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Novoheart Holdings Inc.

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

VANCOUVER, British Columbia, Sept. 05, 2019 (GLOBE NEWSWIRE) -- Novoheart Holdings Inc. (“Novoheart” or the “Company”) reports financial results for the three and twelve months ended June 30, 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, “Over the past year, we have made significant progress to strengthen and broaden our proprietary MyHeartTM technology platform, and make such available to our pharma clients and partners for facilitated drug discovery. As an extension of this established business scope, the acquisition of Xellera Therapeutics Limited has further enabled us to develop novel drugs and next-generation advanced therapeutic products, including gene- and cell-based therapies, for clinical applications. In sum, we believe that the Novoheart group is now well-positioned to revolutionize the discovery and development of novel therapeutics to benefit cardiac patients.”

Q4 2019 Business Highlights:

  • Commencement of Phase 1 of a research contract with AstraZeneca to design and build sick mini-hearts for modelling a serious cardiac condition that afflicts over 30 million patients worldwide
  • Appointment of new Chief Financial Officer and Corporate Secretary
  • Completed the acquisition of Xellera Therapeutics Limited for manufacturing clinical-grade advanced therapeutic products and for developing gene- and cell-based regenerative therapies

Commencement of Phase 1 of a research contract with AstraZeneca to design and build sick mini-hearts for modelling a serious cardiac disease

On April 23, 2019, Novoheart signed a collaborative research agreement with AstraZeneca, another top-15 Global Pharmaceutical Company, to partner in the development of a disease model for heart failure with preserved ejection fraction (HFpEF), a global pandemic that affects approximately 30 million people around the world. The Company will own all intellectual property related to the HFpEF disease model, and AstraZeneca has the right of first refusal to negotiate for an exclusive-use option of the resultant HFpEF model for research and development.

Appointment of new Chief Financial Officer (“CFO”) and Corporate Secretary

On June 17, 2019, the Company appointed Joseph Leung as the CFO and Corporate Secretary. Joseph will assume the duties of CFO and Corporate Secretary which had been taken up by Dr. Camie Chan during the interim period in addition to her position as the Company’s Chief Operating Officer. Joseph has accumulated nearly two decades of experience in the field of financial management and accounting, specializing in mergers and acquisition, compliance and risk management, and the development and monitoring of control systems.

Completed the acquisition of XT for developing gene- and cell-based regenerative therapies

On June 28, 2019, the Company completed the acquisition of all of the shares of XT (the “Acquisition”). As consideration for the Acquisition, the Company has issued an aggregate of 93,000,000 common shares and pre-paid common share purchase warrants (“pre-paid warrants”) at a deemed price of $0.3635 per share, for an aggregate consideration of $33,805,000.

The Acquisition is expected to accelerate progression of the Company’s current business scope to include the development of novel drugs, gene- and cell-based therapies, with the availability of unique expertise and professional networks in clinical trials and related regulatory requirements in the US, EU and HK/China, and a state-of-the-art Good Manufacturing Practice (“GMP”) facility currently being established, with a target completion date in 2020, to be compliant with international standards for manufacturing clinical-grade advanced therapeutic products for clinical trials and other applications. The facility is expected to lead to new revenue streams while creating significant values. Furthermore, the Acquisition has enhanced the Company’s liquidity through access to approximately $22,700,000 cash on XT’s balance sheet.

In connection with the Acquisition, the Company added Dr. Katherine Ngan and Mr. Roger Ngan, two of the founders of XT, to Novoheart’s board of directors (“Board”).

Prior to the Acquisition, the Company entered into a service agreement with XT on October 31, 2018, representing Phase 1 of an intended long-term strategic partnership between the companies. Phase 1 focused on the first steps towards building a GMP facility for generating clinical-grade human stem cell lines, initially within the Southern Chinese population.  The strategic partnership was another step towards clinical translation of Novoheart’s technologies.

