PreMD Reports Second Quarter Results

Advances product pipeline; new regulatory submissions expected before year end 


TORONTO, Aug. 9  /PRNewswire-FirstCall/ -- Predictive medicine company PreMD Inc. (TSX: PMD; Amex: PME) today announced results for the second quarter of fiscal 2006 ended June 30, 2006 (Q2 2006).

  Recent Highlights

  -   Exceeded the enrollment target in the 600-subject PASA study with a
      total of 650 patients enrolled. This study is aimed at expanding
      PREVU(x) Point of Care (POC) Skin Sterol Test's regulatory claim in
      the United States to include risk assessment of heart attack and
      stroke;
  -   Reported positive preliminary data on PREVU(x) LT Skin Sterol Test
      from the life insurance industry study (PREPARE) that demonstrated
      statistically significant relationships and is supportive of the
      study's primary objective;
  -   Submitted a Special 510(k) application to U.S. Food and Drug
      Administration (FDA) for clearance of an enhanced color reader for
      PREVU(x) POC;
  -   Received clearance from Health Canada's Therapeutic Products
      Directorate as well as a Conformite Europeene (CE) Mark for the new
      color reader, which validates the viability of the product and allows
      it to be marketed in Canada and in the European Union; and
  -   Presented data on a new LungAlert(TM) test format at the American
      Association for Clinical Chemistry Annual Meeting.



The consolidated net loss for Q2 2006 was $2,115,000 or $0.10 per share compared with a loss of $1,455,000 or $0.07 per share for the quarter ended June 30, 2005 (Q2 2005). For the six months ended June 30, 2006, the net loss was $4,489,000, or $0.21 per share, compared with $2,757,000, or $0.13 per share for the six months ended June 30, 2005, primarily due to increased research and development expenses related to the acceleration of clinical trials in 2006 and to interest and imputed interest expenses on convertible debentures issued on August 30, 2005. The Company expects research and development expenses to return to lower than historical levels in the second half of fiscal 2006. Cash used to fund operating activities during Q2 2006 amounted to $1,835,000 compared with $1,164,000 in Q2 2005, the increase resulting from increased expenditures on clinical trials.

Total product related sales to McNeil Consumer Healthcare were $5,000 for Q2 2006 compared with $333,000 for Q2 2005. McNeil continues to use inventory purchased in 2005 for sales and marketing proposals to potential customers and has purchased only a small quantity of new products so far in 2006. License revenue was $80,000 for Q2 2006, approximately the same as for Q2 2005.

"We are pleased with the advancements we are making, particularly with the completion of enrollment in the PREPARE and PASA clinical trials," said Dr. Brent Norton, President and Chief Executive Officer. "Preliminary results from PREPARE are positive and we are moving quickly to complete the analysis while working with McNeil Consumer Healthcare to finalize the regulatory and marketing strategies for PREVU(x) LT in 2006. We will also be analyzing the data from PASA in the coming months and expect to be in a position to make various regulatory submissions to the FDA and regulatory authorities in Canada and Europe before the end of the year. Additionally, we have expanded enrollment in the I-ELCAP trial, which we expect to provide important new data on LungAlert(TM) later this year."

  Outlook
  -------



"We believe that a number of McNeil's market evaluations for PREVU(x) are gaining traction, which we expect to see build through the year, particularly as the new reader becomes available," continued Dr. Norton. "We are making excellent progress against our objectives and anticipate revenues and additional milestone payments related to the successful completion of our strategic objectives. As these goals are achieved, we expect to move toward breaking even, possibly by the end of 2006."

  PreMD's near-term objectives include:

  -   Achieve regulatory clearance for PREVU(x) LT to enable marketing
      launch;
  -   Achieve new regulatory claim for PREVU(x) in the U.S. as a test to
      predict risk of heart attack and stroke;
  -   Complete analysis of new LungAlert(TM) data and expand participation
      in I-ELCAP to additional sites;
  -   Complete pivotal study for the breast cancer test at the University
      of Louisville and initiate an additional clinical trial for
      ColorectAlert(TM); and
  -   Conclude a strategic partnership for PreMD's cancer products.

