,743  
      21,979     27,201     28,245     86,033  
OPERATING EXPENSES            
Research and development     773,233     709,039     1,498,650     1,241,717  
Intellectual property and patent     151,820     105,731     305,591     168,124  
General and administrative     1,160,648     1,235,148     2,445,491     1,812,283  
Marketing     134,775     175,221     280,443     342,486  
Share-based compensation     140,094     216,244     349,519     448,351  
Depreciation and amortization     50,537     170,177     179,650     338,404  
      2,411,107     2,611,560     5,059,344     4,351,365  
LOSS FROM OPERATIONS     (2,389,128 )   (2,584,359 )   (5,031,099 )   (4,265,332 )
             
Government grants     351,111     79,602     405,352     543,929  
Other income     260,283     223     335,841     410  
Loss on disposal     (3,149 )   -     (188,841 )   -  
Finance expense     (117,659 )   (11,218 )   (225,564 )   (11,667 )
Foreign exchange (loss) / gain     (3,402 )   (36,772 )   (500 )   938  
      487,184     31,835     326,288     533,610  
             
NET LOSS FOR THE PERIOD BEFORE TAX           (1,901,944 )           (2,552,524 )           (4,704,811 )           (3,731,722 )
             
Tax expense     3,794     29,538     34,173     29,538  
             
NET LOSS FOR THE PERIOD     (1,905,738 )   (2,582,062 )   (4,738,984 )   (3,761,260 )
             
OTHER COMPREHENSIVE (LOSS) INCOME            
Foreign currency translation adjustment     (618,616 )   66,393     935,029     29,957  
             
COMPREHENSIVE LOSS FOR THE PERIOD   $      (2,524,354 ) $      (2,515,669 ) $      (3,803,955 ) $      (3,731,303 )
             
Loss per share – Basic and Diluted   $ (0.01 ) $               (0.03 ) $              (0.03 ) $               (0.04 )
             
             
Weighted average number of shares outstanding – basic and diluted   $ 188,640,774     97,438,816     188,640,774     96,014,445  
           

NOVOHEART HOLDINGS INC.

Condensed Consolidated Interim Statements of Cash Flows (unaudited)(Expressed in Canadian dollars)

                                      
For the six months ended     June 30, 2020     June 30, 2019  
       
CASH FLOWS FROM OPERATING ACTIVITIES      
Net loss for the period after taxes   $    (4,738,984 ) $    (3,761,260 )
Items not affecting cash:      
Share-based compensation     349,519     448,351  
Lease liabilities interests     225,564     -  
Amortization of right-of-use assets     804,591     -  
Depreciation and amortization     179,650     338,404  
Loss on disposal     188,841     -  
Reduction on lease liabilities due to rent concessions     (214,113 )   -  
      (3,204,932 )   (2,974,505 )
Changes in non-cash working capital items:      
Decrease in accounts and other receivables     252,814     357,126  
Decrease / (increase) in prepaid expenses and deposits     182,733     (184,845 )
(Decrease) / increase in accounts payable and accrued liabilities     (120,878 )   411,158  
Decrease in due to related parties     (34,614 )   (2,231 )
Decrease in other long-term liabilities     (25,560 )   (39,256 )
Increase / (decrease) in deferred government grants     49,595     (11,398 )
Increase in contract liabilities     7,917     475,590  
      312,007     1,006,144  
               
 Net cash used in operating activities     (2,892,925 )   (1,968,361 )
       
CASH FLOWS FROM INVESTING ACTIVITIES      
Acquisition of equipment     (454,376 )   (47,270 )
Acquisition of construction in progress     (775,240 )   -  
Cash acquired from acquisition of subsidiary     -     22,692,695  
Decrease / (increase) in pledged bank deposit     5,004,000     (5,028,000 )
       
Net cash generated from investing activities     3,774,384     17,617,425  
       
CASH FLOWS FROM FINANCING ACTIVITIES      
Proceeds from loans     -     1,688,417  
Payment of lease liabilities and interests     (718,100 )   -  
       
Net cash (used in) / generated from financing activities     (718,100 )   1,688,417  
       
Changes in cash and cash equivalents during the period       163,359       17,337,481  
       
Effect of exchange rate changes on cash held in a foreign currency       905,585       141,742  
Cash and cash equivalents, beginning of period     12,167,583     666,494  
       
Cash and cash equivalents, end of period     13,236,527     18,145,717  
       
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