20-F 1 nymox20fdec31.htm ANNUAL REPORT Nymox Pharmaceutical Corporation - Form 20-F


Form 20–F



 

[ ]

Registration Statement pursuant to section 12(b) or (g) of the Securities Exchange Act of 1934

or

[X]

Annual Report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2008

or

[ ]

Transition Report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from               to

or

[ ]

Shell Company Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of event requiring this Shell Company Report from                 to


Commission File Number: 001-12033


NYMOX PHARMACEUTICAL CORPORATION

(Exact name of registrant as specified in its charter)


Canada

(Jurisdiction of incorporation or organization)


9900 Cavendish Blvd., Suite 306

St. Laurent, Quebec, Canada, H4M 2V2

(Address of principal executive offices)

Contact person: Roy Wolvin

Tel. 800-936-9669, e-mail: rwolvin@nymox.com,fax: 514-332-2227



Securities registered or to be registered pursuant to Section 12(b) of the Act.


 

Title of each class

Name of each exchange on which registered

 

None

Not Applicable



Securities registered or to be registered pursuant to Section 12(g) of the Act

Common Stock

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act

None

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.

30,178,607 shares as of December 31, 2008

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.


Yes [ ]

No [X ]


If this is a transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


Yes [ ]

No [X ]



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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Yes [X]

No [ ]


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.  (Check one):


Large accelerated filer [  ] Accelerated filer [X] Non-accelerated filer [   ]


Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:


U.S. GAAP [   ]

International Financial Reporting Standards [   ]

Other  [ X ]

as issued by the International Accounting

Standards Board.


If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:


Item 17 [  ]

Item 18 [X]


If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Yes [ ]

No [X ]




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In this annual report, the term “Nymox” refers to both Nymox Pharmaceutical Corporation and its subsidiaries, Nymox Corporation and Serex Inc. Unless otherwise indicated all dollar amounts are in United States Dollars.


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS


You should be aware that this report contains forward-looking statements about, among other things, the anticipated operations, product development, financial condition and operating results of Nymox, proposed clinical trials and proposed transactions, including collaboration agreements.


By forward-looking statements, we mean any statements that are not statements of historical fact, including (but not limited to) statements preceded by or that include the words, “believes”, “expects”, “anticipates”, “hopes”, “targets” or similar expressions.


In connection with the “safe harbor” provisions in the Private Securities Litigation Reform Act of 1995, we are including this cautionary statement to identify some of the important factors that could cause Nymox’s actual results or plans to differ materially from those projected in forward-looking statements made by, or on behalf of, Nymox. These factors, many of which are beyond the control of Nymox, include Nymox’s ability to:



·

identify and capitalize on possible collaboration, strategic partnering or divestiture opportunities;


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obtain suitable financing to support its operations and clinical trials;


·

manage its growth and the commercialization of its products;


·

achieve operating efficiencies as it progresses from a development-stage to a later-stage biotechnology company;


·

successfully compete in its markets;


·

realize the results it anticipates from the clinical trials of its products;


·

succeed in finding and retaining joint venture and collaboration partners to assist it in the successful marketing, distribution and commercialization of its products;


·

achieve regulatory clearances for its products;


·

obtain on commercially reasonable terms adequate product liability insurance for its commercialized products;


·

adequately protect its proprietary information and technology from competitors and avoid infringement of proprietary information and technology of its competitors;


·

assure that its products, if successfully developed and commercialized following regulatory approval, are not rendered obsolete by products or technologies of competitors; and


·

not encounter problems with third parties, including key personnel, upon whom it is dependent.



Although Nymox believes that the forward-looking statements contained in this annual report are reasonable, it cannot ensure that its expectations will be met. These statements involve risks and uncertainties. Actual results may differ materially from those expressed or implied in these statements.  Factors that could cause such differences include, but are not limited to, those discussed under “Risk Factors.”



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PART I


ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable


ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable


ITEM 3. KEY INFORMATION

Selected Financial Data

The following table sets forth selected consolidated financial data for Nymox for the periods indicated, derived from financial statements prepared in accordance with generally accepted accounting principles (“GAAP”). We prepare our basic financial statements in accordance with Canadian GAAP and include, as a note to the statements, a reconciliation of material differences to United States GAAP. The financial statements have been audited by KPMG LLP, Montreal, Canada as at and for the years ended December 31, 2004, 2005, 2006, 2007 and 2008 and are reported in U.S. dollars. The data set forth below should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in Part I, Item 8 of this report.


NYMOX PHARMACEUTICAL CORPORATION

Selected Consolidated Financial Data

(In U.S. dollars )

    Dec. 31,   Dec. 31,   Dec. 31,   Dec. 31,   Dec. 31,
    2008   2007   2006   2005   2004
CANADIAN GAAP                    
Current Assets $ 480,505 $ 430,960 $ 379,194 $ 291,454 $ 699,074
Property & Equipment   21,525   19,710   7,839   11,463   25,348
Patents & Intellectual Property   3,538,587   3,712,682   3,477,819   3,310,129   3,271,599
Total Assets   4,067,611   4,260,346   3,970,845   3,719,039   4,066,021
Total Liabilities   1,250,470   1,294,745   2,144,312   2,506,902   2,053,634
Share Capital   53,850,147   50,155,147   44,443,350   39,488,350   36,553,350
Shareholders Equity   2,010,726   2,165,601   1,026,533   412,137   1,212,387
Total Revenues   428,409   433,933   442,861   426,282   321,948
Sales   426,675   412,923   437,440   424,506   321,895
Research & Development Expenditures (1)   2,053,368   2,729,862   2,541,096   1,828,516   1,851,881
Net Loss   4,590,345   5,290,431   4,893,685   3,584,528   3,745,625
Loss per Share (basic & diluted) $ 0.15 $ 0.18 $ 0.18 $ 0.14 $ 0.15
Weighted Avg. No. of  Common Shares   29,749,000   29,005,342   27,644,749   26,080,470   24,924,674
 
U.S. GAAP (2)                    
Net Loss $ 4,590,345 $ 5,290,431 $ 4,893,685 $ 3,609,448 $ 3,770,545
Loss per Share   0.15   0.18   0.18   0.14   0.15
Shareholders Equity $ 2,000,617 $ 2,155,492 $ 1,016,424 $ 402,028 $ 1,202,278


(1)

We earn investment tax credits by making qualifying research and development expenditures. These amounts shown are net of investment tax credits.

(2)

Reference is made to Note 14 of Nymox’s audited financial statements as at and for the years ended December 31, 2008, 2007 and 2006 for a reconciliation of differences between Canadian and U.S. GAAP.



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Risk Factors


Investing in our securities involves a significant degree of risk. You should carefully consider the risks described below, together with all of the other information in our publicly filed documents, before making an investment decision. If any of the following risks actually occurs, our business, financial condition or results of operations could be adversely affected. In such an event, the trading price of our Common Shares could decline and shareholders may lose part or all of their investment in our securities.


Our Clinical Trials for our Therapeutic Products in Development, Such as NX-1207, May Not Be Successful and We May Not Receive the Required Regulatory Approvals Necessary to Commercialize These Products


Products requiring regulatory approval, such as NX-1207, will be approved for commercial sale only if governmental regulatory authorities are satisfied that our clinical trials are properly designed and conducted and that the results of those trials provide valid and acceptable evidence that the product is safe  and effective for the conditions or diseases it is intended to treat. We do not know whether our pending or any future clinical trials will demonstrate sufficient safety and efficacy to obtain the requisite regulatory approvals or will result in marketable products. Clinical trials are lengthy, complex, expensive and uncertain processes and failure can occur at any stage of testing. Results attained in pre-clinical testing or in early clinical trials may not be indicative of results that are obtained in later studies. We may suffer significant setbacks in advanced clinical trials, even after promising results in earlier studies. Based on results at any stage of clinical trials, we may decide to repeat or redesign a trial or discontinue development of one or more of our product candidates. If we fail to adequately demonstrate the safety and efficacy of our products under development, we will not be able to obtain the required regulatory approvals to commercialize our product candidates.  Failure to obtain such approval could cause the price of our shares to decline and adversely affect our business, operations, product development programs and financial condition.


Our Clinical Trials for Our Therapeutic Products, Such as NX-1207, May Be Delayed, Making it Impossible to Achieve Anticipated Development or Commercialization Timelines


Delays in the initiation, conduct or completion of clinical trials are not uncommon. If one or more of our clinical trials is delayed, we may be unable to meet our anticipated development or commercialization timelines. Either circumstance could cause the price of our shares to decline, increase clinical trial and product development costs, and affect the company’s business, operations, product development programs and financial condition.


The design, conduct and completion of clinical trials is a complex process involving many third parties, including governmental authorities, institutional review boards, contract manufacturers, contract research organizations (CROs), consultants, investigators, patients, and data monitoring committees. The initiation, progress, completion and success of a clinical trial is in part dependent on third parties providing necessary approvals, agreements and consents, performing necessary tasks in a timely, competent manner, and complying with protocols, good clinical practices and applicable laws, rules and regulations.  Failure of a third party to perform as expected or agreed upon may result in delays or failure in initiating or completing a clinical trial.  


Our clinical trials are subject to prior approvals and continuing oversight by governmental regulatory authorities and institutional review boards. We must meet and comply with their requirements in order to start, continue and successfully complete a clinical trial.  We may not be able to comply with one or more of these requirements or there may be delays in doing so.  A clinical trial may be put on hold or halted altogether due to concerns about patient safety. Governmental regulatory authorities may change approvals or requirements, resulting in changes to the design or conduct of a clinical trial or the need for new or further clinical trials.


Clinical trials for our product candidates require that we identify and enroll a large number of patients with the disorder under investigation. We may not be able to enroll a sufficient number of patients to complete our clinical trials in a timely manner. Patient enrollment is a function of many factors including:




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·

design of the protocol;

·

the size of the patient population;

·

eligibility criteria for the study in question;

·

perceived risks and benefits of the drug under study;

·

availability of competing therapies;

·

efforts to facilitate timely enrollment in clinical trials;

·

patient referral practices of physicians; and

·

availability of clinical trial sites.


If we have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we may need to delay or terminate ongoing clinical trials.


A Setback in Any of Our Clinical Trials Would Likely Cause a Drop in the Price of Our Shares


We have successfully completed several Phase 1 and Phase 2 multi-center, blinded and controlled clinical trials, and follow-up studies, in the U.S. for NX-1207, our drug candidate for the treatment of enlarged prostate (benign prostatic hyperplasia or BPH), and we are currently in Phase 3. The clinical testing of drug candidates is fraught with uncertainties and positive results from earlier clinical trials may not be repeated in later trials.  As well, government regulators such as the U.S. Food and Drug Administration, or FDA, may require additional testing or further documentation relating to the preclinical testing, clinical studies, manufacturing or other issues at any time. These requirements may result in substantial delays in obtaining regulatory approval or make obtaining such approval much more difficult.  Setbacks in any phase of the clinical development of our product candidates could have a negative impact on our business, operations, product development programs and financial condition, could jeopardize FDA or other regulatory approval and would likely cause a drop in the price of our shares.


We May Not be Able to Make Adequate Arrangements with Third Parties for the Commercialization of Our Product Candidates, such as NX-1207


In order to commercialize our product candidates successfully, we intend, on a product-by-product basis, either to make arrangements with third parties to perform some or all of these services or to expand our existing sales, marketing and distribution capabilities. We currently have limited sales and marketing capabilities and limited experience in developing, training or managing a large marketing or sales force.  We currently rely primarily upon distributors for the sales of our existing products. The cost of establishing and maintaining a larger sales force would be substantial and may exceed its cost effectiveness. In addition, in marketing our products, we would likely compete with many companies that currently have extensive and well-funded marketing and sales operations. Despite our marketing and sales efforts, we may be unable to compete successfully against these companies.  We may make arrangements with third parties to market and sell some or all of our products under development in certain territories, rather than establish our own sales force. We may not be able to do so on favorable terms. If we contract with third parties for the sales and marketing of our products, our revenues will depend upon the efforts of these third parties, whose efforts may not be successful.


We anticipate entering into co-development and co-marketing agreements with one or more partners with established sales, marketing and regulatory capabilities in order to assist in the completion of the development and commercialization of NX-1207. We may not be able to do so on favorable terms. If we fail to establish or make adequate arrangements with third parties for such purposes, our business, operations, product development programs and financial condition will be materially adversely affected.





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We May Not Achieve Our Projected Development Goals in the Time Frames We Announce and Expect


We make public statements regarding our estimates and projections for meeting milestones, such as the commencement and completion of clinical trials, anticipated regulatory submission and approval dates and time of product launch. The actual timing of these events can vary dramatically due to factors such as delays or failures in our clinical trials, the uncertainties inherent in the regulatory approval process and delays in achieving manufacturing or marketing arrangements sufficient to commercialize our products. There can be no assurance that our clinical trials will be completed, that we will make regulatory submissions or receive regulatory approvals as planned or that we will be able to adhere to our current schedule for the launch of any of our products. If we fail to achieve one or more of these milestones as planned, the price of our shares could decline.


Even If We Obtain Regulatory Approvals for Our Product Candidates, We Will be Subject to Stringent Ongoing Government Regulation


Even if regulatory authorities approve any of our product candidates, the manufacture, marketing and sale of such products will be subject to strict and ongoing regulation. Compliance with such regulation will be expensive and consume substantial financial and management resources. For example, an approval for a product may be conditioned on our conducting costly post-marketing follow-up studies. In addition, if based on these studies, a regulatory authority does not believe that the product demonstrates a benefit to patients, such authority could limit the indications for which the product may be sold or revoke the product’s regulatory approval.


