CALGARY, ALBERTA, CANADA – The Westaim Corporation announced today that for the year ended December 31, 2003, it recorded a net loss of $34.5 million, or 44 cents per share compared to a net loss of $49.8 million, or 64 cents per share, in the previous year. The results included income from discontinued operations of $2.4 million in 2003 and losses from discontinued operations of $10.7 million in 2002. Revenues from continuing operations were $17.3 million in 2003 compared to $12.6 million in 2002.
For the three months ended December 31, 2003, the Company posted a net loss of $17.7 million, or 23 cents per share, on revenues of $3.6 million compared to a net loss of $9.4 million, or 12 cents per share, on revenues of $3.6 million in the previous year. For the quarter, losses from discontinued operations were $0.9 million in 2003 and $0.5 million in 2002.
The divisional loss from continuing operations for 2003 was $23.1 million, compared to a loss of $24.7 million in 2002. This loss primarily reflects the planned level of investment towards research and development in NUCRYST Pharmaceuticals and iFire Technology, Westaim’s technology divisions.
At December 31, 2003, Westaim had $68.1 million in cash and equivalents, compared to $101.3 million in 2002. The Company has no debt. In January 2004, Westaim sold its Westaim Ambeon division for $35 million, further adding to its strong cash position.
“Westaim has made strategic decisions to both strengthen our balance sheet and increase focus on our two high-potential technology divisions, iFire Technology and NUCRYST Pharmaceuticals,” said Barry M. Heck, President & CEO of Westaim. “Last year we saw NUCRYST enter its first human trials for a new atopic dermatitis drug and iFire successfully scale its proprietary flat panel display to 34 inches in size.”
Review of Operations:
iFire Technology made important advancements with both technology progress and partner collaborations in 2003. Early in the year, iFire added Dai Nippon Printing Co., Ltd. (DNP) as a technology collaboration partner, and in 2004, this relationship has expanded to include pilot production of 34-inch iFire TM display modules to help iFire prove its low-cost manufacturing model. iFire’s other major technology collaboration partner, Sanyo Electric Co., Ltd., has also contributed to the technical progress of iFire’s technology.
In early 2003, iFire progressed from its traditional triple-patterned red, green and blue phosphors to the Color-by-BlueTM process where a single blue phosphor and color conversion materials are used. This created improvements in the display’s performance and is projected to reduce future capital and production costs by approximately 15 per cent. By the end of the year, iFire successfully scaled its technology from 17 inches in size to 34 inches, the anticipated size of its initial product. Collaborative work with its partners DNP and Sanyo Electric, along with the new Color-by-BlueTM method made this accomplishment happen faster than anticipated.
NUCRYST Pharmaceuticals entered an important new chapter as a pharmaceutical company in 2003 when it began Phase 2 human clinical trials for its first drug candidate, (NPI 32101) for the treatment of atopic dermatitis, or eczema, and other skin conditions. The company believes that its nanocrystalline technology with dual anti-inflammatory and antimicrobial properties addresses both the inflammation associated with atopic dermatitis and the secondary infections that often accompany the disease.
NUCRYST’s profitable wound care division continued to grow in 2003 with revenue of $16.2 million, compared to $8.3 million in 2002. The results for 2003 include a US$3.0 million milestone payment from NUCRYST’s wound care partner Smith & Nephew plc for achievement of additional regulatory approvals in Europe.
Strategic Review:
In 2003 the Board completed a thorough, strategic review of the company and its businesses. As disclosed in last year’s information circular, a Strategic Review Committee was formed to help facilitate this process. As part of this review, the Board and the Strategic Review Committee worked with independent advisors, including GMP Securities Ltd., who also acted as the exclusive financial advisor for the sale of Ambeon, and CIBC World Markets. The review reaffirmed Westaim’s continued focus and commitment to iFire and NUCRYST. In its final report to the Board of Directors of Westaim, the Strategic Review Committee reached a number of recommendations and conclusions, which included:
iFire Technology – The Committee believes that iFire has been, and continues to be, a significant opportunity for Westaim and that the continued support of iFire is justified. Although there are technology, manufacturing and marketing risks for the successful development by iFire of a commercial product, the magnitude of the potential rewards justifies Westaim’s continued support.
