Novoheart Holdings Inc. Reports Second Quarter and Fiscal 2019 Financial Results

VANCOUVER, British Columbia, March 11, 2020 (GLOBE NEWSWIRE) -- Novoheart Holdings Inc. (“Novoheart” or the “Company”) reports financial results for the three and six months ended December 31, 2019. Amounts, unless specified otherwise, are expressed in Canadian dollars and are in accordance with International Financial Reporting Standards (IFRS).

Ronald Li, CEO of Novoheart, commented, “During the past quarter, we have been pleased to announce a number of major milestones that recognize consistent advances in our technology and also demonstrate the depth of our integration with multiple leading organizations at the forefront of drug discovery and development.

Two Pfizer-coauthored studies demonstrated the advanced capabilities of the MyHeart platform for drug screening as well as disease modelling, a collaboration with AstraZeneca will see Novoheart co-develop the world’s first Human Heart-in-a-jar Model of heart failure, an exclusive licensing agreement with Harvard University will lead the co-development of a next-generation heart model with significantly enhanced predictive accuracy, capacity and versatility and the award of a multi-million dollar R&D grant by the Innovation & Technology Commission (ITC) in recognition of the consistent advances in the Company's technology. 

We are in a period of significant growth and commercial expansion and expect this strong momentum to continue throughout 2020 further driving both market confidence and industry confidence.”

Business Highlights:

• Co-developing first of its kind human heart-in-a-jar model of heart failure with AstraZeneca
• Exclusively licensed technology from Harvard University to develop next-generation human heart-in-a-jar
• Completion of Phase II of a commercial agreement with a top-10 Global Pharmaceutical Company (“Global Pharma Partner”) to develop high throughput drug screening
• Awarded $1.67 million in research funding

Co-developing first of its kind human heart-in-a-jar model of heart failure with AstraZeneca

In November 2019, the Company announced a collaboration with global biopharmaceutical company AstraZeneca, to develop the world’s first human-specific in vitro, functional model of heart failure with preserved ejection fraction (HFpEF), accounting for approximately 50% of heart failure.

In collaboration with the Cardiovascular, Renal and Metabolism therapy area of AstraZeneca, the Company aims to provide a unique assay for understanding the mechanisms of HFpEF, identification of new therapeutic targets, and assessment of novel therapeutics for treating HFpEF patients. Novoheart will exclusively own the intellectual property rights to the newly developed HFpEF hvCOC model.

Exclusively licensed technology from Harvard University to develop next-generation human heart-in-a-jar

In November 2019, the Company entered into an exclusive licensing agreement with Harvard University’s Office of Technology Development.

The agreement enables Novoheart to combine MyHeart^TM Platform with Harvard’s pioneering tissue-engineered scale model of the cardiac ventricle and bioreactor technology. The combination of these two technologies will elevate Novoheart’s cardiac disease modeling capabilities to an unprecedented level in the field, allowing for greatly improved translation of an in vitro model to predict clinical outcome with a higher accuracy. We anticipate that incorporating Harvard’s technology will broaden our commercial applications and offerings for facilitated drug discovery and development.

Completion of Phase II of a commercial agreement with the Global Pharma Partner to develop high-throughput drug screening as a potential recurrent revenue-generating avenue

In December 2019, Novoheart completed Phase II of a commercial agreement with the Global Pharma Partner. Upon completion of Phase II, the Company recognized $198,078 of revenue for the six months ended December 31, 2019. The Company has received approximately $400,000 from the Global Pharma for Phase I and Phase II of the commercial agreements, The contract deliverables will expand the Company’s testing capabilities of its platform, by designing and developing a new versatile high-throughput microplate which will allow the screening of hundreds of drugs using engineered human ventricular Cardiac Tissue Strips (hvCTS). Termed the hvCTS-96, the disposable microplate will be compatible with robotic plate handling systems for automated high-throughput screening.

The hvCTS-96 will increase the breadth and depth of the MyHeart^TM Platform by offering a range of complementary but distinctive novel technologies to clients as tools for testing the efficacy and safety of drugs by predicting human responses. The patent-pending, custom-designed microplates are to be sold on an ongoing basis as a screening and research tool to the contracted pharma partner, as well as being marketed and sold to other global organizations in the business of drug screening and development. Novoheart retains ownership of all intellectual property rights relating to the new microplate design. The microplate market is estimated at CAD$980M (USD$750M).¹

¹ Research and Markets, Global Microplates Market Size, Market Share, Application Analysis, Regional Outlook, Growth Trends, Key Players, Competitive Strategies and Forecasts, 2018 To 2026

Awarded $1.67 million in research funding from the Innovation and Technology Commission of Hong Kong SAR Government

In December 2019, Novoheart has received a further grant from the Innovation and Technology Commission of Hong Kong SAR Government (the “ITC”). Combined with a cash rebate scheme and funding for hiring research and development talent, the Company is expecting to receive a total of over $1.67 million in grant awards from the ITC over the next two years. This is the third major research and development matching grant that the ITC has awarded Novoheart, making the total awarded grant to over $3.7 million.