We and our contract manufacturers will be required to comply with applicable current Good Manufacturing Practice (“cGMP”) regulations for the manufacture of our products. These regulations include requirements relating to quality assurance, as well as the corresponding maintenance of records and documentation. Manufacturing facilities must be approved before we can use them in commercial manufacturing of our products and are subject to subsequent periodic inspection by regulatory authorities. In addition, material changes in the methods of manufacturing or changes in the suppliers of raw materials are subject to further regulatory review and approval.


If we or any marketing collaborators or contract manufacturers fail to comply with applicable regulatory requirements, we may be subject to sanctions including fines, product recalls or seizures, injunctions, total or partial suspension of production, civil penalties, withdrawals of previously granted regulatory approvals and criminal prosecution. Any of these penalties could delay or prevent the development, marketing or sale of our products.


It is Uncertain When, if Ever, We Will Make a Profit


We first began operations in 1995 and are only in the early stages of commercial marketing of our diagnostic products, AlzheimAlert™, NicAlert™ and TobacAlert™. We have never made a profit. We incurred a net loss of $3.7 million in 2004, $3.6 million in 2005, $4.9 million in 2006, $5.3 million in 2007 and $4.6 million in 2008. As of December 31, 2008, Nymox’s accumulated deficit was $55.2 million.


We cannot say when, if ever, Nymox will become profitable. Profitability will depend on our uncertain ability to generate revenues from the sale of our products and the licensing of our technology that will offset the significant expenditures required for us to advance our research, protect and extend our intellectual property and develop, manufacture, license, market, distribute and sell our technology and products successfully. Similar types of expenditures in the past have helped produce the net losses reported above.






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We May Not Be Able to Raise Enough Capital to Develop and Market Our Products


Nymox has funded its operations primarily by selling shares of its common stock. Since late 1998, a small portion of the funds came from sales. However, sales have not been, and may not be in the foreseeable future, sufficient to meet our anticipated financial requirements.


We will continue to need to raise substantial amounts of capital for our business activities including our research and development programs, the conduct of clinical trials needed to obtain regulatory approvals and the marketing and sales of our products. We anticipate being able to fund our current total annual budgeted expenditures of approximately $3.5 - 5 million per year over the next year through our current cash position and additional financing, including draw downs through our common stock private purchase agreement with Lorros-Greyse Investments, Inc. Clinical trials will substantially increase cash requirements.  We anticipate being able to meet these requirements as they arise. We plan to raise capital either through a new round of financing and/or through partnering with a major pharmaceutical company. The recent financial crisis in the United States and the global economic recession has had a negative impact on the availability of liquidity in the market and may have an effect on the liquidity of the purchaser in our common stock private purchase agreement. Additional financing may not be available when needed, or, if available, may not be available on acceptable terms. If adequate funds on acceptable terms are not available, we may have to curtail or eliminate expenditures for research and development, testing, clinical trials, promotion and marketing for some or all of our products.


We Face Challenges in Developing, Manufacturing and Improving Our Products


Our success depends on our ability to develop or acquire rights to new products or to improve our existing products. We are still developing many of our products and have not yet brought them to market.  We cannot assure you that we will be able to develop or acquire rights to such products and to market them successfully.


Developing a treatment for Alzheimer’s disease is particularly challenging. Many pharmaceutical companies, institutions and researchers are working on many different approaches and treatments.  There is no consensus among researchers about the cause of this fatal illness and no guarantee that our drug development programs in this area are targeting significant factors in its cause, progression or symptoms. It is difficult to design drug candidates that can cross from the bloodstream into the brain, where the damage from Alzheimer’s disease is occurring.  Clinical trials to establish efficacy for drugs that slow down the progression of Alzheimer’s disease over a period of months or years often require that a large number of subjects be tracked over many months or years, making them very expensive to conduct. The potentially long period from discovery and patenting through development and regulatory approval to the market can significantly reduce the patent life of an Alzheimer’s disease treatment. Any marketed treatment in this area may well eventually face competition from “me-too” drugs developed by other pharmaceutical companies based on our research. We will be under constant competitive pressure to improve our products and to develop new treatments in order to protect our position in the field.


Developing and improving our diagnostic products is also challenging. The science and technology of the detection and measurement of very small amounts of biochemicals in bodily fluids and tissue is evolving rapidly. We may need to make significant expenditures in research and development costs and licensing fees in order to take advantage of new technologies. If any major changes to our testing technologies used in our AlzheimAlert™ and NicAlert™ and TobacAlert™ tests are made, further validation studies will be required. Developing new diagnostic products is more challenging, requiring identification and validation of the biochemical marker being detected by the new product in the clinical context and the development and validation of the product designed to detect the marker.


We anticipate outsourcing at least some of the manufacturing required for new products we may develop in order to control start-up and operating costs and to take advantage of the existing manufacturing capabilities and capacity in the large contract manufacturing sectors in the pharmaceutical and diagnostic industries. There are risks associated with this strategy, including difficulties in the transfer of manufacturing, the possibility of production interruption due to causes beyond our control and the need to arrange alternative suppliers.  We currently out-source some of the manufacturing services required for our NicAlert™ and TobacAlert™ products to a contract manufacturer. We do not anticipate any significant risk of long-term interruption of manufacture due to this arrangement. The services supplied are not unique or unduly complicated and other contract manufacturers are available to provide similar services.  The manufacture of therapeutics is more challenging and capital-intensive and may require us to partner with a major pharmaceutical company or other partner in order to manufacture a therapeutic for market.




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Our Products and Services May Not Receive Necessary Regulatory Approvals


Our diagnostic products, AlzheimAlert™, NicAlert™ and TobacAlert™, and our products in development, are subject to a wide range of government regulation governing laboratory standards, product safety and efficacy. The actual regulatory schemes in place vary from country to country and regulatory compliance can take several years and involve substantial expenditures.


We cannot be sure that we can obtain necessary regulatory approvals on a timely basis, if at all, for our products in development and all of the following could have a material adverse effect on our business:


·

failure to obtain or significant delays in obtaining requisite approvals;

·

loss of or changes to previously obtained approvals; and

·

failure to comply with existing or future regulatory requirements.


Any changes in CMS or state law requirements or in the FDA regulations could have a detrimental impact on our ability to offer or market any reference laboratory services and/or on our ability to obtain reimbursement from the Medicare and Medicaid programs and providers.


We have developed a diagnostic kit based on AlzheimAlert™ for sale to third parties. We will require prior approval from the FDA before we can market, distribute or sell this product in the United States. In July 2005, an FDA advisory panel voted 5-2 against approval of our kit, citing the need for further studies, such as long term follow-up and autopsy confirmation.


Similar requirements exist in many other countries. Obtaining these approvals and complying with the subsequent regulatory requirements can be both time-consuming and expensive.  In November 2004, Nymox satisfactorily completed the testing and registration required by European regulatory, environmental and quality standards in order to obtain a  CE Mark for the AlzheimAlert™ kit.  The CE Mark makes the AlzheimAlert™ kit eligible for sale in the European Union and will allow European clinical and hospital laboratories to perform the AlzheimAlert™ test in their own facilities in Europe.


We currently sell NicAlert™ and TobacAlert™ as tests for tobacco product use and exposure and for research use. In October, 2002, we received 510(k) clearance from the U.S. Food and Drug Administration for our NicAlert™ product for medical uses. In January, 2006, we announced the certification of the urine-based version of NicAlert™ with a CE Mark making it eligible for sale in the European Union and in May, 2006 the certification of the saliva-based version of NicAlert™ with a CE Mark. In September, 2003, Nymox launched TobacAlert™ for nonmedical testing for second hand smoke exposure in the U.S.


In the United States, our drugs in development will require final FDA approval before their sale or distribution. Such approval comes only at the end of a lengthy, expensive and often arduous process. In September, 2006, we announced the successful completion of a multi-center, double-blind, placebo-controlled Phase 2 trial of NX-1207, our lead candidate for the treatment of benign prostatic hyperplasia (BPH), a common disorder of older men. The Company reported positive results in 2007 and 2008 in several follow-up studies of BPH patients. In February 2008, the Company reported positive results in a 32 site U.S. Phase 2 prospective randomized clinical trial, with statistically significant improvement compared to an approved BPH drug (finasteride). We cannot predict with any certainty the outcome of this program, what further steps may be required in order to apply for final FDA approval for this drug or whether the FDA will ultimately grant us such approval. Similar requirements exist in many other countries.




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We Face Significant and Growing Competition


The modern pharmaceutical and biotechnology industries are intensely competitive, particularly in the field of Alzheimer’s disease where there is a large unmet need for an effective treatment.  Currently there are five drugs with similar mechanisms of action approved for sale in the United States (Aricept®, Cognex®, Exelon®, Razadyne® and Namenda®). These drugs offer some relatively short-term symptomatic relief, but do not treat the underlying causes of the illness.  Over the past decade, there has been an intense research effort both in the non-profit sectors such as universities, government agencies and research institutes and in the pharmaceutical and biotechnology industry to develop new treatments for Alzheimer’s disease. Treatment candidates under development include:


·

vaccines and other immunotherapies for Alzheimer’s disease.  A number of pharmaceutical and biotechnology companies including Wyeth, Elan, and Baxter are working on such therapies.

·

enzyme-blocking therapies intended to block the production of the protein found in the senile plaques characteristic of Alzheimer’s disease. A number of pharmaceutical and biotechnology companies including Lilly, Bristol-Myers Squibb and Merck are working on such therapies.

·

drugs aimed at reducing, blocking or clearing the aggregation or accumulation of the protein found in senile plaques.  A number of pharmaceutical and biotechnology companies including Pfizer and Prana Biotechnology are working on such therapies.

·

drugs designed to enhance cognition from Pfizer, GlaxoSmithKline, and Abbott among others.

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antihistamines such as Dimebon from Medivation.

·

insulin therapies, including already approved diabetes drug such as rosiglitazone and metformin.

There is also ongoing research into possible methods of preventing Alzheimer’s disease such as taking certain cholesterol-lowering drugs called statins, estrogen replacement therapies, anti-oxidants such as vitamin E and ginkgo biloba or anti-inflammatory drugs such as ibuprofen (e.g., Advil® or Motrin®). The successful development of a treatment or method of preventing Alzheimer’s disease could significantly impact on our ability to develop or market a competing treatment for Alzheimer’s disease.


Our treatments under development for enlarged prostate (benign prostatic hyperplasia or BPH) face significant competition from existing products. There are eight drugs approved for treatment of BPH: four proprietary drugs (dutasteride (Avodart®), tamsulosin (Flomax®), alfusozin (Uroxatral®), and silodosin (Rapaflo™)) and four generics (finasteride, terazozin, doxazozin, and prazosin). There are a number of thermal treatments on the market designed to shrink the enlarged prostate by heating its tissue with a device inserted through the urethra (the passage leading from the bladder through the penis through which men urinate). The devices on the market use microwave energy (Prostatron®, Targis Therapy® or TherMatrx®), low level radiowaves (TUNA System®), lasers (Indigo LaserOptic Treatment System® or Laserscope GreenLight PVP™), direct heat, energy or hot water to heat or burn away prostate tissue. A variety of surgical procedures exist to surgically reduce or remove the prostate or to widen the urethra. These include procedures to cut away prostate tissue such as TURP (transurethral resection of the prostate) and using a resectoscope with an electrical loop inserted through the penis to cut the prostate tissue. A small device used to widen the constricted urethra called a prostatic stent can also be inserted.


The diagnostic testing industry is also highly competitive. In the area of Alzheimer’s disease, Athena Diagnostics, Inc. markets diagnostic tests for different biochemical indicators found in blood and spinal fluid and for genetic predispositions for the illness. Other companies are attempting to develop and market other diagnostic products in this area. The introduction of other diagnostics products for Alzheimer’s disease or tobacco product use that are cheaper, easier to perform, more accurate or otherwise more attractive to the physicians, health care payers or other potential customers would have a significant impact on the sales of our AlzheimAlert™, NicAlert™ or TobacAlert™ products.



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We May Not Be Able to Successfully Market Our Products


To increase our marketing, distribution and sales capabilities both in the United States and around the world, we will need to enter into licensing arrangements, contract sales agreements and co-marketing deals. We cannot assure you that we will be able to enter into agreements with other companies on terms acceptable to us, that any licensing arrangement will generate any revenue for the company or that the costs of engaging and retaining the services of a contract sales organization will not exceed the revenues generated.


Protecting Our Patents and Proprietary Information is Costly and Difficult


We believe that patent and trade secret protection is important to our business, and that our success will depend, in part, on our ability to obtain strong patents, to maintain trade secret protection and to operate without infringing the proprietary rights of others.


Obtaining and maintaining our patent position is costly. We pay for the filing, prosecution and fees of several hundred patents and patent applications in countries around the world, including the United States, Europe, Japan, Canada, Australia, New Zealand and South Korea. In the United States alone, Nymox has twenty patents issued or allowed relating to its technology. Our subsidiary, Serex, Inc. has thirteen patents.


We believe that we have strong patent protection for the products we sell and for our product development programs and we are in the process of extending that patent protection to cover more countries or new discoveries or products.  We cannot assure you that additional patents covering new products or improvements will be issued or that any new or existing patents will be of commercial benefit or be valid and enforceable if challenged.


Many companies have patents covering various drugs, methods and discoveries in the fields of diagnostics and therapeutics for Alzheimer’s disease and related conditions and of new anti-infective agents. We believe that the patents issued to date will not preclude Nymox from developing and marketing our products; however, it is impossible to predict the extent to which licenses from third parties will be necessary. If Nymox were to need licenses from third parties there can be no assurance that we could obtain such licenses on commercially reasonable terms, if at all.


In the fields of diagnostic methods and diagnostic tests for common human diseases and conditions, where Serex has many of its patents, there are many patents issued covering many areas of diagnostic methods, tests and technologies. We believe that these patents issued to date to other companies will not preclude Serex from developing and marketing its products but you should be aware that it is often difficult to determine the nature, breadth and validity of competing patent claims in these fields, that there has been significant litigation in some of these areas (not involving Serex) and that, if and when Serex’s products become more commercially successful, Serex’s products or patents may become the subject matter of litigation. If Serex were to need licenses from third parties there can be no assurance that it could obtain such licenses on commercially reasonable terms, if at all.


