XTL Biopharmaceuticals Announces Financial Results for the Year Ended December 31, 2006

Name	Symbol	Market	Type
XTL Biopharmaceuticals Ltd	NASDAQ:XTLB	NASDAQ	Depository Receipt

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XTL Biopharmaceuticals (NASDAQ:XTLB)
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NEW YORK, March 15 /PRNewswire-FirstCall/ -- XTL Biopharmaceuticals Ltd. (NASDAQ:XTLB)(LSE:XTL)(TASE:XTL), a biopharmaceutical company engaged in the acquisition, development and commercialization of therapeutics for the treatment of unmet medical needs, particularly neuropathic pain and hepatitis C, today announced its financial results for the year ended December 31, 2006. At December 31, 2006, the Company had cash, cash equivalents and short-term bank deposits of $25.2 million, compared to cash and cash equivalents of $13.4 million at December 31, 2005. The year-over-year increase of $11.8 million is attributable primarily to the Company's completion in May of a private placement of ordinary shares yielding $24.4 million in net proceeds, partially offset by operating expenditures associated with the development and support of our hepatitis C clinical product candidates, XTL-2125 and XTL-6865, as well as to the development of the DOS hepatitis C pre-clinical program. The loss for the year ended December 31, 2006 was $15.1 million, or $0.08 per ordinary share, compared to the loss of $14.0 million, or $0.08 per ordinary share, for the year ended December 31, 2005, representing an increase in net loss of $1.1 million. The increased loss was primarily attributable to an increase of $2.9 million in research and development costs, primarily associated with expenditures related to the DOS program acquired from VivoQuest in September 2005, and a $0.4 million increase in business development costs related to the recent in-licensing of our lead clinical compound Bicifadine in January 2007. The increase in loss was partially offset by the absence of $1.8 million in in-process research and development costs related to the DOS program, and also due to a $0.7 million increase in financial and other income, due to the completion of the private placement that closed in May 2006, as well as due to the general increase in short-term market interest rates when compared to the comparable period last year. For the years ended December 31, 2006 and 2005, the Company's loss of $15.1 million and $14.0 million respectively, included $2.2 million and $2.8 million, respectively, of non-cash stock option compensation expense. Ron Bentsur, Chief Executive Officer of XTL, commented, "During the year we were successful in allocating our resources towards the transformation of XTL into a company focused on clinical development with a more robust clinical-stage pipeline. The recent in-licensing of Bicifadine, our lead drug candidate, for the treatment of neuropathic pain, has immediately repositioned us as a late-stage development company and we look forward to starting a clinical trial with Bicifadine in 2007. In addition, we are nearing completion of the Phase I XTL-2125 clinical trial and we expect to report clinical data from the study during the second quarter of 2007. Moreover, we have completed the XTL-6865 Phase I clinical trial and we expect to report clinical data from this study shortly." Mr. Bentsur added, "We enter 2007 with a very well-defined business plan. I believe that the Company now has a clear pathway to success and that the execution of the three main prongs of our business strategy, the development of our lead product, Bicifadine, the development of our HCV product portfolio and the continued opportunistic build-out of our product portfolio through in-licensing and acquisitions, will determine the level of our success." ABOUT XTL BIOPHARMACEUTICALS LTD. XTL Biopharmaceuticals Ltd. ("XTL") is engaged in the acquisition, development and commercialization of therapeutics for the treatment of neuropathic pain and hepatitis C. XTL is developing Bicifadine, a serotonin and norepinephrine reuptake inhibitor, for the treatment of neuropathic pain. In addition, XTL is developing XTL-2125 - a small molecule, non-nucleoside inhibitor of the hepatitis C virus polymerase. XTL-2125 is currently in a Phase 1 clinical trial in patients with chronic hepatitis C. XTL is also developing XTL-6865 - a combination of two monoclonal antibodies against the hepatitis C virus - presently in Phase 1 clinical trials in patients with chronic hepatitis C. XTL's hepatitis C pipeline also includes several families of pre-clinical hepatitis C small molecule inhibitors. XTL also has an active in-licensing and acquisition program designed to identify and acquire additional drug candidates. XTL is publicly traded on the NASDAQ, London, and Tel-Aviv Stock Exchanges (NASDAQ:XTLB)(LSE:XTL)(TASE:XTL). Contact: Ron Bentsur, Chief Executive Officer Tel: +1-(212)-531-5960 Cautionary Statement Some of the statements included in this press release, particularly those anticipating future financial performance, clinical and business prospects for our clinical compound for neuropathic pain, Bicifadine, and for our clinical compounds for hepatitis C, XTL-2125 and XTL-6865, growth and operating strategies and similar matters, may be forward-looking statements that involve a number of risks and uncertainties. