NUCRYST Pharmaceuticals announces year-end results

WAKEFIELD, MA, Feb. 15 /PRNewswire-FirstCall/ -- NUCRYST Pharmaceuticals Corp. today announced that for the year ended December 31, 2005, it recorded a net loss of $2.6 million, or 27 cents per share on revenues of $23.6 million, compared to net income of $1.3 million, or 14 cents a share on revenues of $24.7 million in the previous year. The Company's wound care product revenue of $18.6 million increased 27 per cent in 2005 compared to $14.7 million in 2004. Results in 2005 include the achievement of a $5-million milestone payment from Smith & Nephew plc related to the sales of Smith & Nephew's Acticoat(TM) dressings, compared to $10 million in milestone payments in 2004.

For the three months ended December 31, 2005, the company posted a net loss of $2.8 million, or 29 cents per share, on revenues of $4.8 million compared to a net loss of $1.4 million, or 14 cents a share, on revenue of $4.9 million in the fourth quarter of 2004.

At December 31, 2005 NUCRYST had $35.9 million in cash and short term investments.

NUCRYST and Smith & Nephew have agreements under which NUCRYST receives reimbursement for manufacturing costs and royalties and may also receive milestone payments based on sales of Smith & Nephew's Acticoat(TM) dressings for serious wounds, including burns and chronic wounds. As of December 31, 2005, NUCRYST earned $19 million in milestone payments of a potential $56.5 million under the agreements.

"2005 was a year of significant achievement for NUCRYST including a successful IPO, record revenue from our SILCRYST(TM) medical coatings business and the start of our second Phase 2 clinical trial for our promising NPI 32101 topical cream for skin conditions such as atopic dermatitis, a common form of eczema," said Scott H. Gillis, President & CEO, NUCRYST Pharmaceuticals. "In 2006 we will build on our strong foundation as we continue to grow our medical coatings business and explore new applications for our active pharmaceutical ingredient."

Financial Information Follows

NUCRYST Pharmaceuticals (NASDAQ: NCST; TSX: NCS) develops, manufactures and commercializes medical products that fight infection and inflammation using its patented nanocrystalline silver technology. Advanced wound care products with the company's SILCRYST(TM) coatings are sold by Smith & Nephew plc under an exclusive license in over 30 countries under its Acticoat(TM) trademark. NUCRYST is also developing pharmaceutical products to address medical conditions that are characterized by both infection and inflammation. The company has developed its nanocrystalline silver in a powder form for use as an active pharmaceutical ingredient, referred to as NPI 32101.

All amounts in US dollars SILCRYST(TM) is a trademark of NUCRYST Pharmaceuticals Corp. Acticoat(TM) is a trademark of Smith & Nephew plc

Some of the statements above may constitute forward-looking statements within the meaning of securities legislation in the United States and Canada. In particular, statements regarding our future growth in 2006 may be forward-looking statements for purposes of the U.S. and Canada securities laws or otherwise. Factors that could cause our actual results to differ materially from those indicated in these statements include: the initiation, timing, progress and results of our preclinical and clinical trials, research and development programs; our relationship with Smith & Nephew; our reliance on sales of Acticoat(TM) products with our SILCRYST(TM) coatings; the implementation of our business model, strategic plans for our business, product candidates and technology; our ability to maintain and establish corporate collaborations; changes in general economic conditions; other risks and uncertainties unidentified at this time; management's response to these factors; and other factors described under "Risk Factors" in our Registration Statement on Form F-1 filed with the U.S. Securities & Exchange Commission. NUCRYST disclaims any intention or obligation 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.