We are not currently involved in patent litigation. In the pharmaceutical and biotechnology industry patent disputes are frequent and can preclude the commercialization of products. Patent litigation is costly and the outcome often difficult to predict. It can expose us to significant liabilities to third parties and may require us to obtain third-party licenses at a material cost or cease using the technology or product in dispute.



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We Face Changing Market Conditions


The healthcare industry is in transition with a number of changes that affect the market for therapeutic and diagnostic test products. The U.S. Federal and various state governments have under consideration a number of proposals that may have the effect of directly or indirectly limiting drug prices in the U.S. markets. Such changes may adversely affect the prices we may charge for any therapeutic drug we develop. Funding changes and budgetary considerations can lead major health care payers and providers to make changes in reimbursement policies for our products. These changes can seriously impact the potential for growth for the market for our products, either favorably when the decision is to offer broad coverage for our test at a reasonable price or negatively when the decision is to deny coverage altogether. Changes in the healthcare delivery system have resulted in major consolidation among reference laboratories and in the formation of multi-hospital alliances, reducing the number of institutional customers for therapeutic and diagnostic test products. There can be no assurance that Nymox will be able to enter into and/or sustain contractual or other marketing or distribution arrangements on a satisfactory commercial basis with these institutional customers.


Health Care Plans May Not Cover or Adequately Pay for Our Products and Services


Throughout the developed world, both public and private health care plans are under considerable financial and political pressure to contain their costs. The two principal methods of restricting expenditures on drugs and diagnostic products and services are to deny coverage or, if coverage is granted, to limit reimbursement. For single-payer government health care systems, a decision to deny coverage or to severely restrict reimbursement for one of our products can have an adverse effect on our business and revenues.


In the United States, where, to a significant degree, the patient population for our products is elderly, Medicare and Medicaid are sources of reimbursement. In general, any restriction on reimbursement, coverage or eligibility under either program could adversely affect reimbursement to Nymox for products and services provided to beneficiaries of the Medicare and/or Medicaid programs. Many elderly people are covered by a variety of private health care organizations either operating private health care plans or Medicare or Medicaid programs subject to government regulation. These organizations are also under considerable financial constraints and we may not be able to secure coverage or adequate reimbursement from these organizations. Without coverage, we will have to look to the patients themselves who may be unwilling or unable to pay for the product; in turn, doctors may be reluctant to order or prescribe our products in the absence of coverage of the product for the patient.


The Issuance of New Shares May Dilute Nymox’s Stock


The issuance of further shares and the eligibility of issued shares for sale will dilute our common stock and may lower its share price. There were 30,314,621 common shares of Nymox issued and outstanding as of March 13, 2009. All of these shares are eligible for sale under Rule 144 or are otherwise freely tradable. In addition, 4,869,000 share options are outstanding, of which 2,943,375 are currently vested. Expiry dates for Nymox options range from 1 month to 10 years (see note 7(b) to our consolidated financial statements). These options have been granted to employees, officers, directors and consultants of the company. Moreover, Nymox may use its shares as currency in acquisitions.


We Face Potential Losses Due to Foreign Currency Exchange Risks


Nymox incurs certain expenses, principally relating to salaries and operating expenses at its Canadian head office, in Canadian dollars. All other expenses are derived in U.S. dollars. As a result, we are exposed to the risk of losses due to fluctuations in the exchange rates between the U.S. dollar and the Canadian dollar. We protect ourselves against this risk by maintaining cash balances in both currencies. We do not currently engage in hedging activities. We cannot say with any assurance that the Company will not suffer losses as a result of unfavorable fluctuations in the exchange rates between the United States dollar and Canadian dollar.




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We Have Never Paid a Dividend and are Unlikely to do so in the Foreseeable Future


Nymox has never paid any dividends and does not expect to do so in the foreseeable future. We expect to retain any earnings or positive cash flow in order to finance and develop Nymox’s business.


ITEM 4. INFORMATION ON THE COMPANY


History of the Company


Nymox was incorporated under the Canada Business Corporations Act in May, 1995 to acquire all of the common shares of DMS Pharmaceutical Inc., a private company which had been carrying on research and development since 1989 on diagnostics and drugs for brain disorders and diseases of the aged with an emphasis on Alzheimer’s disease. Nymox has two subsidiaries: one wholly-owned subsidiary named Nymox Corporation and the other a majority owned subsidiary named Serex, Inc., acquired in 2000. Both subsidiaries are based in the same building in Hasbrouck Heights, New Jersey. Nymox Corporation conducts some research and development, while Serex conducts research and development, and some of the manufacturing for NicAlert™ and TobacAlert™.


Nymox’s principal executive offices are located at:


Nymox Pharmaceutical Corporation

9900 Cavendish Boulevard, Suite 306, St. Laurent, Quebec, Canada, H4M 2V2

Phone: (800) 936-9669   Fax: (514) 332-2227


Nymox’s registered agent in the United States is:


CT Corporation System

111 Eighth Avenue, 13th Floor

New York, NY, 10011


Nymox’s two subsidiaries are located at:


Nymox Corporation

777 Terrace Avenue

Hasbrouck Heights, NJ, USA 07604


Serex, Inc.

777 Terrace Avenue

Hasbrouck Heights, NJ, USA 07604


Nymox Pharmaceutical Corporation is a biopharmaceutical company with three unique proprietary products on the market, and a significant R&D pipeline of drug and diagnostic products in development for the treatment of such conditions and diseases as enlarged prostate (benign prostatic hyperplasia or BPH), Alzheimer’s disease (AD), E. coli O157:H7 contamination of food and drink products, and bacterial infections and for the diagnosis of AD and other indications. Nymox has also U.S. and global patent rights for the use of statin drugs for the treatment and prevention of Alzheimer’s disease.  





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Acquisition of a Majority Interest in Serex, Inc.


In March 2000, we acquired a controlling interest in Serex, Inc., a privately held diagnostic company based in New Jersey and now own approximately 99% of its common stock.


Serex’s patented diagnostic technologies include its particle valence technology, a unique, highly sensitive, new method to detect very small amounts of biochemical indicators in body fluids such as blood, urine and saliva. This technology can be adapted to detect a wide range of biochemical indicators for diseases, conditions and drug use. Our NicAlert™ and TobacAlert™ employ this technology to measure levels of one of the metabolic products of nicotine in human urine, in order to determine whether a person is using or has been exposed to a tobacco product. NicAlert™ and TobacAlert™ are currently being distributed by Nymox, drugstore.com and Jant Pharmacal Corporation.


Products


NicAlert™ for Tobacco Product Use and TobacAlert™ for Second-Hand Smoke Exposure


Nymox has developed and markets NicAlert™ and TobacAlert™, which are inexpensive, simple-to-use test strips for determining whether a person is using tobacco products (NicAlert™) or has been recently exposed to second-hand smoke (TobacAlert™). Both NicAlert™ and TobacAlert™ employ Serex, Inc.’s patented technology to provide an accurate read-out of levels of cotinine, a by-product of the body’s breakdown of nicotine and generally regarded as the best indicator of tobacco exposure for smokers and nonsmokers.  The technology can be used with saliva as well as urine samples in order to detect tobacco product use.  NicAlert™ and TobacAlert™ do not require instruments or special training to use and offer a quick, convenient means to test on-site whether a person, such as a child, teenager, student athlete or insurance applicant, is using a tobacco product or has been exposed to second-hand smoke.


Smoking and other tobacco product use is a serious public health problem around the world. Smoking kills. According to the Centers for Disease Control and Prevention, cigarette smoking is responsible for more than 430,000 deaths per year in the United States alone. Smoking can cause cancer of the lung, mouth, bladder, larynx, esophagus and other organs, as well as heart disease and stroke and chronic lung disease. Every year, exposure to second-hand smoke (environmental tobacco smoke or ETS) causes an estimated 3,000 nonsmoking Americans to die of lung cancer and up to 300,000 American infants and small children to suffer from lower respiratory tract infections.


NicAlert™ received clearance from the U.S. Food and Drug Administration (FDA) in October 2002 for medical use to determine if an individual has been exposed to tobacco products. In January, 2006, Nymox announced the certification of the urine-based version of NicAlert™ with a CE Mark making it eligible for sale in the European Union and in May, 2006 the certification of the saliva-based version of NicAlert™ with a CE Mark.  In September, 2003, Nymox launched TobacAlert™ for nonmedical testing for second hand smoke exposure in the U.S.


We market the NicAlert™ and TobacAlert™ tests through our own marketing arm and distributors in North America, Europe and Asia. TobacAlert™ is also available online at www.drugstore.com. and at www.tobacalert.com. Nymox has entered into distribution and marketing agreements with companies and organizations in the U.S., the U.K., and Spain for these products.


Our NicAlert™ and TobacAlert™ products face competition from clinical laboratories such as LabCorp and Quest Diagnostics which provide off-site lab testing for cotinine, the by-product of the body’s breakdown of nicotine measured by NicAlert™ and TobacAlert™, and from assay suppliers, including immunoassay developers such as Orasure Techologies Inc. and Cozart Bioscience Ltd, and diagnostic system manufacturers such as Roche Diagnostics, Abbott and Diagnostic Products Corporation.  NicAlert™ and TobacAlert™ also face competition from distributors who supply yes-no smoking status tests such as SmokeCheck, NicQuick, and QuickScreen, from NicCheck I, an FDA-cleared smoking status test being marketed by Mossman & Associates Ltd, from SmokeScreen, a chemical color-based tobacco test being marketed by Mermaid Diagnostics, Ltd. in the United Kingdom, and from carbon monoxide (CO) monitors such as SmokeCheck.




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NicAlert™ and TobacAlert™ products are currently partly manufactured through out-sourcing arrangements with contract manufacturers. To date, we have not experienced any significant interruptions in the manufacture of these products and the cost of the manufacturing services has not been volatile. The manufacturing services supplied by our current contract manufacturers are not unique or unduly complicated and other contract manufacturers are available to provide similar services in the event that our current contract manufacturers fail to meet our needs.


The technology used in these products is covered by patents and patent applications held by Nymox's subsidiary, Serex, Inc., both in the U.S. and elsewhere in the world with expiry dates no earlier than 2012.  


Independent studies published in peer-reviewed medical and scientific journals reported finding that the Company's NicAlert™ Saliva product provides an accurate, convenient and cost-effective way to verify self-reported smoking status with broad potential applications both in the clinic and in large research trials and surveys.  In 2008, one such study, Fiona Cooke et al. “Diagnostic accuracy of NicAlert cotinine test strips in saliva for verifying smoking status,” Nicotine Tob Res. 2008;10:607-12, was published in Nicotine & Tobacco Research, the official journal of the Society for Research on Nicotine and Tobacco (SRNT).  Other published studies include Cancer Epidemiol Biomarkers Prev. 2007;16:1858-62 and Int J Circumpolar Health. 2007; 66 Suppl 1:29-38.


NicAlert™ Saliva was also reported used in research studies where there was a need to verify or monitor smoking status or nicotine replacement therapy (NRT): see, for example, Am J Prev Med. 2007; 33:297-305 (monitoring NRT in smoking cessation research involving pregnant women), Int J Behav Med. 2006; 13:16-25 (verifying smoking status in a smoking study of cancer patients), and Neuropsychopharmacology 2008; 33:480–490 (confirming non-smoking status for entry into the study).


AlzheimAlert ™; an Aid to the Diagnosis of Alzheimer’s Disease


We offer AlzheimAlert™, a proprietary urine assay that can aid physicians in the diagnosis of Alzheimer’s disease. We offer a kit version of the AlzheimAlert™ assay for sale in Europe. The AlzheimAlert™ kit has the CE Mark. The kit allows clinical reference laboratories to perform the AlzheimAlert™ assay on site with urine samples sent directly to the laboratory. Nymox has signed distribution deals for AlzheimAlert™ with companies in Italy, Spain, Greece, the U.K., the Czech Republic and South Korea. We filed a premarket approval (PMA) application for the diagnostic kit version of the AlzheimAlert™ test with the U.S. FDA in February 2004. On July 15, 2005, an FDA advisory panel voted 5-2 against approval of the kit, citing the need for further studies, such as long term follow-up and autopsy confirmation.


The AlzheimAlert™ assay is based on research by scientists at the Massachusetts General Hospital and Brown University – and on years of clinical studies to establish and confirm the accuracy of the assay technology as an aid to the diagnosis of Alzheimer’s disease. In 1997, Nymox succeeded in developing a commercial assay that used spinal fluid samples. Subsequently, Nymox was able to develop an assay that used more easily obtained first morning urine samples. The AlzheimAlert™ assay represents the latest generation of development of this testing technology.


Nymox licensed the technology that led to the development of the AlzheimAlert™ assay in 1997 from  the Massachusetts General Hospital as part of a sponsored research and licensing agreement, under which Nymox sponsored the research of the principal investigators into the use of neural thread protein (NTP), its antibodies or genes for diagnostic or therapeutic purposes. Nymox also paid the patent costs for the patent applications filed arising out of this research. In return, Nymox received an exclusive worldwide license of the patents to sell products and to use processes encompassed by them. Nymox is to pay the Massachusetts General Hospital a 4% royalty of the net sales price of any product developed and sold under the license. Nymox currently pays this royalty on its sales of its AlzheimAlert™ product. The license and the obligation to pay patent costs and royalties continue for the life of the patents, which run until November 2014 at the earliest. The Massachusetts General Hospital has the right to terminate the license in any country where, after the first commercial sale of the product in the country, there is a continuous two year period in which no product is sold in such country. There are eight issued U.S. patents under license and a correspondingly larger number of patents and patent applications in Europe, Japan, Canada, Australia, New Zealand and South Korea. The sponsored research portion of this agreement terminated in March 1999. Nymox retained the exclusive license to the rights to the AlzheimAlert™-related patents owned by the Massachusetts General Hospital.