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Among the factors that could cause our actual results to differ materially are the following: our ability to start a clinical trial with Bicifadine in 2007; our ability to meet the forecast reporting deadlines for XTL-2125 and XTL-6865 clinical trials that we mentioned above; our ability to successfully complete cost-effective clinical trials for the drug candidates in our pipeline which would affect our ability to continue to fund our operations with our available cash reserves, our ability to meet anticipated development timelines for the drug candidates in our pipeline due to recruitment, clinical trial results, manufacturing capabilities or other factors; and other risk factors identified from time to time in our reports filed with the Securities and Exchange Commission and the London Stock Exchange, including our annual report on Form 20-F filed with the Securities and Exchange Commission on May 25, 2006. Any forward-looking statements set forth in this press release speak only as of the date of this press release. We do not intend to update any of these forward-looking statements to reflect events or circumstances that occur after the date hereof. This press release and prior releases are available at http://www.xtlbio.com/. The information in our website is not incorporated by reference into this press release and is included as an inactive textual reference only. XTL BIOPHARMACEUTICALS LTD. (A Development Stage Company) CONSOLIDATED BALANCE SHEETS (in thousands of US dollars, except share amounts) December 31 2006 2005 --------- --------- A s s e t s CURRENT ASSETS: Cash and cash equivalents 4,400 13,360 Short-term bank deposits 20,845 -- Trading securities 102 -- Property and equipment (held for sale) -- net 18 -- Deferred tax asset 29 -- Other receivables and prepaid expenses 702 431 --------- --------- T o t a l current assets 26,096 13,791 --------- --------- EMPLOYEE SEVERANCE PAY FUNDS 98 449 RESTRICTED LONG-TERM DEPOSITS 172 110 PROPERTY AND EQUIPMENT -- net 490 762 INTANGIBLE ASSETS -- net 25 39 DEFERRED TAX ASSET 19 -- --------- --------- T o t a l assets 26,900 15,151 ========= ========= Liabilities and shareholders' equity CURRENT LIABILITIES: Accounts payable and accrued expenses 3,003 2,007 Deferred gain 399 399 --------- --------- T o t a l current liabilities 3,402 2,406 --------- --------- LIABILITY IN RESPECT OF EMPLOYEE SEVERANCE OBLIGATIONS 340 695 DEFERRED GAIN 398 798 COMMITMENTS AND CONTINGENCIES --------- --------- T o t a l liabilities 4,140 3,899 --------- --------- SHAREHOLDERS' EQUITY: Ordinary shares of NIS 0.02 par value (authorized: 300,000,000 as of December 31, 2006 and 2005; issued and outstanding: 220,124,349 as of December 31, 2006 and 173,180,441 as of December 31, 2005) 1,072 864 Additional paid in capital 136,611 110,179 Deficit accumulated during the development stage (114,923) (99,791) ------- --------- T o t a l shareholders' equity 22,760 11,252 --------- --------- T o t a l liabilities and shareholders' equity 26,900 15,151 ========= ========= XTL BIOPHARMACEUTICALS LTD. (A Development Stage Company) CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands of US dollars, except share and per share amounts) Period from March 9, 1993* to December 31, Year ended December 31 2006 2006 2005 2004 (unaudited) -------- -------- -------- -------- REVENUES: Reimbursed out-of-pockets -- 6,012 expenses 2,743 3,269 License 454 454 185 1,093 --------- --------- --------- --------- 454 3,197 3,454 7,105 COST OF REVENUES: Reimbursed out-of-pockets -- 6,012 expenses 2,743 3,269 License (with respect to 54 140 royalties) 54 32 --------- --------- --------- --------- 54 2,797 3,301 6,152 GROSS MARGIN 400 400 153 953 RESEARCH AND DEVELOPMENT COSTS (includes non-cash stock option compensation of $173, $112 and $30, in 10,229 93,119 2006, 2005 and 2004, respectively) 7,313 11,985 L E S S - PARTICIPATIONS -- -- -- 10,950 --------- --------- --------- --------- 10,229 7,313 11,985 82,169 IN - PROCESS RESEARCH AND DEVELOPMENT COSTS -- 1,783 -- 1,783 GENERAL AND ADMINISTRATIVE EXPENSES (includes non-cash stock option compensation of $1,992, $2,641 and $2, in 2006, 5,576 34,588 2005 and 2004, respectively) 5,457 4,134 BUSINESS DEVELOPMENT