  PREVU(x) Commercialization Update
  ---------------------------------



McNeil is advancing initiatives in targeted segments of the risk assessment market as well as the life insurance industry:

  -   McNeil will showcase the new handheld PREVU(x) POC spectrometer to
      cardiologists and other medical professionals at the World Congress
      of Cardiology 2006, an event organized by the European Society of
      Cardiology and the World Heart Federation, to be held in Barcelona,
      Spain in September.

  -   McNeil's pilot program with Costco, held at two retail locations in
      Florida in March, is expected to be rolled out to additional stores
      in the southeastern U.S. in the fourth quarter. Additionally, McNeil
      is working to significantly extend its previous retail pilot program
      with Wal-Mart in Quebec this fall in response to favorable customer
      and retailer feedback.

  -   McNeil has completed a sales broker contract with Medivon, LLC, a
      Florida-based healthcare company that provides heart disease risk
      assessment programs. Medivon has selective rights in the U.S. to
      promote the use of PREVU(x) POC with selected customers.

  -   In the life insurance market, McNeil's efforts to raise awareness of
      PREVU(x) LT with life insurance companies include presentations at
      the recent annual meetings of the Canadian Institute of Underwriters
      (CIU) and the SouthEastern Home Office Underwriters' Association
      (SEHOUA).

  -   McNeil continues to evaluate opportunities in the occupational health
      market, which includes employee health fairs and programs, and has
      established an industry advisory board. This advisory board met in
      May at the American College of Occupational and Environmental
      Medicine conference to discuss PREVU(x) POC and establish contacts
      with industry thought leaders.

  Financial Review
  ----------------



During Q2 2006, the Company focused on accelerating key clinical trials to obtain additional claims for PREVU(x) POC and to obtain regulatory clearance for PREVU(x) LT, the company's skin sterol test for the life insurance industry. As a result, research and development expenditures increased by $665,000 to $1,470,000 from $805,000 in Q2 2005. The variance for the quarter reflects:

  -   an increase of $851,000 in spending on clinical trials for the
      company's family of skin sterol tests, particularly related to the
      PREPARE and PASA trials, as well as clinical trials for the lung,
      colorectal and breast cancer technologies;
  -   a decrease of $85,000 in legal fees on intellectual property; and
  -   a decrease of $96,000 in subcontract research due to the completion
      of the development of the second-generation spectrometer.



Total research and development expenditures for the six months ended June 30, 2006 and 2005 amounted to $2,986,000 and $1,448,000, respectively. As a result of the completion of enrolment in the above-noted trials, clinical trial costs are expected to decline significantly for the balance of 2006.

General and administration expenses amounted to $689,000 for Q2 2006 compared with $770,000 in Q2 2005, a decrease of $81,000. The decrease for the quarter reflects a decrease of $74,000 in expenses related to investor communications. For the six months ended June 30, 2006, general and administration expenses amounted to $1,266,000, a decrease of $269,000 from the corresponding period in 2005.

Interest on convertible debentures (issued on August 30, 2005) amounted to $173,000 in Q2 2006 compared with nil in Q2 2005. For the six months ended June 30, 2006, interest amounted to $338,000 compared with nil for the corresponding period in 2005. The debentures bear interest at an annual rate of 7%, payable quarterly in either cash or common shares. The expense for Q2 2006 was paid in common shares, of which 40,561 were issued during the quarter and 31,065 were issued subsequent to the quarter, on July 5, 2006.

Imputed interest for the three and six months ended June 30, 2006 amounted to $205,000 and $404,000, respectively, compared with nil for the corresponding periods in 2005. It is a non-cash expense and represents the amortization of the fair value of the warrants and equity component of the debentures over the life of the debentures.

Amortization expenses for equipment and acquired technology for Q2 2006 amounted to $46,000 compared with $54,000 for Q2 2005. For the six months ended June 30, 2006 and 2005, amortization amounted to $89,000 and $106,000, respectively. Purchases of capital assets amounted to $3,000 during Q2 2006 compared with $81,000 in Q2 2005.