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Effective March 1999, Nymox entered into a similar sponsored research and licensing agreement with Brown University and the Rhode Island Hospital. Under the terms of this agreement, Nymox continued to sponsor research into the uses of neural thread proteins, their antibodies or genes for diagnostic, therapeutic and research purposes and to pay the patent costs for any patent applications filed arising out of this research. In return, Nymox received an exclusive worldwide license of any such patents to sell products and to use processes encompassed by them. The Rhode Island Hospital has the right to terminate the license in any country where, after the first commercial sale of the product in the country, there is a continuous two year period in which no product is sold in such country. Nymox is to pay the Rhode Island Hospital a 4% royalty of the net sales price of any product developed and sold under the license. The sponsorship of this agreement expired in March 2005; however, Nymox retains the exclusive license to patent rights on certain NTP-based technology including a license to an issued U.S. patent.


Recent publications in the peer-reviewed literature concerning the clinical utility of the assay in the diagnosis of Alzheimer’s disease include, for example, the Journal of Clinical Investigation (1997; 100: 3093-3104); Journal of Contemporary Neurology (1998; art. 4a); Journal of Clinical Laboratory Analysis (1998; 12: 285-288) and (1998; 12: 223-226); Alzheimer’s Reports (1999; 2: 327-332), (2000; 3: 177-184), (2001; 4: 61-65) and (2002; 5: 1-6); Neurology (2000; 54: 1498-1504) and (2000; 55: 1068); Journal of Alzheimer’s Disease (2001; 3: 345-353) and (2004; 6(3): 231-42); Cellular and Molecular Life Sciences (2001; 58: 844-849) and (2003; 60: 2679-91); Neurology and Clinical Neurophysiology (2002; 1: 2-7); Journal of Neuropathology and Experimental Neurology (2001; 60: 195-207) and (1996; 55: 1038-1050), Frontiers in Bioscience (2002; 7: d989-96), Journal of the American Medical Directors Association (Jan 2007; 8:21-30), Journal of Clinical Laboratory Analysis (Jan 2007;21:24-33), and Expert Review of Molecular Diagnostics (January 2008; 8:21-28).


Nymox believes that its AlzheimAlert™ test can assist a physician faced with the task of diagnosing whether a patient has Alzheimer’s disease. A recently published independent peer-reviewed double blind study from 8 prestigious centers across the U.S. found the level of accuracy of the AlzheimAlert™ urine test to be over 90% (Journal of the American Medical Directors Association Jan 2007; 8:21-30; “A multi-center blinded prospective study of urine neural thread protein measurements in patients with suspected Alzheimer's disease,” Goodman I et al.).  This study confirmed several earlier company funded trials of the AlzheimAlert™ technology. In earlier studies, the test results were positive for over 87% of the patients with verified Alzheimer disease and negative in over 89% of subjects without the disease (known as a low false positive rate). The low rate of positive results for patients without the disease is important for doctors investigating patients with subtle or marginal symptoms of mental, emotional, cognitive, or behavioral changes. If the doctor can rule out Alzheimer’s with more assurance, a great deal of patient and family anguish and anxiety will be avoided. A low test score will help the doctor to be more certain that Alzheimer’s disease is not the cause of the patient’s symptoms and to target the other, often reversible causes of the patient’s symptoms, such as depression. There can be no assurance that further studies will repeat the same level of success experienced to date.




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There is a large unmet need for a simple, non-invasive test that can aid in the diagnosis of Alzheimer’s disease. Alzheimer’s disease is the most common cause of dementia in persons 65 years of age and older and is the fourth leading cause of death among the elderly. There are an estimated 4.5 million people with Alzheimer's disease in the United States alone; by 2050 this number is projected to increase almost three times to 13.2 million. Worldwide estimates of the current number of people with Alzheimer's disease range from 15 to 20 million. The annual national direct and indirect costs of caring for Alzheimer patients in the U.S. alone are estimated at $100 billion. The human toll on patients, families and caregivers is incalculable. Despite the need for an accurate clinical test, the definitive diagnosis of the disease is possible only after the death of the patient by expert, pathologic examination of brain tissue.


The U.S. Surgeon General’s Report on Mental Health, released on December 13, 1999, identified the importance and the need for the early detection and diagnosis of Alzheimer’s disease. The report described the current approach to Alzheimer’s disease diagnosis, clinical examination and the exclusion of other common causes of its symptoms, as time- and labor-intensive, costly and largely dependent on the expertise of the examiner. As a result, the illness is currently under-recognized, especially in primary care settings, where most older patients seek care. The report joined other experts writing in the field in recognizing the need for a better, more reliable method for diagnosing the disease in living patients and in particular, the need of a simple, accurate and convenient test that could detect a biochemical change early in patients with Alzheimer’s disease. We believe our AlzheimAlert™ product provides such a test.


The early diagnosis of Alzheimer’s disease is important to physicians, patients and their families and enables them to make informed and early social, legal and medical decisions about treatment and care. Early diagnosis of Alzheimer’s disease has become increasingly important with new improvements in drug treatment and care. Even a modest delay in institutionalization can mean substantial social and financial savings. Conversely, any testing procedure that could rule out Alzheimer’s disease would eliminate the tremendous uncertainty and anxiety patients and their families otherwise face and would allow physicians to focus on the other, often reversible, causes of cognitive changes.


Early diagnosis as facilitated by the AlzheimAlert™ test represents a potentially large cost-savings in the form of a reduced number of office visits, lab tests, scans and other procedures required by the traditional methods of diagnosis.


In the field of Alzheimer’s disease diagnosis, our AlzheimAlert™ test faces growing competition which could detrimentally impact on our ability to successfully market and sell our diagnostic test. Our competitors include:


·

Athena Diagnostics, Inc., a wholly owned subsidiary of Thermo Fisher Scientific, which is currently marketing three tests claimed to aid in the diagnosis of Alzheimer's disease: a genetic test for the rare cases of familial, early-onset Alzheimer's disease; a genetic test for a relatively common mutation of a gene said to increase the likelihood of a person with at least one of the genes contracting the disease; and a test for two proteins in the spinal fluid of patients.

·

Innogenetics NV, a Solvay Pharmaceuticals company, which currently markets tests and kits for two proteins and a variant of one of these proteins in the spinal fluid of patients and a genetic test for a relatively common mutation of a gene said to increase the likelihood of a person developing the disease.

·

Applied NeuroSolutions, Inc. currently markets a research test for a variant of a protein in the spinal fluid of patients.


There are also a number of other proposed biochemical signs of the disease that could potentially be developed into a commercial diagnostic test as well as various scanning and imaging technologies which compete for a portion of the diagnostic market for Alzheimer’s disease. In June 2004, the Centers for Medicare and Medicaid Services (CMS) approved limited coverage of a Positronic Emission Tomography (PET) imaging procedure for helping to more precisely distinguish Alzheimer's disease from a rarer type of dementia when clinical evaluation has been inconclusive. In October 2004, the National Institute on Aging in conjunction with other Federal agencies, private companies and organizations launched the Alzheimer ’s disease Neuroimaging Initiative, a $60 million initiative to test whether various scanning and imaging technologies, biochemical markers, and clinical and neuropsychological testing can be combined to help diagnose early Alzheimer’s disease. A number of companies, including GE, are actively working to develop imaging technologies for the diagnosis of Alzheimer’s disease.



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Products in Development:


NX-1207 for Enlarged Prostate (BPH)


We are developing treatments for enlarged prostate (benign prostatic hyperplasia or BPH), using novel compounds. Our lead candidate NX-1207, which successfully completed a multi-center, double-blind, placebo-controlled Phase 2 trial in September 2006, is presently in Phase 3. We cannot predict with any certainty the outcome of this trial, what further steps may be required in order to apply for final FDA approval for this drug or whether the FDA will ultimately grant us such approval.


There is a significant unmet need for an effective treatment for BPH. More than half of men in their sixties and as many as 90% of men in their seventies and eighties have some symptoms of BPH. Symptoms include more frequent urination (especially at night), difficulty urinating, incomplete emptying of the bladder and sometimes complete inability to urinate. More serious cases may require surgical intervention to reduce the size of the prostate.  There is a need for a simple, effective treatment for BPH, particularly in cases where existing drug treatments have proven to be ineffective and where more intrusive procedures such as surgery may be inadvisable or bring unacceptable risks.


In September, 2006, Nymox announced positive efficacy and safety results from the completed multi-center, double-blind, placebo-controlled Phase 2 clinical trial of NX-1207. 43 clinical trial sites across the U.S. and 175 subjects participated in the Phase 2 trial. Overall, patients treated with NX-1207 showed a total pooled mean improvement of 9.35 points in the primary outcome endpoint of AUA Symptom Score values, a standardized measurement of BPH symptoms used to evaluate the effectiveness of treatments for BPH. This total mean improvement for NX-1207 treatment reached statistical significance when compared with the placebo control (p=.017). Published studies of currently approved drugs for BPH show AUA Symptom Score improvement in the 3.5 to 5 point range.  The treated subjects also showed an overall significant reduction in mean prostate volume (secondary outcome) of 11.7% (6.84 grams; p=.02). The results of the trial demonstrated an excellent safety and side effect profile for NX-1207. Subjects treated with NX-1207 had no serious side effects. In particular, patients given NX-1207 had no (0%) significant sexual side effects.


In February 2008, the Company reported statistically significant positive results in a new 32 site U.S. study of NX-1207. The mean improvement in this Phase 2 study (9.71 points in the BPH Symptom Score) was superior to the study comparator, which was finasteride, an approved drug for BPH (4.13 points) (p=.001). The study demonstrated a statistically significant greater improvement in patients given full dose NX-1207 compared to low dose NX-1207 (p=.033). Safety results in the clinical trial were excellent.


Results of 6 follow-up studies of available subjects from NX-1207 clinical trials have provided evidence of durable benefits from NX-1207 treatment for up to 4½ years from the date of treatment. In May 2008, the Company reported statistically significant improvement compared to placebo in a 22 to 33 month follow-up study of 93 patients treated with NX-1207 at 17 U.S. clinical trial sites. Results in that study showed that patients at follow-up without any other treatment for BPH had a mean of 11.3 points BPH Symptom Score reduction, which represents a 47% improvement in symptoms from before treatment.


Our treatments under development for enlarged prostate (benign prostatic hyperplasia or BPH) face significant competition from existing products. There are eight drugs approved for treatment of BPH: four proprietary drugs (dutasteride (Avodart®), tamsulosin (Flomax®), alfusozin (Uroxatral®), and silodosin (Rapaflo™)) and four generics (finasteride, terazozin, doxazozin, and prazosin). There are a number of thermal treatments on the market designed to shrink the enlarged prostate by heating its tissue with a device inserted through the urethra (the passage leading from the bladder through the penis through which men urinate). The devices on the market use microwave energy (Prostatron®, Targis Therapy® or TherMatrx®), low level radiowaves (TUNA System®), lasers (Indigo LaserOptic Treatment System® or Laserscope GreenLight PVP™), direct heat or hot water to heat or burn away prostate tissue.  A variety of surgical procedures exist to surgically reduce or remove the prostate or to widen the urethra.  These include procedures to cut away prostate tissue such as TURP (transurethral resection of the prostate) and using a resectoscope with an electrical loop inserted through the penis to cut the prostate tissue. A small device used to widen the constricted urethra called a prostatic stent can also be inserted.



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NXC-4720 for E. coli Contamination of Meat


We are developing novel antibacterial agents for the treatment of E. coli O157:H7 bacterial contamination in hamburger meat and other food and drink products and for the treatment of urinary tract and other bacterial infections in humans which have proved highly resistant to conventional antibiotic treatments.


E. coli contamination of food and drink is a serious public health problem worldwide and a major concern for meat processors in particular. E. coli bacteria occur normally and usually harmlessly in the gastrointestinal tracts of humans, cows and other animals. However, one mutant variety of the E. coli bacteria, E. coli O157:H7, can cause life-threatening illness and has been implicated in cases of severe diarrhea, intestinal bleeding and kidney failure, leading, in some cases, to death in children and the elderly. E. coli contamination in hamburger meat and other food products and in drinking water affects about 70,000 people in the United States a year.


There is a well-recognized need in the beef industry to address the problem of E. coli contamination in meat processing and in livestock. E. coli contamination has triggered massive recalls of ground beef in the U.S. Cattle are a natural reservoir for the deadly strain of E. coli. Water contamination from cattle operations have led to public health tragedies.


Nymox developed a potent new antibacterial agent, NXC-4720. Tests of NXC-4720 show it to be highly effective against all known substrains of E. coli O157:H7, destroying the bacteria efficiently, rapidly and at a very low dose. In 1999, we began further laboratory trials for this agent as a treatment for food and drink contamination and entered into agreements with various collaborators. NXC-4720, which is being developed as a treatment of meat at the processing stage, has been shown to be capable of substantially reducing the level of potentially fatal E. coli O157:H7 contamination on fresh beef according to laboratory studies.  Other projects in this area, such as treating E. coli O157:H7 infection in livestock, are in preliminary stages of development. Further pre-clinical testing and development is required before we can apply for regulatory approval for use of this agent on the processing of food and drink for human consumption.


The problem of E. coli O157:H7 contamination of hamburger meat and other food products is also well-known and a number of companies and researchers have been pursuing various potential solutions, including irradiation with x-rays, better detection of contamination, electronic pasteurization, vaccination and competitive exclusion of the pathogenic E. coli bacteria by harmless bacteria.  The development of alternative solutions to the problem of E. coli infection may adversely affect the market for our treatment for E. coli O157:H7 infection in cattle and contamination of food products.