Latest Business Developments:

  • Entered into a commercial agreement with an international leading gene-editing company (“Leading Gene-Editing Company”) to study a rare disease with Novoheart‘s proprietary cardiac engineering technology
  • Completion of a commercial contract with Pfizer on cardiac drug screening disease modeling led to the publication of two scientific articles published in peer-reviewed journals
  • Commencement of Phase II of a commercial agreement with another top-10 Global Pharmaceutical Company (“Global Pharma Partner”) for a high-throughput system to measure engineered human heart tissues from Novoheart
  • Received funding support from the Innovation and Technology Commission of Hong Kong (“ITC”)

Entered into a commercial agreement with Leading Gene-Editing Company to study a rare disease with Novoheart’s proprietary cardiac engineering technology

On July 1, 2019, Novoheart signed a commercial agreement with Leading Gene-Editing Company, which focuses on developing transformative gene-based medicines for serious human diseases. Pursuant to the agreement, Novoheart will perform research on the MyHeartTM Platform human cardiac tissue disease models.

Completion of a commercial contract with Pfizer on cardiac drug screening disease modeling led to the publication of two scientific articles published in peer-reviewed journals

Novoheart and Pfizer investigators have jointly published results from their collaborative research on the disease Friedreich’s Ataxia (FRDA), a neurodegenerative disease in which patients most often die of heart complications. Using Novoheart’s proprietary MyHeartTM Platform, the Novoheart team successfully produced the world’s first 3D human cardiac tissue models which carry the FRDA disease, capturing key clinical symptoms seen in FRDA patients. This novel functional FRDA model thus fills a longstanding gap by providing a highly effective, human-based screening and discovery platform for developing novel therapeutics. The results were published in the peer-reviewed journal Stem Cell Research & Development on July 8, 2019.

Commencement of Phase II of a commercial agreement with the Global Pharma Partner to develop high-throughput system to measure engineered human heart tissues from the Company

In December 2018, the Company signed a contract with the Global Pharma Partner, entering into a multi-phase partnership that requires the Company to design a custom tailored high-throughput system with hardware and software for measuring human cardiac tissues engineered by the Company. Novoheart will have exclusive rights to the generated intellectual property and to market this technology to the broader pharmaceutical, biotech and academic markets, where the Company believes higher throughput assays, with strong capabilities in recapitulating human physiology at the tissue level, are in significant demand. Phase I began in December 2018 and was completed in July 2019. As a result, the Company recognized $165,031 of revenue for the year ended June 30, 2019. The Global Pharma Partner has recognized a successful outcome of Phase I and the commercial agreement has now advanced to Phase II.

Received funding support from the ITC

On August 23, 2019, the Company received of the first payment of $132,117 (HK$782,500) from the ITC pursuant to an agreement under the Enterprise Support Scheme (“ESS”) effective June 1, 2018. The grant was awarded to the Company to further enhance the drug screening capabilities of its proprietary human ventricular cardiac tissue strip, as part of its MyHeartTM Platform of bioengineered human heart tissues.

The ESS provides funding support on a matching basis for conducting research and development. The project is estimated to have a total cost of $775,640 (HK$4,782,000). Under the agreement, the ITC will contribute 50% of the total cost with a maximum of $387,820 (HK$2,391,000), and the Company will be responsible for the remaining costs.

Financial Results for 2019

The Company recorded net loss of $7,656,520 (loss per share of $0.08) for the year ended June 30, 2019 compared to a net loss of $12,463,044 (loss per share of $0.17) for the year ended June 30, 2018. The decrease in the net loss was mainly due to a non-cash loss on completion of reverse takeover of $5,213,597 for the year ended June 30, 2018, while offset by the increase in operating expenses compared to the year ended June 30, 2018.

Revenue and Cost of Sales

For the year ended June 30, 2019, the Company recorded revenue of $165,031 and cost of sales of $75,487, compared to revenue of $95,124 and cost of sales of $38,208 for the year ended June 30, 2018. The revenue was mainly attributed to a contract with the Global Pharma Partner. The contract required the Company to design a custom tailored high-throughput system with hardware and software for measuring human cardiac tissues engineered by Novoheart. Services for Phase 1 commenced in December 2018 and was completed in July 2019. Cost of sales mainly comprised of labour and material costs. The Global Pharma Partner has recognized a successful outcome of Phase I and the commercial agreement has now advanced to Phase II.