The new ITC grant will support the development of the automated next generation of human heart assays, with further enhanced throughput, accuracy and sensitivity in screening drugs for toxic or therapeutic effects on the heart. The platform is designed to help drug developers increase their confidence in the selection and investment of candidate drugs that are most likely to succeed in clinical trials.

Change of fiscal year-end

To better align its financial reporting with the calendar year and that of its industry peers, during the six months ended December 31, 2019, the Company changed its fiscal year-end to December 31, from June 30. The Company’s transition year is the six months ended December 31, 2019, and the comparative period is the twelve months ended June 30, 2019. The variation in the duration of the comparative must be considered in evaluating the financial information noted below.

Financial Results for the six months ended December 31, 2019

The Company recorded a net loss after tax of $3,995,070 (loss per share of $0.02) for the six months ended December 31, 2019 compared to a net loss of $7,656,520 (loss per share of $0.08) for the year ended June 30, 2019.

Revenue and Cost of Sales

For the six months ended December 31, 2019, the Company recorded revenue of $266,747 and cost of sales of $93,138 compared to revenue of $165,031 and cost of sales of $75,487 for the year ended June 30, 2019. The increase in revenue was mainly due the completion of Phase II with the Global Pharma Partner (see “Business Highlights”, above). Services for Phase II commenced in August 2019 and was completed in December 2019. Cost of sales mainly comprised of labour and material costs.

Operating Expenses

Operating expenses for the six months December 31, 2019 was $4,511,814 compared to $8,327,059 for the year ended June 30, 2019. The most significant contributing factors to the increase was a result of the acquisition of Xellera Therapeutics Limited, increases in research and development expenses and general and administrative expense. The increase was offset by the decrease of share-based compensation expenses, marketing expenses and intellectual property expenses. 

Financial Results for the Three Months Ended December 31, 2019

The Company recorded a net loss after tax of $2,539,336 (loss per share of $0.02) in the three months ended December 31, 2019 compared to $1,932,758 (loss per share of $0.03) in the three months ended December 31, 2018. The increase in the net loss was due primarily to an increase in research and development expenses, general and administrative expenses in the area of occupancy costs, while being offset by the increase in revenue.

Operating expenses for the three months ended December 31, 2019 was $2,643,509 as compared to $1,999,010 for the three months ended December 31, 2018. The increase was primarily related to increases in research and development expense and general and administrative expenses while partially offset by the decrease in share-based compensation expenses. Research and development expenses increased as the Company enters into more commercial agreements and partnership research and development projects. The increase in general and administrative expenses was a result of the expansion of the lab and office, as well as the build-out of the GMP facility. Share-based compensation expenses decreased due to some of the restricted share units and options being fully vested.

Liquidity and Outstanding Share Capital

As at December 31, 2019, the Company had cash and cash equivalents of $12,167,583 and pledged bank deposits of $5,004,000. As at March 11, 2020, there were 188,640,774 common shares issued and outstanding, and 8,798,373 of common shares issuable upon the exercise of outstanding stock options at an exercise price range of $0.32 to $0.50 per share and 176,251 of the issuance of vested restricted share units.

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 recent 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 is traded on the TSX Venture Exchange under the symbol “NVH”.

For further information please contact:

Novoheart Holdings Inc.
Suite 2600, 595 Burrard Street
Vancouver, British Columbia
V7X 1L3

Ronald Li
Chief Executive Officer

[phone]
[e-mail]

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^TM 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.
Consolidated Statements of Financial Position
(Expressed in Canadian dollars)

		December 31, 2019			June 30, 2019
ASSETS
Current
Cash and cash equivalents	$	12,167,583		$	18,145,717
Pledged bank deposit		5,004,000			5,028,000
Accounts and other receivables		317,819			165,979
Prepaid expenses and deposits		475,638			421,569
		17,965,040			23,761,265
Property and equipment, net		532,589			803,412
Right-of-use assets		6,996,852			-
Intangible assets, net		231,052			187,727
Goodwill		8,806,998			8,806,998
	$	34,532,531		$	33,559,402
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities	$	921,672		$	1,646,733
Loans		-			1,676,000
Lease liabilities – current		1,124,678			-
Contract liabilities		22,549			35,902
Deferred government grants		8,253			-
Due to related parties		32,835			44,202
		2,109,987			3,402,837
Lease liabilities – non-current		5,555,838			-
Restoration provision		451,937			-
Deferred government grants		-			19,529
Long-term license payable		24,238			38,967
		8,142,000			3,461,333
Shareholders' Equity
Share capital		52,179,118			52,149,493
Contributed surplus		1,888,156			1,942,532
Accumulated other comprehensive income		312,627			373,646
Accumulated deficit		(27,989,370)			(24,367,602)
		26,390,531			30,098,069
	$	34,532,531		$	33,559,402