Nymox has also developed three other novel antibacterial agents, NXB-4221 for the treatment of difficult chronic and persistent urinary tract infections; NXB-5886 for the treatment of streptococcal infection; and NXT-1021 for the treatment of staphylococcal infection. Urinary tract infections in women caused by bacteria such as E. coli are a common and significant infection often resistant to conventional antibiotic treatment. Some varieties of streptococcus and staphylococcus bacteria, a common source of infection in humans, have acquired a broad immunity to antibiotic treatments. Infections from these antibiotic resistant bacteria are difficult to treat and can be life threatening.




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Nymox’s three antibacterial agents for the treatment of infectious disease have all shown the ability to kill their bacterial targets in culture with no signs of toxicity. Further pre-clinical testing and development is required before we can apply for regulatory approval to begin initial testing in humans.


A similar competitive reality prevails in the field of novel anti-infectives. Over the past ten years, there has been an increasing awareness of the medical need and of emerging market opportunities for new treatments for antibiotic resistant bacterial infections. Many of the major pharmaceutical companies are developing anti-infective drugs that either modify their existing drugs or involve new anti-bacterial properties. Many biotechnology companies are developing new classes of anti-bacterial drugs. At least three major pharmaceutical companies have vaccines against bacterial infections in development. To the extent that these companies are able to develop drugs or vaccines that offer treatment for some or all of the indications for our anti-infectives, the market for our products may be adversely affected.


Nymox has patent rights to these and other antibacterial agents.


The Use of Statin Drugs for the Treatment or Prevention of Alzheimer’s Disease


In October 2002, we were issued a United States patent for the use of statin drugs to treat, prevent or reduce the risk of the onset of Alzheimer’s disease and have issued patents or pending patent applications elsewhere, including Europe, Japan, Canada and Australia. Statins are a class of commonly prescribed cholesterol lowering drugs that have a well-established safety record and are widely available. The potential of statin drugs for AD has been featured in a cover story in Newsweek, as well as in the New York Times, Fortune, Los Angeles Times, and The Wall Street Journal. Some of the recent scientific studies and reviews concerning the potential for statin drugs to treat or reduce the risk of AD or loss of cognitive function include Neurology. 2007; 69:1873-80; Expert Opinion on Ther Targets. 2007;11:1257-60; CNS Drugs. 2007;21:449-62; Neurosci Lett. 2007;416:279-84; Curr Med Chem. 2007;14:103-12; Neurol Res. 2006; 28:630-6, Acta Neurol Scand 2006; 114 (Suppl. 185): 78-86, Acta Neurol Scand 2006; 114 (Suppl. 185): 3–7, J.Neurochem. 2006; 97:716-723; Restor. Neurol. Neurosci 2006; 24:79-95; Neuromolecular Med. 2006; 8:319-328, Neurology 2005; 65:1388-1394, J. Neurol. Neurosurg. Psychiatry 2005; 76:1624-1629, The American Journal of Medicine 2005; 118: 48S-53S; The Lancet Neurology 2005; 4:841-852; Current Opinions in Lipidology 2005;16: 619-623; The Lancet Neurology 2005; 4: 521-2, Arch Neurol 2005; 62:1047-51, Neurology 2005; 64:1531-8, Arch Neurol 2005; 62:753-7, J Neurol Sci 2005; 229-230:147-50, Arch Gen Psychiatry 2005; 62:217-24. International Journal of Geriatric Psychiatry (2004; 19:327-32), Neuroepidemiology (2004; 23:94-8); Neuron (2004; 41:7-10); Archives of Neurology (2000; 57:1439-1443); Lancet (2000; 356:1627-1631); Archives of Neurology (2002; 59:223-227); Journals of Gerontology: Biological Sciences and Medical Sciences (2002; 57:M414-M418); and Journal of the American Geriatrics Society (2002;50:1852-1856).  Some studies, however, have not found evidence that statins may help treat or prevent Alzheimer’s disease and research in this area is ongoing.  No statin drug has been approved for use in the treatment or prevention of Alzheimer’s disease.


Research and Development of New Products


New Therapeutics for Alzheimer’s Disease


Nymox has a number of proprietary drug development programs aimed at treatments for Alzheimer's disease and other indications. One program targets neural thread protein (NTP) and its role in the extensive brain cell loss associated with AD. Another program is based on spherons, which Nymox researchers regard as a source of senile plaques, the characteristic abnormality found in abundance in the brains of patients with AD and widely believed to play a major role in the cause and course of the illness. A third program is based on a novel drug candidate, NXD-5150, for neurodegenerative disease.



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At present, there is no cure for Alzheimer’s disease. There are five drugs approved by the FDA, tacrine (brand-name Cognex®), donepezil HCI (brand-name Aricept®), rivastigmine (brand-name Exelon®), galantamine hydrobromide (brand name Razadyne®) and memantine (brand name Namenda™) for the treatment of Alzheimer’s disease. However, at most these drugs offer symptomatic relief for the loss of mental function associated with the disease and possibly help to delay the progression. There is no consensus as to the cause of Alzheimer’s disease or even whether it is one disease or many.


There is an urgent need for an effective treatment for the illness, caused in part by the rising health care, institutional and social costs for the treatment and care of Alzheimer’s disease sufferers. The Surgeon General’s Report on Mental Health released on December 13, 1999, put the direct health care costs for the illness in the United States at almost $18 billion for 1996. In April 2002, the National Institute on Aging reported that the cost of care to family, caregivers and society in general was estimated to exceed $100 billion per year.


These costs are expected to rise sharply as the baby boom generation ages and more people become at risk for the disease. According to the National Institute on Aging’s 2007 Progress Report on Alzheimer’s Disease: Discovery and Hope, experts agree that the number of people with AD will increase significantly if current population trends continue and no preventive treatments become available. As people live longer, they become more at risk of developing Alzheimer’s disease.  The U.S. Census Bureau estimates that the number of people in the U.S. aged 65 and older is expected to double to about 72 million people in the next 25 years. Moreover, the 85-and-older age group is now the fastest growing segment of the U.S. population.


Nymox’s research into drug treatments for Alzheimer’s disease is aimed at compounds that could arrest the progression of the disease and therefore are targeted for long term use.


Drugs Targeting Spherons


We are a leader in research and development into drugs for the treatment of Alzheimer’s disease that target spherons. Nymox researchers believe that spherons are a cause of senile plaques, the characteristic lesion found abundantly in the brains of patients with Alzheimer’s disease and believed by many researchers to play a pivotal role in the fatal illness. Spherons are tiny balls of densely packed protein found in brain cells scattered throughout the brains of all humans from age one. Nymox researchers have found that as humans age the spherons grow up to a hundred times larger until they become too large for the cells that hold them. Once released from the cells, the researchers believe that the spherons burst, creating senile plaques, contributing to the cellular damage and biochemical changes pivotal to the symptoms and signs of Alzheimer’s disease.


The substantial evidence linking spherons to senile plaques and Alzheimer’s disease has been published in journals such as the Journal of Alzheimer’s Disease, Drug News & Perspectives and Alzheimer Reports. There are 20 important criteria of validity which have been set forth correlating the disappearance of spherons in old age with the appearance of senile plaques and implicating spherons as a major cause in Alzheimer’s disease. In 2000, Nymox researchers published important findings in Alzheimer Reports (2000; 3: 177-184) confirming that spherons contain key proteins that are also known to be in senile plaques and showing that, like senile plaques, spherons contain unusually old proteins in terms of the human body’s metabolism, with an average age of 20 to 40 years. In 2003, Nymox announced the discovery that spherons contain toxic molecules termed spherotoxins which its researchers believe contribute significantly to the cell death and symptoms characteristic of Alzheimer's disease.


Nymox researchers believe that stopping or inhibiting the transformation of spherons into senile plaques will help stop or slow the progress of this illness. However, there is no consensus among researchers about the causes or possible treatments of Alzheimer’s disease and not all researchers share this belief that spherons are a causative factor in Alzheimer’s disease or are a target for the development of treatments for the disease.



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Based on the research findings discussed above and the spheron-based approach to the treatment of the disease, we have developed novel, proprietary drug screening methods based on spherons and used them to discover, develop and test drug candidates to inhibit the formation of Alzheimer plaques from spherons. These candidates have the potential to slow or stop the progression of the disease.


We have two distinct new drug candidates, NXD-3109 and NXD-1191, neither of which demonstrate significant toxicity and both of which had positive animal testing results. These candidates are at the stage of pre-clinical testing.


Such drug candidates will require regulatory approval in order to begin clinical studies for humans, but there is no guarantee that any of these drug candidates will ever be approved for marketing as a treatment for Alzheimer’s disease. Drug candidates that look promising in early studies in the laboratory or with animals often prove on further testing to be unsafe, ineffective or impractical to use with human patients. The cost of bringing a drug candidate through the necessary clinical trial and regulatory approvals is very high and may require us to seek substantial financing through various sources including the issuing of more stock, the borrowing of funds secured by financial instruments such as bonds or agreements with major pharmaceutical companies. We risk not being able to secure such funding in the necessary amounts or on sufficiently favorable terms.


Nymox holds global patent rights covering both methods for using spherons as targets for developing drugs and for the actual drug candidates discovered.


Neural Thread Protein Based Drugs


Nymox developed a unique drug screening system, based on the research that led to its AlzheimAlert™ test, to identify other potential drug candidates for the treatment of Alzheimer’s disease. There is a substantial body of evidence showing that NTP may play a key role in Alzheimer’s disease, including such published studies as Journal of the Neurological Sciences (1996; 138: 26-35), Journal of Neuropathology and Experimental Neurology (1996; 55: 1038-50) and (2001; 60: 195-207), Journal of Clinical Investigation (1997; 100: 3093-3104), Alzheimer’s Reports (1999; 2: 327-332), Journal of Alzheimer’s Disease (2001; 3: 345-353) and (2005; 7(1): 45-61), and Cellular and Molecular Life Sciences (2001; 58: 844-849) and (2003; 60:2679-91).


Nymox licensed the NTP technology in 1997 from Harvard University and the Massachusetts General Hospital as part of a sponsored research and licensing agreement. Under the terms of this agreement, Nymox sponsored the research of the principal investigators into the use of neural thread protein, its antibodies or genes for diagnostic or therapeutic purposes. Nymox also paid the patent costs for the patent applications filed arising out of this research. In return, Nymox received an exclusive worldwide license of the patents to sell products and to use processes encompassed by them. Nymox is to pay the Massachusetts General Hospital a 4% royalty of the net sales price of any product developed and sold under the license. Nymox currently pays this royalty on its sales of its AlzheimAlert™ product. The license and the obligation to pay patents costs and royalties continue for the life of the patents, which run until November, 2014 at the earliest. The Massachusetts General Hospital has the right to terminate the license in any country where, after the first commercial sale of the product in the country, there is a continuous two year period in which no product is sold in such country. There are eight issued U.S. patents under license and a correspondingly larger number of patents and patent applications in Europe, Japan, Canada, Australia, New Zealand and South Korea. The sponsored research portion of this agreement terminated in March, 1999. Nymox retained the exclusive license to the rights to the NTP-related patents owned by the Massachusetts General Hospital.


Effective March 1999, Nymox entered into a similar sponsored research and licensing agreement with Brown University and the Rhode Island Hospital. Under the terms of this agreement, Nymox continued to sponsor research into the uses of neural thread proteins, their antibodies or genes for diagnostic, therapeutic and research purposes and to pay the patent costs for any patent applications filed arising out of this research. In return, Nymox received an exclusive worldwide license of any such patents to sell products and to use processes encompassed by them. The Rhode Island Hospital has the right to terminate the license in any country where, after the first commercial sale of the product in the country, there is a continuous two year period in which no product is sold in such country. Nymox is to pay the Rhode Island Hospital a 4%  royalty of the net sales price of any product developed and sold under the license. The sponsorship agreement expired in March 2005; however, Nymox retains the exclusive license to patent rights on certain NTP-based technology including a license to an issued U.S. patent.




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Nymox has screened compounds for their ability to impede the process of premature cell death and thus potentially help slow or halt the loss of brain cells in the Alzheimer’s disease brain. This screening process identified promising drug candidates. The Company has developed a candidate, NXD-9062, which has shown significant progress in preclinical studies but successful completion of other pre-clinical studies is necessary before it can move into formal regulatory studies.


The company’s third program is based on a new drug candidate for neurodegenerative disease, NXD-5150, which successfully completed important pre-clinical milestones. Nymox has exclusive rights to two patent applications covering NXD-5150 as well as other related drug candidates for neurodegenerative disorders.


Nymox faces intense competition for the development of an effective treatment for Alzheimer’s disease. The market conditions for an Alzheimer’s disease drug strongly favor the entry of other corporations into the area. The current market for therapeutic drugs for Alzheimer’s disease is an estimated $2 billion. This market is expected to grow rapidly as new drugs enter the market and as the baby boom generation becomes more at risk for developing Alzheimer’s disease. As a result, most of the major pharmaceutical companies and many biotechnology companies have ongoing research and development programs for drugs and treatments for Alzheimer’s disease. Many of these companies have much greater scientific, financial and marketing resources than we have and may succeed in developing and introducing effective treatments for Alzheimer’s disease before we can. At present, four drugs for Alzheimer’s disease are being widely marketed in the United States, Aricept® by Pfizer, Exelon® by Novartis, Razadyne® by Janssen and Namenda™ by Forest. These four drugs only treat some of the symptoms of Alzheimer’s disease by enhancing memory and other mental functions and not the underlying causes of the illness.


Oncology products

  

We are in the preclinical stage of developing therapeutic products for oncological indications based on technology licensed from the Massachusetts General Hospital. We cannot predict with any certainty whether any such product will successfully complete preclinical testing, whether government regulatory agencies, such as the FDA, will permit such products to proceed to human trials, or whether ultimately any such product will be granted approval for sale and marketing in the U.S., Canada, or elsewhere in the world.