COSTS (includes non-cash stock option compensation of $15, $10 641 5,154 and $0, in 2006, 2005 and 2004, respectively) 227 810 --------- --------- --------- --------- OPERATING LOSS 16,046 14,380 16,776 122,741 FINANCIAL AND OTHER INCOME 1,141 8,284 - net 443 352 --------- --------- --------- --------- LOSS BEFORE INCOME TAXES 14,905 13,937 16,424 114,457 INCOME TAXES 227 78 49 466 --------- --------- --------- --------- LOSS FOR THE PERIOD 15,132 14,015 16,473 114,923 ========= ========= ========= ========= BASIC AND DILUTED LOSS PER ORDINARY SHARE $0.08 $ 0.08 $ 0.12 ========= ========= ========= WEIGHTED AVERAGE NUMBER OF SHARES USED IN COMPUTING BASIC AND 201,737,295 170,123,003 134,731,766 DILUTED LOSS PER ORDINARY SHARE * Incorporation date, see note 1 XTL BIOPHARMACEUTICALS LTD. (A Development Stage Company) CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (in thousands of US dollars, except share amounts) Ordinary shares ------------------- Additional Number of paid in shares Amount capital --------- --------- ----------- BALANCE AT DECEMBER 31, 2005 173,180,441 864 110,179 CHANGES DURING 2006: Comprehensive loss - loss for the -- -- -- period Non-employee stock option -- -- 7 compensation expenses Employee stock option compensation -- -- 2,173 expenses Exercise of stock options 277,238 1 96 Issuance of share warrants, net of $681 -- -- 4,565 share issuance expenses Issuance of shares, net of $2,956 share issuance expenses 46,666,670 207 19,591 --------- --------- --------- BALANCE AT DECEMBER 31, 2006 220,124,349 1,072 136,611 ========= ========= ========= Deficit Accumulated during the development stage Total ----------- --------- BALANCE AT DECEMBER 31, 2005 (99,791) 11,252 CHANGES DURING 2006: Comprehensive loss - loss for the (15,132) (15,132) period Non-employee stock option -- compensation expenses 7 Employee stock option compensation -- expenses 2,173 Exercise of stock options -- 97 Issuance of share warrants, net of $681 -- share issuance expenses 4,565 --------- --------- Issuance of shares, net of $2,956 share issuance expenses -- 19,798 BALANCE AT DECEMBER 31, 2006 (114,923) 22,760 ========= ========= XTL BIOPHARMACEUTICALS LTD. (A Development Stage Company) CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of US dollars) Period from March 9, 1993 (a) to December Year ended December 31 31, 2006 2006 2005 2004 (unaudited) --------- --------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Loss for the period (15,132) (14,015) (16,473) (114,923) Adjustments to reconcile loss to net cash used in operating activities: Depreciation and amortization 243 242 319 3,072 Linkage difference on restricted (10) 3 -- (7) deposits Acquisition of in process -- 1,783 -- 1,783 research and development Loss (gain) on disposal of (57) 6 1 (39) property and equipment Increase (decrease) in liability in respect of employee 8 (159) 30 1,236 severance obligations Impairment charges -- 26 -- 380 Loss (gain) from sales of -- -- 13 (410) investment securities Other income related to exchange (100) -- -- (100) of shares Gain from trading securities (2) -- -- (2) Stock option based compensation 2,180 2,763 32 5,458 expenses Gain on amounts funded in respect of employee (1) (6) (4) (92) severance pay funds Deferred tax asset (48) -- -- (48) Changes in operating assets and liabilities: Decrease (increase) in other receivables and (178) 418 (143) (609) prepaid expenses Increase (decrease) in accounts payable 910 (1,127) 133 2,917 and accrued expenses Increase (decrease) in deferred (400) (400) 1,597 797 gain --------- --------- --------- --------- Net cash used in operating (12,587) (10,466) (14,495) (100,587) activities --------- --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Decrease (increase) in (20,845) 10,136 7,193 (20,845) short-term bank deposits Restricted deposits (52) -- 46 (165) Investment in investment -- -- -- (3,363) securities Proceeds from sales of -- -- 722 3,773 investment securities Employee severance pay funds (18) (50) (136) (909) Purchase of property and (21) (38) (180) (4,042) equipment Proceeds from disposals of 103 27 5 252 property and equipment Acquisition in respect of -- (548) -- (548) license and purchase of assets --------- --------- --------- --------- Net cash provided by (used in) (20,833) 9,527 7,650 (25,847) investing activities XTL BIOPHARMACEUTICALS LTD. (A Development Stage Company) CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (in thousands of U.S dollars) Period from March 9, 1993 (a) to December Year ended December 31 31, 2006 2006 2005 2004 (unaudited) --------- --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of share capital and warrants 24,363 -- 15,430 128,734 - net of share issuance expenses Exercise of share warrants and 97 1,511 19 2,100 stock options Proceeds