Amortization of deferred financing fees related to the convertible debentures amounted to $32,000 in Q2 2006 ($65,000 for the six months ended June 30, 2006) compared with nil in Q2 2005. The financing fees are being amortized over the life of the convertible debentures.

The gain on foreign exchange for Q2 2006 amounted to $278,000 compared with $12,000 for the corresponding period in 2005. Included in the gain for 2006 is $425,000 resulting from the effects of foreign exchange on the convertible debentures which are repayable in U.S. dollars. It is partially offset during the quarter by a loss on the revaluation of investments held in U.S. dollars, amounting to $163,000. For the six months ended June 30, 2006 and 2005, the gain on foreign exchange amounted to $215,000 and $13,000, respectively.

Refundable scientific investment tax credits (ITCs) accrued for Q2 2006 amounted to $70,000 versus $48,000 for Q2 2005. For the six months ended June 30, 2006 and 2005, the ITC revenue amounted to $130,000 and $98,000, respectively.

Interest income amounted to $70,000 for Q2 2006 compared with $22,000 for Q2 2005 as a result of higher cash balances. For the six months ended June 30, 2006 and 2005, interest income amounted to $157,000 and $51,000, respectively.

As at June 30, 2006, PreMD had cash, cash equivalents and short-term investments totaling $5,888,000 ($8,679,000 as at December 31, 2005). The Company invests its funds in short-term financial instruments and marketable securities. Cash used to fund operating activities during Q2 2006 amounted to $1,835,000 compared with $1,164,000 in Q2 2005, the increase resulting from the increased expenditures on clinical trials.

To date, the Company has financed its activities through product sales, license revenues, the issuance of shares and convertible debentures and the recovery of ITCs. Management believes that clinical trial expenses will be reduced dramatically for the balance of 2006 and for 2007 and that, based on historic cash expenditures and the current expectation of further revenues from product sales, royalties and license fees, its existing cash resources together with the ITC receivable of $330,000 will be sufficient to meet its current operating and capital requirements through at least 2008.

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  Conference Call and Webcast

  PreMD will hold a conference call and webcast tomorrow, Thursday,
  August 10, 2006, at 10 a.m. ET. To access the conference call, please
  dial 1-800-866-5043. A live audio webcast will be available at
  http://www.premdinc.com/, and will be subsequently archived for three months. To
  access the replay via telephone, which will be available until Thursday,
  August 17, 2006, please dial [phone] or [phone] and enter
  the passcode 21199051 followed by the number sign.
  -------------------------------------------------------------------------

  About PreMD Inc.



PreMD Inc. is a world leader in predictive medicine, dedicated to developing rapid, non-invasive tests for the early detection of life-threatening diseases. PreMD's cardiovascular products, which are branded as PREVU(x) Skin Sterol Test, are licensed worldwide to McNeil Consumer Healthcare. The company's cancer tests include ColorectAlert(TM), LungAlert(TM) and a breast cancer test. PreMD's head office is located in Toronto, and its research and product development facility is at McMaster University in Hamilton, Ontario. For further information, please visit http://www.premdinc.com/. For more information about PREVU(x), please visit http://www.prevu.com/ or call 1-866-283-8328 (North America) or 00-800-8283-8328 (Europe), or email .

This news release contains forward-looking statements, including the Company's expectations related to future performance. Known and unknown risks and uncertainties that could cause the Company's actual results to differ materially from those in the forward-looking statements include, among others: the successful and timely completion of clinical studies; the successful development or marketing of the Company's products and the competitiveness of the Company's products if successfully commercialized; whether reimbursement for the Company's products will be available and the potential impact of reimbursement policies imposed by third-party payers on the development, usage and pricing of the Company's products; the lack of operating profit and availability of funds and resources to pursue R&D projects and clinical trials; product liability; the Company's reliance on third-party manufacturers; the ability of the Company to take advantage of business opportunities; uncertainties related to the Company's presentation of data to regulatory authorities and the approval of marketing applications by regulatory authorities; and general changes in economic conditions. In addition, while the Company routinely obtains patents for its products and technology, the protection offered by the Company's patents and patent applications may be challenged, invalidated or circumvented by its competitors and there can be no guarantee of the Company's ability to obtain or maintain patent protection for its products or product candidates.