NOVOHEART HOLDINGS INC.
Consolidated Statements of Loss and Comprehensive Loss
For the six months ended December 31, 2019 and year ended June 30, 2019
(Expressed in Canadian dollars, except number of common shares)

		Six months ended December 31, 2019					Year ended June 30, 2019
Revenue	$	266,747			$		165,031
Cost of sales		93,138					75,487
		173,609					89,544
OPERATING EXPENSES
Research and development		1,446,188					2,177,271
Intellectual property and patent		60,986					236,933
General and administrative		1,995,765					3,093,687
Marketing		320,879					782,379
Share-based compensation		348,551					1,367,157
Depreciation and amortization		339,445					669,632
		4,511,814					8,327,059
LOSS FROM OPERATIONS		(4,338,205)					(8,237,515)
Government grants		369,931					617,267
Other income		179,379					66
Finance expense		(88,962)					(9,869)
Foreign exchange (loss) / gain		(14,887)					3,069
		445,461					610,533
NET LOSS FOR THE PERIOD/YEAR BEFORE TAX	$	(3,892,744)			$		(7,626,982)
Tax expense		102,326					29,538
NET LOSS FOR THE PERIOD/YEAR AFTER TAX	$	(3,995,070)			$		(7,656,520)
OTHER COMPREHENSIVE INCOME
Foreign currency translation adjustment		(61,019)					70,385
COMPREHENSIVE LOSS FOR THE PERIOD/YEAR	$	(4,056,089)			$		(7,586,135)
Loss per share – Basic and Diluted	$	(0.02)			$		(0.08)
Weighted average number of shares outstanding – basic and diluted		188,555,443					94,727,746

NOVOHEART HOLDINGS INC.
Consolidated Statements of Cash Flow
For the six months ended December 31, 2019 and year ended June 30, 2019
(Expressed in Canadian dollars)

	Six months ended December 31, 2019			Year ended June 30, 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period/year after tax	$	(3,995,070)		$	(7,656,520)
Items not affecting cash:
Share-based compensation		348,551			1,367,157
Lease liabilities interests		81,208			-
Amortization of right-of-use assets		417,198			-
Depreciation and amortization		339,445			669,632
		(2,808,668)			(5,619,731)
Changes in non-cash working capital items:
(Increase) / decrease in accounts and other receivables		(154,335)			469,525
Increase in prepaid expenses and deposits		(237,146)			(120,841)
(Decrease) / increase in accounts payable and accrued liabilities		(725,200)			257,552
Decrease in due to related parties		(11,262)			(33,268)
Decrease in other long-term liabilities		(14,706)			(39,256)
Decrease in deferred government grants		(11,308)			(22,639)
(Decrease) / increase in contract liabilities		(13,330)			2,231,110
		(1,167,287)			2,742,183
Net cash used in operating activities		(3,975,955)			(2,877,548)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash acquired from acquisition of a subsidiary		-			22,692,695
Acquisition of equipment and payment of leasehold improvements		(16,147)			(81,611)
Payment for the right-of-use assets		(431,451)			-
Lease incentive received		606,594			-
Increase in pledged bank deposit		-			(5,028,000)
Acquisition of intangible assets		(98,038)			-
Net cash generated from investing activities		60,958			17,583,084
CASH FLOWS FROM FINANCING ACTIVITIES
(Repayment of) / proceeds from loans		(1,686,670)			1,688,417
Payment of lease liabilities and interests		(355,031)			-
Net cash (used in) / generated from financing activities		(2,041,701)			1,688,417

NOVOHEART HOLDINGS INC.
Consolidated Statements of Cash Flow
For the six months ended December 31, 2019 and year ended June 30, 2019
(Expressed in Canadian dollars)

		Six months ended December 31, 2019		Year ended June 30, 2019
Changes in cash and cash equivalents during the period/year		(5,956,698)			16,393,953
Effect of exchange rate changes on cash held in a foreign currency		(21,436)			156,670
Cash and cash equivalents, beginning of period/year		18,145,717			1,595,094
Cash and cash equivalents, end of period/year		12,167,583		$	18,145,717