from long-term debt -- -- -- 399 Proceeds from short-term debt -- -- -- 50 Repayment of long-term debt -- -- -- (399) Repayment of short-term debt -- -- -- (50) --------- --------- --------- --------- Net cash provided by financing 24,460 1,511 15,449 130,834 activities --------- --------- --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (8,960) 572 8,604 4,400 BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 13,360 12,788 4,184 -- --------- --------- --------- --------- BALANCE OF CASH AND CASH EQUIVALENTS AT END OF PERIOD 4,400 13,360 12,788 4,400 ========= ======== ======== ========= Supplementary information on investing and financing activities not involving cash flows: Issuance of ordinary shares in respect of license and purchase of assets -- 1,391 -- 1,391 Conversion of convertible subordinated debenture into shares -- -- -- 1,700 Supplemental disclosures of cash flow information: Income taxes paid 136 49 107 457 ========= ======== ======== ========= Interest paid -- -- -- 350 ========= ======== ======== ========= (a) Incorporation date, see note 1 XTL BIOPHARMACEUTICALS LTD. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. GENERAL XTL Biopharmaceuticals Ltd. ("the Company") was incorporated under the Israel Companies Ordinance on March 9, 1993. The Company is a development stage company in accordance with Statement of Financial Accounting Standards ("SFAS") No. 7 "Accounting and Reporting by Development Stage Enterprises." The consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States ("US GAAP"). The preparation of the financial statements, in conformity with US GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported expenses during the reporting periods. Actual results may vary from these estimates. Through December 31, 2006, the Company has incurred losses in an aggregate amount of US $114.9 million. Such losses have resulted from the Company's activities as a development stage company. It is expected that the Company will be able to finance its operations from its current reserves through 2007. Continuation of the Company's current operations after utilizing its current cash reserves during 2008 is dependent upon the generation of additional financial resources either through agreements for the commercialization of its product portfolio or through external financing. 2. STOCK-BASED COMPENSATION The Company adopted SFAS No. 123R "Share - Based Payment" ("SFAS 123R") as of January 1, 2005, using the modified prospective application transition method. Under such transition method, the Company's financial statements for periods prior to the effective date of SFAS 123R (January 1, 2005) have not been restated. 3. RESEARCH AND DEVELOPMENT COSTS Research and development costs are expensed as they are incurred and consist primarily of salaries and related personnel costs, fees paid to consultants and other third-parties for clinical and laboratory development, license and milestone fees, and facilities-related and other expenses relating to the design, development, testing, and enhancement of product candidates. In connection with the purchase of assets, amounts assigned to intangible assets to be used in a particular research and development project that have not reached technological feasibility and have no alternative future use are charged to in-process research and development costs at the purchase date. 4. REVENUE RECOGNITION The Company recognizes the revenue from its licensing agreement with Cubist under the provisions of the EITF 00-21 "Revenue Arrangements with Multiple Deliverables" and SAB 104 "Revenue Recognition." Under those pronouncements, companies are required to allocate revenues from multiple-element arrangements to the different elements based on sufficient objective and reliable evidence of fair value. Since the Company does not have the ability to determine the fair value of each unit of accounting, the agreement was accounted for as one unit of accounting, after failing the separation criteria, and the Company recognizes each payment on the abovementioned agreement ratably over the expected life of the arrangement. In addition, through 2005, Cubist had requested that the Company provide development services to be reimbursed by Cubist. As required by EITF 01-14 "Income Statement Characterization of Reimbursements Received for "Out-of-Pocket" Expenses Incurred," amounts paid by the Company, as a principal, are included in the cost of revenues as reimbursable out-of-pocket expenses, and the reimbursements the Company receives as a principal are reported as reimbursed out-of-pocket revenues. DATASOURCE: XTL Biopharmaceuticals Ltd CONTACT: Contact: Ron Bentsur, Chief Executive Officer, Tel: +1-(212)-531-5960

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XTLB XTL Biopharmaceuticals Ltd