New Diagnostic Products


Nymox has a number of proprietary diagnostic markers and technologies, including a patented platform for point-of-care testing, and has tests utilizing these technologies in the early stages of development. Nymox also has U.S. patents for a unique method and device for using saliva to determine cholesterol levels and for a method of testing for osteoporosis. The company also owns patent rights to several novel biochemical indicators for Alzheimer’s disease.


Manufacturing Arrangements


Our NicAlert™ and TobacAlert™ products and AlzheimAlert™ kits are currently partly manufactured through out-sourcing arrangements with contract manufacturers. To date, we have not experienced any significant interruptions in the manufacture of these products and the cost of the manufacturing services has not been volatile. The manufacturing services supplied by our current contract manufacturer are not unique or unduly complicated and other contract manufacturers are available to provide similar services in the event that our current contract manufacturer fails to meet our needs.



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Property, Plant and Equipment


Nymox and Serex laboratory facilities in Hasbrouck Heights, New Jersey comprise 4,799 square feet of leased space. That lease agreement expires August 31, 2010. Nymox office and research facilities in St. Laurent, Quebec, Canada comprise 8,781 square feet of leased space. The lease agreement expires on August 31, 2010. Nymox Pharmaceutical Corp. and its two US subsidiaries Nymox Corp. and Serex, Inc. own a full complement of equipment used in all aspects of their research and development work. Nymox believes that its facilities are adequate for its current needs and that additional space, if required, would be available on commercially reasonable terms.


Governmental Regulation

Our AlzheimAlert™ test is subject to extensive government regulation in the United States. Any changes in CMS or state law requirements or in the FDA regulations could have an impact on our future ability to offer or market any reference laboratory services and/or on our ability to obtain reimbursement from the Medicare and Medicaid programs and providers.


We have developed a diagnostic kit version of the AlzheimAlert™ test. We will need to obtain FDA approval before we can market or sell such a diagnostic kit version outside of the clinical reference laboratory setting in the United States. Such approval for this type of commercial development is necessary for all in vitro diagnostic kits. On July 15, 2005, an FDA advisory panel voted 5-2 against recommending approval of our PMA application for the kit, citing the need for further studies, such as long term follow-up and autopsy confirmation. We cannot predict with any certainty when or if FDA approval will be forthcoming and we anticipate that more clinical testing or further documentation will be required before approval. If approved, the diagnostic kit would then be subject to postmarketing record and reporting obligations and manufacturing requirements.


Similar requirements exist in many other countries. In November 2004, Nymox satisfactorily completed the testing and registration required by European regulatory, environmental and quality standards in order to obtain a  CE Mark for the AlzheimAlert™ kit.  The CE Mark makes the AlzheimAlert™ kit eligible for sale in the European Union and enables European clinical and hospital laboratories to perform the AlzheimAlert™ test in their own facilities in Europe.


The regulatory process leading to such approval can be time-consuming and expensive and can result in an outright denial or a very limited approval only. Our product will be subject to premarketing and postmarketing requirements applicable to such devices, including those governing:


·

clinical testing;

·

design control procedures;

·

prior FDA approval of a 510(k) application, where the FDA has determined that our diagnostic device is substantially equivalent to a marketed device, or a premarket approval application, where the FDA has been satisfied with clinical studies demonstrating the safety and efficacy of our device;

·

postmarketing record and reporting obligations; and

·

good manufacturing practices.


The requirements for a premarket approval application are analogous to those for the approval of a new drug and include four categories of information: indications for use, device description and manufacturing methods, alternative practices and procedures for the diagnosis of the disease and clinical and nonclinical studies. The requirements for a 510(k) application are generally less onerous but still include indications for use, safety and effectiveness data as well as manufacturing and quality assurance data and information. There can be no assurance that the AlzheimAlert™ test or any other medical device that we may develop in the future will obtain the necessary approvals within a specified time framework, if ever. In addition, the FDA may impose certain postmarketing requirements that may significantly increase the regulatory costs associated with our product. The FDA has recourse to a wide range of administrative sanctions and civil and criminal penalties in order to enforce the applicable laws, rules and regulations.




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Our therapeutic products under development by Nymox would also have to receive regulatory approval. This is a costly, lengthy and risky process. In the United States, in order for a product to be marketed, it must go through four distinct development and evaluation stages:


Product Evaluation

We must conduct preliminary studies of potential drug candidates using various screening methods to evaluate them for further testing, development and marketing.


Optimization of Product Formulation

The activities in this stage of development involve consultations between us and investigators and scientific personnel. Preliminary selection of screening candidates to become product candidates for further development and further evaluation of drug efficacy is based on a panel of research based biochemical measurements. Extensive formulation work and in vitro testing are conducted for each of various selected screening candidates and/or product candidates.


Clinical Screening and Evaluation

During this phase of development, portions of which may overlap with product evaluation and optimization of product formulation, initial clinical screening of product candidates is undertaken and full scale clinical trials commence. The FDA must approve any clinical testing on healthy subjects (Phase 1) and on patients (Phase 2 and 3).


Final Product Development

The activities to be undertaken in final product development include performing final clinical evaluations, conducting large-scale experiments to confirm the reproducibility of clinical responses, making clinical lots for any additional extensive clinical testing that may be required, performing any further safety studies required by the FDA, carrying out process development work to allow pilot scale production of the product, completing production demonstration runs for each potential product, filing new drug applications, product license applications, investigational device exemptions (and any necessary supplements or amendments) and undergoing comprehensive regulatory approval programs and processes.


We cannot assure you that we will successfully complete the development and commercialization of any therapeutic products.


In the United States, obtaining the necessary FDA approval for any drug is a lengthy, expensive and often arduous process. We cannot predict with any certainty the amount of time the FDA will take to approve one of our drugs or even whether any such approval will be forthcoming. Similar requirements exist in many other countries.


In the United States, the FDA approval procedure is a two-step process. We must file an investigational new drug (IND) application for each product with the FDA before beginning the initial (Phase 1) clinical testing of the new drug in healthy subjects. If the FDA has not commented on or questioned the application within 30 days of its filing, initial clinical studies may begin. If, however, the FDA has comments or questions, the questions must be answered to the satisfaction of the FDA before initial clinical testing can begin. In some instances, this process could result in substantial delay and expense. Phase I studies are intended to demonstrate the functional characteristics and safety of a product.




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After Phase 1 testing, we must conduct extensive clinical trials with patients in order to establish the efficacy and safety of our drug. Once we complete the required clinical testing, we expect to have to file a new drug application for FDA approval in order to market most, if not all, of our new drugs. The application is complicated and detailed and must include the results of extensive clinical and other testing, the cost of which is substantial. The FDA conducts an extensive and often lengthy review of such applications. The agency is required to review applications within 180 days of their filing, but, during the review, frequently requests that additional information be submitted. This starts the 180-day regulatory review period anew when the requested additional information is submitted and, as a result, can significantly extend the review period. Until the FDA actually approves the new drug application, there can be no assurance that the agency will consider the information requested and submitted to justify approval. The packaging and labeling of products are also subject to FDA regulation. Accordingly, it is impossible to anticipate when the FDA will approve a new drug application.


Our lead candidate is NX-1207. We cannot predict with any certainty the outcome of future trials, what further steps may be required in order to apply for final FDA approval for this drug or whether the FDA will ultimately grant us such approval.


We must also obtain approval for our drugs or diagnostic devices from the comparable regulatory authority in other countries before we can begin marketing our product in that country. The approval procedure varies from country to country and can involve additional testing. The time required may differ from that required for FDA approval. Although there are some procedures for unified filings for certain European countries, in general each country has its own procedures and requirements, many of which are time-consuming and expensive. Thus, there can be substantial delays in obtaining required approvals from both the FDA and foreign regulatory authorities after the relevant applications are filed.


After such approvals are obtained, further delays may be encountered before the products become commercially available. If, subsequent to approval, new information becomes available concerning the safety or effectiveness of any approved product, the regulatory authority may require the labeling for the affected product to be revised or the product to be withdrawn. Our manufacturing of any approved drug must conform with the FDA’s good manufacturing practice regulations which govern the production of pharmaceutical products and be subject to inspections and compliance orders.


Government regulation also affects our ability to receive an appropriate level of reimbursement for our products. Throughout the developed world, both public and private health care plans are under considerable financial and political pressure to contain their costs. The two principal methods of restricting expenditures on drugs and diagnostic products and services are to deny coverage or, if coverage is granted, to limit reimbursement. For single-payer government health care systems, a decision to deny coverage or to severely restrict reimbursement for one of our products can have an adverse effect on our business and revenues.


In the United States, where, to a significant degree, the patient population for our products is elderly, Medicare and Medicaid are sources of reimbursement. In general, any restriction on reimbursement, coverage or eligibility under either program could adversely affect reimbursement to Nymox for products and services provided to beneficiaries of the Medicare and/or Medicaid programs. Many elderly people are covered by a variety of private health care organizations either operating private health care plans or Medicare or Medicaid programs subject to government regulation. These organizations are also under considerable financial constraints and we may not be able to secure coverage or adequate reimbursement from these organizations. Without coverage, we will have to look to the patients themselves who may be unwilling or unable to pay for the product; in turn, doctors may be reluctant to order or prescribe our products in the absence of coverage of the product for the patient.


In response to rising health care costs, there have been a number of legislative and administrative proposals in the U.S. for the reform of the heathcare system. In 1997 the U.S. Congress implemented sweeping changes to the U.S. Medicare and Medicaid systems. Under Part C: Medicare + Choice programs, beneficiaries can opt for a variety of health delivery models, including coordinated care plans, HMOs, preferred provider organizations and provider sponsored organizations, private fee-for-service plans and medical savings account plans. In addition, states have the option to require Medicaid recipients to enroll with managed health care plans without first obtaining a waiver, making it substantially easier for the states to meet their Medicaid obligations through private managed care organizations. All these health care delivery systems, including the original Medicare and Medicaid systems, are subject to funding formulas and spending caps and may compensate for these restrictions by limiting coverage, eligibility and/or payments. In 2003, the U.S. government added insurance coverage to help pay for prescription drugs to Medicare. Legislative proposals before Congress to change the pricing mechanism for the prescription drugs available through that program, if passed, may have the effect of reducing the prices and profitability of such drugs. The long-term impact of legislative changes in terms of their efficiency, effectiveness and financial viability in delivering health care services to an aging population is uncertain at present. Any legislative or regulatory actions to reduce or contain federal spending under either the Medicare or Medicaid programs could adversely affect our ability to participate in either program as a provider or supplier of services or products and the amount of reimbursement under these programs potentially available to us.




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Our AlzheimAlert™ test, and any of the new diagnostic and therapeutic products and services that we may develop, will be subject to coverage determinations by health care providers and payers. Federal and state regulations and law and internal coverage policies of health care organizations affect our ability to obtain payments for our products and services. The Medicare program will not pay for any expenses incurred for items or services that are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member. Historically, CMS interpreted this provision in order to exclude from Medicare coverage those medical and health care services that are not demonstrated to be safe and effective by acceptable clinical evidence. CMS recently revised both its national coverage policies and procedures in general and specifically its coverage of diagnostic laboratory tests and constituted a Medicare Coverage Advisory Committee to provide advice on the effectiveness and appropriateness of medical items and services that are eligible for coverage under Medicare. It is unknown how these changes will affect our ability to obtain Medicare coverage for its products and services.  However, an adverse national coverage decision with respect to one of our products or services will make it impossible to receive reimbursement from Medicare for that product and more difficult to convince private health care organizations to provide coverage for it. Even if we receive a favorable coverage decision for one of our products or services, there is no guarantee that the level of reimbursement for it will be close to our retail price for it or commensurate with the costs of developing and marketing it.


Patents And Proprietary Information

We believe that patent and trade secret protection is important to our business, and that our success will depend, in part, on our ability to obtain strong patents, to maintain trade secret protection and to operate without infringing the proprietary rights of others.


The commercial success of products incorporating our technologies may depend, in part, upon our ability to obtain strong patent protection. We cannot assure you that additional patents covering new products or improvements will be issued or that any new or existing patents will be of commercial benefit or be valid and enforceable if challenged.


We pursue a policy of seeking patent protection for valuable patentable subject matter of our proprietary technology and require all employees, consultants and other persons who may have access to its proprietary technology to sign confidentiality agreements.


The Company currently owns or has licensed exclusive rights to several hundred patents and patent applications in the U.S. and other countries around the world in support of its proprietary product development programs. Nymox has twenty U.S. patents issued or allowed and a corresponding larger number of patents and patent applications worldwide. Nymox has issued patents in the main European markets, including Great Britain, Germany, France, Italy, The Netherlands, Sweden and Spain among others and in other countries such as Japan, Canada and Australia. These patents and patent applications cover much of our current product development and technologies, including new drug candidates, proprietary screening technologies for finding drugs, promising diagnostic markers, new diagnostic assay methods, methods of treating meat and other food products; and anti-infective agents. The earliest expiry date for its issued patents is July 2010 and the rest range from 2013 through 2021.




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Nymox's subsidiary, Serex, has thirteen patents issued or allowed in the United States and a corresponding larger number of patents and patent applications worldwide. These patents and patent applications cover such areas as Serex's proprietary diagnostic technologies and methodologies. The expiry dates for its patents range from 2012 to 2017.


Nymox also has exclusive rights to twelve issued U.S. patents as well as a corresponding larger number of patents and patent applications worldwide through research and license agreements. The earliest of these patents expires in 2014.