NUCRYST PHARMACEUTICALS CORP. Financial Highlights (unaudited) (thousands of U.S. dollars except share and per share data) ------------------------------------------------------------------------- Three Months Ended Twelve Months Ended December 31, December 31, --------------------- ---------------------- Consolidated Statements of Operations 2005 2004 2005 2004 ------------------------------------------------------------------------- Revenue $ 4,780 $ 4,949 $ 23,636 $ 24,682 (Loss) income from operations (1,906) (475) 856 4,448 Net (loss) income (2,835) (1,388) (2,641) 1,348 Net (loss) income per common share - basic and diluted (0.29) (0.14) (0.27) 0.14 Weighted average number of common shares outstanding - basic 9,874,239 9,727,500 9,764,486 9,727,500 - diluted 9,874,239 9,727,500 9,764,486 9,905,464 ------------------------------------------------- December 31, --------------------- Consolidated Balance Sheets 2005 2004 ------------------------------------------------- Cash and cash equivalents $ 35,901 $ 948 Current assets 48,992 8,002 Total assets 59,460 15,597 Current liabilities 45,691 37,181 Shareholders' equity (deficit) 13,769 (21,584) ------------------------------------------------------------------------- Three Months Ended Twelve Months Ended December 31, December 31, --------------------- ---------------------- Other Data 2005 2004 2005 2004 ------------------------------------------------------------------------- Revenue Wound care product revenue $ 4,780 $ 4,949 $ 18,636 $ 14,682 Milestone revenue - - 5,000 10,000 ----------- ---------- ---------- ----------- Total revenue $ 4,780 $ 4,949 $ 23,636 $ 24,682 Manufacturing costs $ 2,739 $ 2,502 $ 10,015 $ 7,141 Gross margin excluding milestone revenue $ 2,041 $ 2,447 $ 8,621 $ 7,541 Gross margin percent excluding milestone revenue 42.7% 49.4% 46.3% 51.4% NUCRYST Pharmaceuticals Corp. Consolidated Statements of Operations (unaudited) ------------------------------------------------------------------------- Three Months Ended Twelve Months Ended December 31, December 31, (thousands of U.S. dollars --------------------- ---------------------- except share and per share data) 2005 2004 2005 2004 ------------------------------------------------------------------------- Revenue Wound care product revenue $ 4,780 $ 4,949 $ 18,636 $ 14,682 Milestone revenue - - 5,000 10,000 ------------------------------------------------------------------------- 4,780 4,949 23,636 24,682 Costs Manufacturing 2,739 2,502 10,015 7,141 Research and development 2,683 1,914 8,520 8,971 General and administrative 1,188 954 3,945 3,901 Depreciation and amortization 76 54 300 221 ------------------------------------------------------------------------- (Loss) income from operations (1,906) (475) 856 4,448 Foreign exchange gains (losses) 116 (122) 193 82 Interest income 12 21 12 66 Interest expense (967) (808) (3,540) (3,229) ------------------------------------------------------------------------- (Loss) income before income taxes (2,745) (1,384) (2,479) 1,367 Current income tax expense (90) (4) (162) (19) ------------------------------------------------------------------------- Net (loss) income $ (2,835) $ (1,388) $ (2,641) $ 1,348 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (Loss) income per common share Net (loss) income - basic and diluted $ (0.29) $ (0.14) $ (0.27) $ 0.14 Weighted average number of common shares outstanding: - basic 9,874,239 9,727,500 9,764,486 9,727,500 - diluted 9,874,239 9,727,500 9,764,486 9,905,464 ------------------------------------------------------------------------- ------------------------------------------------------------------------- NUCRYST Pharmaceuticals Corp. Consolidated Balance Sheets (unaudited) ------------------------------------------------------------------------- (thousands of U.S. dollars, December 31 December 31 except share data) 2005 2004 ------------------------------------------------------------------------- ASSETS Current Cash and cash equivalents $ 35,901 $ 948 Accounts receivable - net 6,401 4,187 Inventories 6,569 2,727 Other 121 140 ------------------------------------------------------------------------- 48,992 8,002 Restricted cash 130 128 Capital assets - net 9,464 6,561 Intangible assets - net 874 906 ------------------------------------------------------------------------- $ 59,460 $ 15,597 ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current Accounts payable and accrued liabilities $ 