NUCRYST Pharmaceuticals – The Committee believes that the NUCRYST wound care business is a valuable asset and supports continuing to pursue further wound care opportunities with Smith & Nephew. Although monetizing the royalty stream of the wound care business is possible, the Committee concluded the value of this business could be substantially enhanced as the ability to achieve projected sales targets is proven. The Committee affirmed that NUCRYST should continue to fund its current Phase 2 human efficacy trials for atopic dermatitis. With respect to all other indications, the Committee recommends that NUCRYST’s management continue to assess and develop its pharmaceutical strategy.
As disclosed in last year’s information circular, the Board of Directors added two new members who were nominated by some of the company’s large institutional shareholders. These new Board Members were Michael B.C. Davies and G. Wesley Voorheis, both of whom were members of the Strategic Review Committee. Now that the strategic review is complete, Mr. Davies and Mr. Voorheis have retired from the Board. Westaim thanks them for their contribution. As recommended by the Strategic Review Committee, Westaim’s Board will commence a search for two new independent Board members.
Shareholder Rights Plan:
Westaim also announced today that its Board of Directors has approved the renewal of a shareholder rights plan designed to ensure the fair treatment of shareholders in the event of a take-over offer for the common shares of Westaim. This action has been taken as part of the Board’s fiduciary responsibility to shareholders and is not in response to any specific effort to acquire control of the company. The plan is subject to regulatory approval, and must be ratified at Westaim’s next annual meeting of shareholders. Full details of the plan will be included in the proxy circular that will be sent to all shareholders prior to the annual meeting.
The plan will provide Westaim’s Board of Directors and shareholders more time to evaluate any unsolicited take-over bid and, if appropriate, to seek out other alternatives to maximize shareholder value. The plan will be in effect for six years, but must be reconfirmed by shareholders after a three-year period.
Under the plan, one right is issued and attaches to each outstanding common share at no cost. Rights issued under the plan become exercisable only when a person, including certain related persons, acquires or announces their intention to acquire 20 per cent or more of Westaim’s outstanding common shares without complying with the “permitted bid” provisions of the plan or without the approval of Westaim’s Board. Should such an acquisition occur, each right, if exercised, would entitle the holder, other than the acquiring person and persons related to it, to purchase Westaim’s common shares at a price equal to half their current market value.
A “permitted bid” or offer for Westaim’s common shares must be made to all shareholders. The offer must remain open for at least 60 days and must be accepted by a minimum of 50 per cent of the shares not already held by the bidder. If this occurs, the bidder may take up and pay for tendered shares, but must extend the offer for another 10 days. This will allow shareholders sufficient time to consider the bid and any other available options. It also gives Westaim’s Board of Directors time to consider alternatives and make recommendations to shareholders. Westaim’s plan is similar to plans adopted by a number of other Canadian companies.
About Westaim:
The Westaim Corporation’s technology investments include: NUCRYST Pharmaceuticals, which researches, develops and commercializes wound care and pharmaceutical products based on its nanocrystalline silver technology; and iFire Technology, which has developed a revolutionary low-cost flat panel display. Westaim's common shares are listed on Nasdaq under the symbol WEDX and on The Toronto Stock Exchange under the trading symbol WED.
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For more information contact:
David Wills
Investor Relations
(416) 504-8464
info@westaim.com
www.westaim.com
This news release may contain forward-looking statements, including but not limited to those concerning technology progress, partner collaborations, pilot production of display modules, anticipated size of initial display products, product development, technology, manufacturing and marketing risks, potential rewards of product development, and pharmaceutical strategy. These statements are based on current expectations that are subject to risks and uncertainties, and the Company can give no assurance that these expectations are correct. Various factors could cause actual results to differ materially from those projected in such statements, including the risk factors set forth in our Form 40-F as filed with the U.S. Securities and Exchange Commission. The Company disclaims any intention or obligations to revise forward-looking statements whether as a result of new information, future developments or otherwise. All forward-looking statements are expressly qualified in their entirety by this Cautionary Statement.
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