Many companies have patents covering various drugs, methods and discoveries in the fields of diagnostics and therapeutics for Alzheimer’s disease and related conditions and of new anti-infective agents. We believe that the patents issued to date will not preclude Nymox from developing and marketing our products; however, it is impossible to predict the extent to which licenses from third parties will be necessary. If Nymox were to need licenses from third parties there can be no assurance that we could obtain such licenses on commercially reasonable terms, if at all.


In the fields of diagnostic methods and diagnostic tests for common human diseases and conditions, where Serex has many of its patents, there are many patents issued covering many areas of diagnostic methods, tests and technologies. We believe that these patents issued to date to other companies will not preclude Serex from developing and marketing its products but you should be aware that it is often difficult to determine the nature, breadth and validity of competing patent claims in these fields, that there has been significant litigation in some of these areas (not involving Serex) and that, if and when Serex’s products become more commercially successful, Serex’s products or patents may become the subject matter of litigation. If Serex were to need licenses from third parties there can be no assurance that it could obtain such license on commercially reasonable terms, if at all.


Neither Nymox nor Serex are currently involved in litigation over patent and other intellectual property rights but significant litigation over these matters in the pharmaceutical and biotechnology industry is not uncommon. The validity and extent of patent rights can be very difficult to determine and involve complex legal, factual and scientific questions. Important legal issues about patent protection in the field of biotechnology have not been resolved. Patent litigation is costly and time-consuming and can consume substantial resources. An adverse decision can preclude the marketing of a product, expose us to significant liabilities or require us to obtain third party licenses, which may not be available at commercially reasonable prices.


We also rely upon trade secrets, know-how, and continuing technological advancement to develop and maintain our competitive position. We control the disclosure and use of our know-how and confidential information through agreements with the parties involved. In addition, we have confidentiality agreements with our key employees, consultants, officers and directors. There can be no assurance, however, that all confidentiality agreements will be honored, that others will not independently develop equivalent technology, that disputes will not arise as to the ownership of intellectual property, or that disclosure of our trade secrets will not occur. Furthermore, there can be no assurance that others have not obtained or will not obtain patent protection that will exclude us from using our trade secrets and confidential information. To the extent that consultants or research collaborators use intellectual property owned by others in their work with us, disputes may also arise as to the rights to related or resulting know-how or inventions.



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Competition


Rapidly evolving technology and intense competition are the hallmarks of modern pharmaceutical and biotechnology industries. Our competitors include:


·

major pharmaceutical, diagnostic, chemical and biotechnology companies, many of which have financial, technical and marketing resources significantly greater than ours;

·

biotechnology companies, either alone or in collaborations with large, established pharmaceutical companies to support research, development and commercialization of products that may be competitive with ours; and

·

academic institutions, government agencies and other public and private research organizations which are conducting research into Alzheimer’s disease and which increasingly are patenting, licensing and commercializing their products either on their own or through joint ventures.

In the field of Alzheimer’s disease diagnosis, our AlzheimAlert™ test faces growing competition which could detrimentally impact on our ability to successfully market and sell our diagnostic test. Our competitors include:


·

Athena Diagnostics, Inc., a wholly owned subsidiary of Thermo Fischer Scientific, which is currently marketing three tests claimed to aid in the diagnosis of Alzheimer's disease: a genetic test for the rare cases of familial, early-onset Alzheimer's disease; a genetic test for a relatively common mutation of a gene said to increase the likelihood of a person with at least one of the genes contracting the disease; and a test for two proteins in the spinal fluid of patients.

·

Innogenetics NV which currently markets tests and kits for two proteins and a variant of one of these proteins in the spinal fluid of patients and a genetic test for a relatively common mutation of a gene said to increase the likelihood of a person developing the disease.

·

Applied NeuroSolutions, Inc. currently markets a research test for a variant of a protein in the spinal fluid of patients.


There are also a number of other proposed biochemical signs of the disease that could potentially be developed into a commercial diagnostic test as well as various scanning and imaging technologies which compete for a portion of the diagnostic market for Alzheimer’s disease. In June 2004, the Centers for Medicare and Medicaid Services (CMS) approved limited coverage of a Positronic Emission Tomography (PET) imaging procedure for helping to more precisely distinguish Alzheimer's disease from a rarer type of dementia when clinical evaluation has been inconclusive. In October 2004, the National Institute of Aging in conjunction with other Federal agencies, private companies and organizations launched the Alzheimer’s Disease Neuroimaging Initiative, a $60 million initiative to test whether various scanning and imaging technologies, biochemical markers, and clinical and neuropsychological testing can be combined to help diagnose early Alzheimer’s disease. A number of companies, including GE, are actively working to develop imaging technologies for the diagnosis of Alzheimer’s disease.


Our NicAlert™ and TobacAlert™ products face competition from clinical laboratories such as LabCorp and Quest Diagnostics which provide off-site lab testing for cotinine, the by-product of the body’s breakdown of nicotine measured by NicAlert™ and TobacAlert™, and from assay suppliers, including immunoassay developers such as Orasure Techologies Inc. and Cozart Bioscience Ltd, and diagnostic system manufacturers such as Roche Diagnostics, Abbott and Diagnostic Products Corporation.  NicAlert™ and TobacAlert™ also face competition from distributors who supply simple yes-no smoking status tests such as SmokeCheck, NicQuick, and QuickScreen, from NicCheck I, an FDA-cleared smoking status test being marketed by Mossman & Associates Ltd, from SmokeScreen, a chemical color-based tobacco test being marketed by Mermaid Diagnostics, Ltd. in the United Kingdom, and from carbon monoxide (CO) monitors such as SmokeCheck.




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We also face intense competition for the development of an effective treatment for Alzheimer’s disease. The market conditions for an Alzheimer’s disease drug strongly favor the entry of other corporations into the area. The current market for therapeutic drugs for Alzheimer’s disease is an estimated $2 billion. This market is expected to grow rapidly as new drugs enter the market and as the baby boom generation becomes more at risk for developing Alzheimer’s disease. As a result, most of the major pharmaceutical companies and many biotechnology companies have ongoing research and development programs for drugs and treatments for Alzheimer’s disease. Many of these companies have much greater scientific, financial and marketing resources than we have and may succeed in developing and introducing effective treatments for Alzheimer’s disease before we can. At present, four drugs for Alzheimer’s disease are being widely marketed in the United States, Aricept® by Pfizer, Exelon® by Novartis, Razadyne® by Janssen and Namenda™ by Forest. These four drugs only treat some of the symptoms of Alzheimer’s disease by enhancing memory and other mental functions and not the underlying causes of the illness.


A similar competitive reality prevails in the field of novel anti-infectives. Over the past ten years, there has been an increasing awareness of the medical need and of emerging market opportunities for new treatments for antibiotic resistant bacterial infections. Many of the major pharmaceutical companies are developing anti-infective drugs that either modify their existing drugs or involve new anti-bacterial properties. Many biotechnology companies are developing new classes of anti-bacterial drugs. At least three major pharmaceutical companies have vaccines against bacterial infections in development. To the extent that these companies are able to develop drugs or vaccines that offer treatment for some or all of the indications for our anti-infectives, the market for our products may be adversely affected.


Our treatments under development for enlarged prostate (benign prostatic hyperplasia or BPH) face significant competition from existing products. There are eight drugs approved for treatment of BPH: four proprietary drugs (dutasteride (Avodart®), tamsulosin (Flomax®), alfusozin (Uroxatral®), and silodosin (Rapaflo™)) and four generics (finasteride, terazozin, doxazozin, and prazosin). There are a number of thermal treatments on the market designed to shrink the enlarged prostate by heating its tissue with a device inserted through the urethra (the tube leading from the bladder through the penis through which men urinate) or through the abdomen. The devices on the market use microwave energy (Prostatron®, Targis Therapy® or TherMatrx®), low level radiowaves (TUNA System®), lasers (Indigo LaserOptic Treatment System® or Laserscope GreenLight PVP™), direct heat or hot water to heat or burn away prostate tissue.  A variety of surgical procedures exist to surgically reduce or remove the prostate or to widen the urethra.  These include procedures to cut away prostate tissue such as TURP (transurethral resection of the prostate) and using a resectoscope with an electrical loop inserted through the penis to cut the prostate tissue. A small device used to widen the constricted urethra called a prostatic stent can also be inserted.


The problem of E. coli O157:H7 contamination of hamburger meat and other food products is also well-known and a number of companies and researchers have been pursuing various potential solutions, including irradiation with x-rays, better detection of contamination, electronic pasteurization, vaccination and competitive exclusion of the pathogenic E. coli bacteria by harmless bacteria.  The development of alternative solutions to the problem of E. coli infection may adversely affect the market for our treatment for E. coli O157:H7 infection in cattle and contamination of food products.


Marketing

Our AlzheimAlert™ test is certified with a CE Mark, making the device eligible for sale in the European Union. Nymox has signed distribution agreements for AlzheimAlert™ in Italy, the Czech Republic, Spain, Greece, Italy, the United Kingdom and South Korea.


At present, we do most of our marketing ourselves. To increase our marketing, distribution and sales capabilities both in the United States and around the world, we will need to enter into licensing arrangements, contract sales agreements and co-marketing deals. We cannot assure you that we will be able to enter into agreements with other companies on terms acceptable to us, that any licensing arrangement will generate any revenue for the company or that the costs of engaging and retaining the services of a contract sales organization will not exceed the revenues generated.




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If successfully developed and approved, we plan to market and sell our therapeutic and diagnostic products directly or through co-promotion arrangements or other licensing arrangements with third parties. In cases where we have sole or shared marketing rights, we plan to build a small, focused sales force if and when such products approach marketing approval in some markets, including Europe. Implementation of this strategy will depend on many factors, including the market potential of any products we develop as well as on our financial resources. To the extent we will enter into co-promotion or other licensing arrangements, any revenues received by us will be dependent on the efforts of third parties.


ITEM 4A.  UNRESOLVED STAFF COMMENTS

None.

Principal Markets


The Company markets its products for sale principally in the United States, Canada and overseas. Set forth below is a breakdown of the Company’s revenues by geographic market for the last three years.

 

          United   Europe  
      Canada   States   and other  
 
 
Revenues:            
     2008 $ 9,637 $ 347,764 $ 71,008
     2007   34,410   349,337   50,186
     2006   26,370   313,148   103,343



ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

General

Nymox Pharmaceutical Corporation is a biopharmaceutical company with three unique proprietary products on the market, and an R&D pipeline of drug and diagnostic products in development.


We market the AlzheimAlert™ test as an aid to the diagnosis of Alzheimer’s disease. The kit version of the AlzheimAlert™ test is certified with a CE Mark in Europe. AlzheimAlert™ is an improved version of our AD7C™ test, from which we began generating revenue from sales in 1997.


We also market NicAlert™ and TobacAlert™, our two products, which determine a person’s level of exposure to tobacco products. These products are also certified with a CE Mark, making the devices eligible for sale in the European Union.


We have under development therapeutic agents for the treatment of Alzheimer’s disease, for the treatment of enlarged prostate (BPH) and of certain antibiotic-resistant infections as well as antibacterial agents for E. coli contamination of food and drink products.


We also have the rights to a U.S. patent for the use of statin drugs for the treatment or prevention of Alzheimer’s Disease.


We have incurred operating losses throughout our history. Management believes that such operating losses will continue for the next few years. The costs relating to clinical trials for our potential therapeutic products will increase expenditures and delay profitability, despite anticipated increases in sales revenue in the coming years.




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All figures are presented in U.S. dollars, unless otherwise stated.


History of Capital Funding

We fund our operations and projects primarily by selling shares of Nymox’s common stock. However, since 1997, a small portion of our funding also comes from sales. This source of funding became more significant in late 1998, following the launch of our urinary version of the AD7C™ test. Since its incorporation in May, 1995, Nymox raised the capital necessary to fund its on-going research and development work and its marketing and sales operations primarily through private placements of its shares.


On December 1, 1997, our common shares began trading on the Nasdaq Stock Market. Nymox’s common shares also traded on the Montreal Exchange from December 18, 1995 to November 19,1999.


Private placements completed by Nymox since December, 1995 are as follows:


·

December 1995, 1,578,635 common shares at a price of CAN$2.00 (US$1.38) per share for total proceeds of CAN$3,157,270 (US$2,187,536);

·

April 1996, 877,300 common shares at a price of CAN$6.00 (US$4.15) per share for total proceeds of CAN$5,263,800 (US$3,647,059);

·

May 1997, 696,491 common shares at a price of CAN$6.50 (US$4.50) and warrants exercisable at a price of CAN$8.50 (US$5.88) per share for total proceeds of CAN$4,527,191 (US$3,136,694). In 1998, all 696,491 of these warrants were exercised for additional proceeds to Nymox of CAN$5,920,174 (US$4,101,832);

·

May 1998, 231,630 common shares at a price of CAN$8.50 (US$5.88) for total proceeds of CAN$1,968,855 (US$1,364,134). A total of 110,000 warrants were issued as well, exercisable at a price of CAN$8.50 (US$5.88) per share (50,000) and CAN$10.00 (US$6.93) per share (60,000). These warrants have since expired;

·

December 1998, 135,000 common shares and January 1999, 55,000 common shares at CAN$8.50 (US$5.88) per share, for total proceeds of CAN$1,615,000 (US$1,118,963). A total of 95,000 warrants were issued as well, exercisable at the price of CAN$10.00 (US$6.93) per share. These warrants have since expired;

·

September 1999, 122,000 common shares at CAN$5.00 (US$3.46) per share, for total proceeds of CAN$610,000 (US$422,642).

·

March 2000, 821,637 common shares at an average price of $4.87 per share, for total proceeds of $4,000,000. A total of 93,334 warrants were issued as well, exercisable at a price of $9.375 per share (66,667) and $7.8125 per share (26,667). These warrants expired on March 6, 2004.

·

March, 2001, 200,000 common shares at $2.06 per share, for total proceeds of $412,000. A total of 100,000 warrants were issued as well, exercisable at a price of $2.06. These warrants were exercised on February 17, 2003.