Operating Expenses

Operating expenses for the year ended June 30, 2019 was $8,327,059 compared to $7,245,780 for the year ended June 30, 2018. The increase in operating expenses was due to the increase in research and development expenses and marketing expenses, while offset by decreases in general and administrative expenses and intellectual property and patent expenses. Research and development expenses increased from $1,647,270 in 2018 to $2,177,271 in 2019 as a result of the expansion of the scientific team resulting in an increase in personnel costs, and the commencement of a sponsored research agreement signed with the Regents of the University of California, Irvine Campus. The increase in marketing expenses from $166,690 to $782,379 was due to the focus of the Company to expand the commercialization of its MyHeartTM platform. The decrease in general and administrative from $3,440,000 in 2018 to $3,093,687 in 2019 was mainly due to the scale down in investor relation services as well as professional and regulatory fees following the completion of the listing. The decrease in the intellectual property and patent expenses from $420,399 to $236,933 was mainly due to a one-time milestone payment made to the Icahn School of Medicine at Mount Sinai for the year ended June 30, 2018.

Financial Results for the Fourth Quarter of 2019

The Company recorded net loss of $2,534,813 (loss per share of $0.03) for the three months ended June 30, 2019 (“Q4 2019”) compared to a net loss of $2,995,770 (loss per share of $0.03) for the three months ended June 30, 2018 (“Q4 2018”). The Company recognized $51,821 in revenue and $24,620 in cost of sales in Q4 2019 relating to a contract with the Global Pharma. Phase I was completed in July 2019 and the Company entered into Phase II of the commercial agreement.

Operating expenses for Q4 2019 was $2,611,560 compared to operating expenses of $2,802,851 for Q4 2018. The decrease in operating expenses was primarily related to a decrease in share-based compensation expenses of $366,222, a decrease in general and administrative expenses of $110,570 while offset by an increase in research and development expenses of $123,912.  Share-based compensation expenses decreased due to some of the restricted share units being fully vested. The decrease in general and administrative expenses was a result of the scale down in investor relation services.

Liquidity and Outstanding Share Capital

As at June 30, 2019, the Company had cash and bank balances of $23,173,717. As at September 4, 2019, there were 162,810,239 common shares issued and outstanding, and 6,116,373 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 275,000 of the issuance of vested restricted share units. In connection with the acquisition of Xellera Therapeutics Limited, the Company has issued pre-paid warrants of 25,731,786, which is automatically converted to common shares upon Dr. Katherine Ngan and Mr. Roger Ngan’s personal information forms being cleared by the TSX Venture Exchange. The Company also has 972,037 purchase warrants outstanding with an exercise price of $0.50, expiring in September 2019.

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

Joseph Leung
Chief Financial Officer

(604) 398-3170
info@novoheart.com

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 MyHeartTM 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 undertakes 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)

   June 30,
2019
 June 30,
2018
      
ASSETS     
      
Current     
Cash and bank balances $23,173,717 $1,595,094 
Accounts and other receivables  165,979  615,332 
Prepaid expenses and deposits  421,569  312,161 
   23,761,265  2,522,587 
      
Property and equipment, net  803,412  1,245,981 
Intangible assets, net  187,727  277,948 
Goodwill  8,806,998  - 
      
  $33,559,402 $4,046,516 
      
LIABILITIES AND SHAREHOLDERS' EQUITY    
     
Current    
Accounts payable and accrued liabilities $1,646,733 $1,357,713 
Loans  1,676,000  - 
Contract liabilities  35,902  - 
Due to related parties  44,202  60,684 
   3,402,837  1,418,397 
      
Deferred government grants  19,529  40,648 
Long-term license payable  38,967  75,424 
      
   3,461,333  1,534,469 
      
Shareholders' Equity     
Share capital  52,149,493  17,426,693 
Contributed surplus  1,942,532  1,493,175 
Accumulated other comprehensive income  373,646  303,261 
Accumulated deficit  (24,367,602) (16,711,082)
   30,098,069  2,512,047 
      
  $33,559,402 $4,046,516 
        


NOVOHEART HOLDINGS INC.