Investors should consult the Company's quarterly and annual filings with the Canadian and U.S. securities commissions, available at http://www.sedar.com/ and http://www.sec.gov/, for additional information on risks and uncertainties relating to the forward-looking statements. Investors are cautioned not to rely on these forward-looking statements. The Company is providing this information as of the date of this news release and does not undertake any obligation to update any forward-looking statements contained in this news release as a result of new information, future events or otherwise.

  (x) Trademark



  PreMD Inc.
  Incorporated under the laws of Canada


                       CONSOLIDATED BALANCE SHEETS
                          (In Canadian dollars)

  As at June 30, 2006 and December 31, 2005
  Unaudited

                                                    June 30,   December 31,
                                                     2006          2005
                                                       $             $
  -------------------------------------------------------------------------

  ASSETS
  Current
  Cash and cash equivalents                           90,801       773,199
  Short-term investments                           5,797,510     7,905,883
  Accounts receivable                                      -       881,891
  Inventory                                           35,638        36,306
  Prepaid expenses and other receivables             225,603       317,264
  Investment tax credits receivable                  330,000       200,000
  -------------------------------------------------------------------------
  Total current assets                             6,479,552    10,114,543
  -------------------------------------------------------------------------
  Deferred financing fees, net of accumulated
   amortization of $108,157 (2005 - $43,059)         412,627       477,725
  Capital assets, net of accumulated
   amortization of $782,589 (2005 - $721,784)        370,746       410,636
  Acquired technology, net of accumulated
   amortization of $885,999 (2005 - $856,970)        261,257       290,286
  -------------------------------------------------------------------------
                                                   7,524,182    11,293,190
  -------------------------------------------------------------------------
  -------------------------------------------------------------------------

  LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
  Current
  Accounts payable                                   721,748       291,125
  Accrued liabilities                                665,719       655,113
  Current portion of deferred revenue                306,900       311,915
  -------------------------------------------------------------------------
  Total current liabilities                        1,694,367     1,258,153
  -------------------------------------------------------------------------
  Convertible debentures                           5,913,256     5,893,340
  Deferred revenue                                 2,143,823     2,297,400
  -------------------------------------------------------------------------
  Total liabilities                                9,751,446     9,448,893
  -------------------------------------------------------------------------

  Shareholders' equity (deficiency)
  Capital stock                                   24,546,459    24,449,826
  Contributed surplus                              2,161,979     1,840,979
  Equity component of convertible debentures       2,393,145     2,393,145
  Warrants                                         1,373,718     1,373,718
  Deficit                                        (32,702,565)  (28,213,371)
  -------------------------------------------------------------------------
  Total shareholders' equity (deficiency)         (2,227,264)    1,844,297
  -------------------------------------------------------------------------
                                                   7,524,182    11,293,190
  -------------------------------------------------------------------------
  -------------------------------------------------------------------------



  PreMD Inc.

               CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
                          (In Canadian dollars)

  Unaudited
                             Three months ended        Six months ended
                                  June 30                   June 30
                         ------------------------  ------------------------
                             2006         2005         2006         2005
                               $            $            $            $
  -------------------------------------------------------------------------

  REVENUE
  Product sales               5,015      332,701        5,132      345,060
  License revenue            79,624       78,081      156,675      154,806
  -------------------------------------------------------------------------
                             84,639      410,782      161,807      499,866
  Cost of product sales       4,255      319,322        4,383      330,551
  -------------------------------------------------------------------------
  Gross Profit               80,384       91,460      157,424      169,315
  -------------------------------------------------------------------------

  EXPENSES
  Research and
   development            1,469,815      805,088    2,985,524    1,447,574
  General and
   administration           688,617      769,537    1,265,865    1,534,912
  Interest on convertible
   debentures               172,623            -      338,137            -
  Imputed interest on
   convertible debentures   205,269            -      404,132            -
  Amortization               77,561       53,705      154,932      106,011
  Gain on foreign
   exchange                (277,675)     (11,537)    (215,043)     (13,047)
  -------------------------------------------------------------------------
                          2,336,210    1,616,793    4,933,547    3,075,450
  -------------------------------------------------------------------------