4,991 $ 3,699 Accounts payable and accrued liabilities to related party 1,058 - Indebtedness to related party 39,642 33,482 ------------------------------------------------------------------------- 45,691 37,181 ------------------------------------------------------------------------- Shareholders' equity (deficit) Common shares no par value, unlimited shares authorized: issued and outstanding - 14,227,500 and 9,727,500 shares at December 31, 2005 and 2004, respectively $ 42,629 $ 3,534 Accumulated other comprehensive loss (5,281) (4,180) Accumulated deficit (23,579) (20,938) ------------------------------------------------------------------------- Total shareholders' equity (deficit) 13,769 (21,584) ------------------------------------------------------------------------- $ 59,460 $ 15,597 ------------------------------------------------------------------------- ------------------------------------------------------------------------- NUCRYST Pharmaceuticals Corp. Consolidated Cash Flow Statements (unaudited) ------------------------------------------------------------------------- Three Months Ended Twelve Months Ended December 31, December 31, --------------------- ---------------------- (thousands of U.S. dollars) 2005 2004 2005 2004 ------------------------------------------------------------------------- Operating activities Net (loss) income $ (2,835) $ (1,388) $ (2,641) $ 1,348 Items not affecting cash Depreciation and amortization 376 232 1,282 875 Dividends on preferred shares - - - 389 Accounts receivable 3,713 2,898 (2,000) (1,254) Inventories (1,396) 36 (3,612) (850) Other (37) (16) 22 (15) Accounts payable and accrued liabilities 1,606 765 1,191 1,150 Accounts payable and accrued liabilities to related party 1,058 - 1,058 - Accrued interest on indebtedness to related party (386) 895 2,589 3,122 ------------------------------------------------------------------------- Cash provided from (used in) operating activities 2,099 3,422 (2,111) 4,765 ------------------------------------------------------------------------- Investing activities Restricted cash - - (2) (2) Capital expenditures (477) (1,247) (3,784) (1,817) Intangible assets (20) (25) (127) (115) ------------------------------------------------------------------------- Cash used in investing activities (497) (1,272) (3,913) (1,934) ------------------------------------------------------------------------- Financing activities Issuance of common shares, net of share issuance costs 39,095 - 39,095 - Net (repayments to) advances from related party (5,478) (1,728) 1,662 (1,949) ------------------------------------------------------------------------- Cash provided from (used in) financing activities 33,617 (1,728) 40,757 (1,949) ------------------------------------------------------------------------- Effect of exchange rate changes on cash and cash equivalents 253 32 220 (135) ------------------------------------------------------------------------- Net increase in cash and cash equivalents 35,472 454 34,953 747 Cash and cash equivalents at beginning of period 429 494 948 201 ------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 35,901 $ 948 $ 35,901 $ 948 ------------------------------------------------------------------------- ------------------------------------------------------------------------- NUCRYST Pharmaceuticals Corp. Consolidated Statements of Shareholders' Equity (Deficit) (unaudited) ------------------------------------------------------------------------- Accumulated (thousands of Common Shares Other Total U.S. dollars, ---------------------- Compre- Accum- Compre- except share Stated hensive ulated hensive data) Number Amount Loss Deficit Loss ------------------------------------------------------------------------- December 31, 2003 9,727,500 $ 3,534 $ (2,479) $ (22,286) Foreign currency translation adjustments - - (1,701) - $ (1,701) Net income - - - 1,348 1,348 ------------------------------------------------------------------------- December 31, 2004 9,727,500 3,534 (4,180) (20,938) (353) Issuance of common shares 4,500,000 39,095 - - - Foreign currency translation adjustments - - (1,101) - (1,101) Net loss - - - (2,641) (2,641) ------------------------------------------------------------------------- December 31, 2005 14,227,500 $ 42,629 $ (5,281) $ (23,579) $ (3,742) ------------------------------------------------------------------------- -------------------------------------------------------------------------