Consolidated Statements of Loss and Comprehensive Loss
For the years ended June 30, 2019 and 2018
(Expressed in Canadian dollars, except number of common shares)

   2019  2018 
      
Revenue $165,031 $95,124 
Cost of sales  75,487  38,208 
   89,544  56,916 
      
OPERATING EXPENSES     
Research and development  2,177,271  1,647,270 
Intellectual property and patent  236,933  420,399 
General and administrative  3,093,687  3,440,000 
Marketing  782,379  166,690 
Share-based compensation  1,367,157  1,172,403 
Depreciation and amortization  669,632  399,018 
   8,327,059  7,245,780 
LOSS FROM OPERATIONS  (8,237,515  ) (7,188,864)
      
Government grants  617,267  63,383 
Other income  66  118,303 
(Finance expense) / interest income  (9,869) 31,926 
Foreign exchange gain / (loss)  3,069  (274,195)
Non-cash loss on completion of reverse takeover  -  (5,213,597)
   610,533  (5,274,180)
      
NET LOSS FOR THE YEAR BEFORE TAX $(7,626,982)$(12,463,044)
      
Tax expense  29,538  - 
      
NET LOSS FOR THE YEAR AFTER TAX $(7,656,520)$(12,463,044)
      
OTHER COMPREHENSIVE INCOME (LOSS)     
Foreign currency translation adjustment  70,385  172,795 
      
COMPREHENSIVE LOSS FOR THE YEAR $(7,586,135)$(12,290,249)
      
Loss per share – Basic and Diluted $(0.08)$(0.17)
      
      
Weighted average number of shares outstanding – basic and diluted  94,727,746  72,616,534 
      


NOVOHEART HOLDINGS INC.
Consolidated Statements of Cash Flow
For the years ended June 30, 2019 and 2018
(Expressed in Canadian dollars)

   
   2019  2018 
    
CASH FLOWS FROM OPERATING ACTIVITIES   
Net loss for the year after tax $(7,656,520)$(12,463,044)
Items not affecting cash:   
Non-cash loss on completion of reverse takeover  -  5,213,597 
Share-based compensation  1,367,157  1,172,403 
Depreciation and amortization  669,632  399,018 
   (5,619,731) (5,678,026)
Changes in non-cash working capital items:   
Decrease / (increase) in accounts and other receivables  469,525  (5,504)
Increase in prepaid expenses  (120,841) (212,245)
Increase in accounts payable and accrued liabilities  257,552  793,432 
(Decrease) / increase in due to related parties  (33,268) 270,812 
(Decrease) / increase in other long-term liabilities  (39,256) 75,474 
Decrease in deferred government grants  (22,639) (21,763)
Increase in contract liabilities  2,231,110  - 
   2,742,183  900,206 
 
Net cash used in operating activities
  (2,877,548) (4,777,820)
    
CASH FLOWS FROM INVESTING ACTIVITIES   
Cash acquired from acquisition of a subsidiary  22,692,695  - 
Acquisition of equipment and payment of leasehold improvements  (81,611) (1,374,690)
Increase in pledged bank deposit  (5,028,000) - 


Acquisition of intangible assets  - (339,630)
    
Net cash generated from / (used) in investing activities  17,583,084 (1,714,320)
    
CASH FLOWS FROM FINANCING ACTIVITIES   
Proceeds from loan  1,688,417 - 
Proceeds from share issuance, net  - 6,663,982 
Cash acquired in RTO  - 112,662 
    
Net cash generated from financing activities  1,688,417 6,776,644 
    
Changes in cash and cash equivalents during the year  16,393,953 284,504 
    
Effect of exchange rate changes on cash held in a foreign currency  156,670 (9,158)
Cash and cash equivalents, beginning of year  1,595,094 1,319,748 
    
Cash and cash equivalents, end of year $18,145,717$1,595,094 
    

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