  RECOVERIES AND OTHER
   INCOME
  Investment tax credits     70,000       47,923      130,000       97,923
  Interest                   70,394       22,383      156,929       51,273
  -------------------------------------------------------------------------
                            140,394       70,306      286,929      149,196
  -------------------------------------------------------------------------
  Net loss for the
   period                (2,115,432)  (1,455,027)  (4,489,194)  (2,756,939)

  Deficit, beginning
   of period            (30,587,133) (24,525,578) (28,213,371) (23,223,666)
  -------------------------------------------------------------------------
  Deficit, end of
   period               (32,702,565) (25,980,605) (32,702,565) (25,980,605)
  -------------------------------------------------------------------------
  -------------------------------------------------------------------------

  Basic and diluted
   loss per share            $(0.10)      $(0.07)      $(0.21)      $(0.13)
  -------------------------------------------------------------------------
  -------------------------------------------------------------------------

  Weighted average
   number of common
   shares outstanding    21,566,994   21,529,262   21,559,121   21,434,065
  -------------------------------------------------------------------------
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  PreMD Inc.

                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                          (In Canadian dollars)

  Unaudited
                             Three months ended        Six months ended
                                  June 30                   June 30
                         ------------------------  ------------------------
                             2006         2005         2006         2005
                               $            $            $            $
  -------------------------------------------------------------------------

  OPERATING ACTIVITIES
  Net loss for the
   period                (2,115,432)  (1,455,027)  (4,489,194)  (2,756,939)
  Add items not
   involving cash
    Amortization             77,561       53,705      154,932      106,011
    Stock-based
     compensation costs
     included in:
      Research and
       development
       expense               58,904       58,122       94,719       88,443
      General and
       administration
       expense              173,741      183,477      243,212      282,027
    Imputed interest
     on convertible
     debentures             205,269            -      404,132            -
  Interest on convertible
   debentures paid in
   stock                     79,702            -       79,702            -
  Deduct gain on
   foreign exchange        (277,675)     (11,537)    (215,043)     (13,047)
  Net change in non-cash
   working capital
   balances related to
   operations                44,745       83,858    1,296,533     (444,739)
  Decrease in deferred
   revenue                  (81,867)     (76,725)    (158,592)    (153,450)
  -------------------------------------------------------------------------
  Cash used in operating
   activities            (1,835,052)  (1,164,127)  (2,589,599)  (2,891,694)
  -------------------------------------------------------------------------

  INVESTING ACTIVITIES
  Short-term
   investments            1,695,094    1,009,887    1,881,904    2,645,617
  Purchase of capital
   assets                    (2,817)     (80,511)     (20,915)    (115,776)
  -------------------------------------------------------------------------
  Cash provided by
   investing activities   1,692,277      929,376    1,860,989    2,529,841
  -------------------------------------------------------------------------

  FINANCING ACTIVITIES
  Issuance of capital
   stock, net of issue
   costs                          -            -            -      198,400
  -------------------------------------------------------------------------
  Cash provided by
   financing activities           -            -            -      198,400
  -------------------------------------------------------------------------
  Effect of exchange rate
   changes on cash and
   cash equivalents           4,145        1,270       46,212         (844)
  -------------------------------------------------------------------------

  Net decrease in cash
   and cash equivalents
   during the period       (138,630)    (233,481)    (682,398)    (164,297)

  Cash and cash
   equivalents
    - Beginning of period   229,431      308,642      773,199      239,458
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    - End of period          90,801       75,161       90,801       75,161
  -------------------------------------------------------------------------
  -------------------------------------------------------------------------

  Represented by:
  Cash                       90,801       75,161       90,801       75,161
  -------------------------------------------------------------------------
                             90,801       75,161       90,801       75,161
  -------------------------------------------------------------------------
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DATASOURCE: PreMD Inc.



CONTACT: Sarah Borg-Olivier, Director, Communications, T: [phone],

; Ron Hosking, Chief Financial Officer, T : (416)

222-3449, 

Copyright