·

August 3, 2001, 80,000 common shares at $2.50 per share for total proceeds of $200,000.

·

August 22, 2001, 140,000 common shares at $3.75 per share for total proceeds of $525,000.

·

October 3, 2001, 110,000 common shares at $3.75 per share for total proceeds of $412,500.

·

November 14, 2001, 64,100 common shares at $3.90 per share for total proceeds of $250,000.

·

January 24, 2002, 74,074 common shares at $4.05 per share for total proceeds of $300,000.

·

March 18, 2002, 195,000 common shares at $4.20 per share for total proceeds of $819,000.

·

June 18, 2002, 90,000 common shares at $4.00 per share for total proceeds of $360,000.

·

July 17, 2002, 86,000 common shares at $4.68 per share for total proceeds of $403,000.

·

September 9, 2002, 91,000 common shares at $4.40 per share for total proceeds of $400,400.

·

November 27, 2002, 53,500 common shares at $3.75 per share for total proceeds of $200,625.

·

December 17, 2002, 125,000 common shares at $4.10 per share for total proceeds of $512,500.

·

February 17, 2003, 100,000 warrants were exercised at a price of $2.06 per share for total proceeds of $206,000.


From March 2000 to January 2003, we received a total of $1,327,273 for the following sales of our shares pursuant to a common stock purchase agreement with an investment company:


·

August 16, 2000, 152,616 common shares at a volume weighted average price of $3.2924 per share;

·

October 12, 2000, 137,889 common shares at a volume weighted average price of $3.6261 per share;

·

February 7, 2001, 161,696 common shares at a volume weighted average price of $2.0240 per share;



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·

May 31, 2001, 56,108 common shares at a volume weighted average price of $1.9466 per share.


This common stock purchase agreement expired in January 2003. As part of the agreement we issued to the investment company a stock purchase warrant, which expired November 30, 2004, permitting it to purchase up to 200,000 shares of our common stock at an exercise price of $4.53 per share.


On January 27, 2003 we entered into a Common Stock Private Purchase Agreement with an investment company, Lorros-Greyse Investments, Ltd., for the future issuance and purchase of Nymox’s common shares. In general, the agreement provided Nymox with a commitment from the investment company to purchase up to $5 million of Nymox’s common shares over the twenty-four month period beginning in January 2003.


Under the terms of this agreement, which has since been replaced annually by new agreements with the same investor, we may give notice to the investment company requiring it to purchase a specified dollar amount of our shares. The amount specified in any one notice may be up to $500,000 but not less than $100,000. The maximum amount can be higher if both parties agree. The number of shares Nymox will issue to the investment company in return for that money will be equal to the amount specified in the notice divided by 97% of the average market price of our common shares for the five trading days preceding the giving of the notice.


Under the agreement dated January 27, 2003, we received a total of $2,360,000 for the following shares under this common stock private purchase agreement:


·

January 30, 2003, 107,382 common shares at a price of $3.725 per share.

·

March 3, 2003, 245,098 common shares at a price of $4.08 per share.

·

June 6, 2003, 167,224 common shares at a price of $2.99 per share.

·

July 8, 2003, 80,128 common shares at a price of $3.12 per share.

·

August 8, 2003, 77,778 common shares at a price of $2.70 per share.


On August 25, 2003, we signed a new Common Stock Private Purchase Agreement, whereby the same investor was committed to purchase up to $12 million of Nymox’s common shares over the twenty-four month period beginning in August 2003, subject to the same terms and conditions as before.


Under the agreement dated August 25, 2003, we received a total of $4,350,000 for the following shares under this common stock private purchase agreement:


·

September 30, 2003, 204,918 common shares at a price of $2.44 per share.

·

October 21, 2003, 182,203 common shares at a price of $2.36 per share.

·

December 8, 2003, 106,383 common shares at a price of $2.82 per share.

·

December 22, 2003, 109,091 common shares at a price of $2.75 per share.

·

January 14, 2004, 102,041 common shares at a price of $3.92 per share.

·

February 27, 2004, 69,284 common shares at a price of $4.33 per share.

·

March 10, 2004, 100,402 common shares at a price of $4.98 per share.

·

April 30, 2004, 92,807 common shares at a price of $4.31 per share.

·

June 22, 2004, 69,444 common shares at a price of $2.88 per share.

·

July 7, 2004, 140,056 common shares at a price of $3.57 per share.

·

August 3, 2004, 130,990 common shares at a price of $3.13 per share.

·

September 27, 2004, 52,885 common shares at a price of $2.08 per share.


On October 6, 2004, we signed a new Common Stock Private Purchase Agreement, whereby the same investor was committed to purchase up to $13 million of Nymox’s common shares over the twenty-four month period beginning in October 2004, subject to the same terms and conditions as before.


Under the agreement dated October 6, 2004, we received a total of $3,485,000 for the following shares under this common stock private purchase agreement:



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·

October 25, 2004, 95,238 common shares at a price of $2.10 per share.

·

December 14, 2004, 148,699 common shares at a price of $2.69 per share.

·

December 22, 2004, 78,616 common shares at a price of $3.18 per share.

·

February 9, 2005, 82,474 common shares at a price of $2.91 per share.

·

February 22, 2005, 50,676 common shares at a price of $2.96 per share.

·

March 17, 2005, 51,136 common shares at a price of $2.64 per share.

·

April 25, 2005, 127,119 common shares at a price of $2.36 per share.

·

May 24, 2005, 109,489 common shares at a price of $2.74 per share.

·

June 9, 2005, 95,339 common shares at a price of $2.36 per share.

·

June 17, 2005, 58,333 common shares at a price of $2.40 per share.

·

July 15, 2005, 92,437 common shares at a price of $2.38 per share.

·

August 2, 2005, 98,684 common shares at a price of $2.28 per share.

·

August 18, 2005, 83,333 common shares at a price of $2.40 per share.

·

September 26, 2005, 110,619 common shares at a price of $2.26 per share.

·

October 11, 2005, 72,464 common shares at a price of $2.07 per share.

·

November 10, 2005, 49,020 common shares at a price of $2.04 per share.


On October 21, 2005, we signed a new Common Stock Private Purchase Agreement, whereby the same investor was committed to purchase up to $13 million of Nymox’s common shares over the twenty-four month period beginning in October 2005, subject to the same terms and conditions as before.


Under this agreement dated October 21, 2005, we received a total of $4,655,000 for the following shares under this common stock private purchase agreement:


·

November 18, 2005, 49,020 common shares at a price of $2.04 per share.

·

December 8, 2005, 46,729 common shares at a price of $2.14 per share.

·

December 14, 2006, 47,847 common shares at a price of $2.09 per share.

·

January 10, 2006, 50,000 common shares at a price of $2.00 per share.

·

January 18, 2006, 51,020 common shares at a price of $1.96 per share.

·

January 24, 2006, 52,083 common shares at a price of $1.92 per share.

·

February 3, 2006, 51,020 common shares at a price of $1.96 per share.

·

February 10, 2006, 51,546 common shares at a price of $1.94 per share.

·

February 25, 2006, 103,093 common shares at a price of $1.94 per share.

·

March 6, 2006, 52,632 common shares at a price of $1.90 per share.

·

March 16, 2006, 51,813 common shares at a price of $1.93 per share.

·

March  27, 2006, 246,914 common shares at a price of $4.05 per share.

·

April 12, 2006, 188,917 common shares at a price of $3.97 per share.

·

May 2, 2006, 82,645 common shares at a price of $3.63 per share.

·

July 25, 2006, 37,488 common shares were issued at a price of $2.67 per share.

·

August 7, 2006, 37,879 common shares were issued at a price of $2.64 per share.

·

August 24, 2006, 39,063 common shares were issued at a price of $2.56 per share.

·

September 12, 2006, 40,000 common shares were issued at a price of $2.50 per share.

·

September 26, 2006, 73,260 common shares were issued at a price of $2.73 per share.

·

October 3, 2006, 56,022 common shares were issued at a price of $3.57 per share.

·

October 18, 2006, 33,943 common shares were issued at a price of $3.83 per share.

·

October 25, 2006, 73,529 common shares were issued at a price of $4.08 per share.

·

November 20, 2006, 43,103 common shares were issued at a price of $4.06 per share.


On November 13, 2006, we signed a new Common Stock Private Purchase Agreement, whereby the same investor was committed to purchase up to $13 million of Nymox’s common shares over the twenty-four month period beginning in November 2006, subject to the same terms and conditions as before.



34





Under this agreement dated November 13, 2006, we received a total of $4,750,000 for the following shares under this common stock private purchase agreement:


·

December 6, 2006, 29,499 common shares were issued at a price of $3.39 per share.

·

December 13, 2006, 56,818 common shares were issued at a price of $3.52 per share.

·

December 20, 2006, 91,185 common shares were issued at a price of $3.29 per share.

·

January 24, 2007, 121,294 common shares were issued at a price of $3.71 per share.

·

February 14, 2007, 181,087 common shares were issued at a price of $4.97 per share.

·

March 26, 2007, 67,869 common shares were issued at a price of $5.89 per share.

·

April 26, 2007, 97,276 common shares were issued at a price of $5.14 per share.

·

May 9, 2007, 286,145 common shares were issued at a price of $6.64 per share.

·

September 6, 2007, 57,582 common shares were issued at a price of $5.21 per share.

·

October 11, 2007, 77,042 common shares were issued at a price of $6.49 per share.

·

December 4, 2007, 64,205 common shares were issued at a price of $6.23 per share.


On November 16, 2007, we signed a new Common Stock Private Purchase Agreement, whereby the same investor was committed to purchase up to $15 million of Nymox’s common shares over the twenty-four month period beginning in November 2007, subject to the same terms and conditions as before.


Under this agreement dated November 16, 2007, we received a total of $3,695,000 for the following shares under this common stock private purchase agreement:


·

January 30, 2008, 50,917 common shares were issued at a price of $4.91 per share.

·

February 12, 2008, 84,980 common shares were issued at a price of $5.06 per share.

·

March 4, 2008, 56,391 common shares were issued at a price of $5.32 per share.

·

March 28, 2008, 58,366 common shares were issued at a price of $5.14 per share.

·

May 6, 2008, 34,325 common shares were issued at a price of $4.37 per share.

·

May 27, 2008, 34,965 common shares were issued at a price of $4.29 per share.

·

June 23, 2008, 46,838 common shares were issued at a price of $4.27 per share.

·

July 24, 2008, 28,169 common shares were issued at a price of $3.55 per share.

·

August 6, 2008, 59,267 common shares were issued at a price of $4.64 per share.

·

August 22, 2008, 23,364 common shares were issued at a price of $5.35 per share.

·

September 10, 2008, 36,496 common shares were issued at a price of $5.48 per share.

·

September 17, 2008, 36,430 common shares were issued at a price of $5.49 per share.

·

September 26, 2008, 43,706 common shares were issued at a price of $5.72 per share.

·

October 23, 2008, 61,659 common shares were issued at a price of $4.46 per share.

·

November 26, 2008, 108,280 common shares were issued at a price of $3.14 per share.

·

December 22, 2008, 48,701 common shares were issued at a price of $3.08 per share.


On November 10, 2008, we signed a new Common Stock Private Purchase Agreement, whereby the same investor is committed to purchase up to $15 million of Nymox’s common shares over the twenty-four month period beginning in November 2008, subject to the same terms and conditions as before.


Under this agreement dated November 10, 2008, which became effective December 23, 2008, we received a total of $450,000 for the following shares under this common stock private purchase agreement:


·

January 27, 2009, 70,225 common shares were issued at a price of $3.56 per share.

·

February 27, 2009, 65,789 common shares were issued at a price of $3.04 per share.



As of March 13, 2009, Nymox had approximately $14.55 million of financing available under the facility. We expect this stock purchase agreement to provide sufficient financing to enable us to advance our research and product development for the next two years.



35






Also, the Company has received total proceeds of approximately $1.03 million from the exercise of 346,400 options since 1995 as follows:


·

$355,536 for 158,900 shares at a per share price of $2.25

·

$258,858 for 83,000 shares at a per share price of $3.12

·

$16,000 for 5,000 shares at a per share price of $3.20

·

$38,750 for 10,000 shares at a per share price of $3.875

·

$2,620 for 1,000 shares at a per share price of $2.62

·

$96,290 for 25,000 shares at a per share price of $3.852

·

$9,650 for 5,000 shares at a per share price of $1.93

·

$47,000 for 10,000 shares at a per share price of $4.70

·

$96,875 for 25,000 shares at a per share price of $3.875

·

$108,250 for 25,000 shares at a price per share of $4.33


Pursuant to the share purchase agreement we entered into in March 2000 to acquire a controlling interest of Serex, Inc., a total of 257,607 additional shares and 158,526 warrants were issued in exchange for the shares of Serex. Since January 2004, 131,940 of these warrants have been exercised under a “cashless exercise”, whereby the warrant holder receives a number of shares equivalent in value to the net difference between the strike price on the warrant and the average market price on the day before the date of the “cashless exercise”, according to a formula contained in the warrant agreement. The net effect of these “cashless exercises” has been the issuance of 22,061 shares of Nymox common stock. Another 1,090 of these warrants were exercised resulting in the issuance of 1,090 shares of Nymox, for proceeds of $4,033.


In total, Nymox has raised over $53.8 million through the issuance of common stock or securities exercisable for shares of common stock, since its incorporation in May 1995.


We have no financial obligations of significance other than long-term lease commitments for our premises in the United States and Canada of $23,947 per month in 2009. Total commitments in 2009 and beyond are summarized in note 8 to the consolidated financial statements.


The demand note payable by the Company to a third party of $500,000, as at December 31, 2006 was paid in full in May 2007.






36






MANAGEMENT'S DISCUSSION AND ANALYSIS

(in US dollars)


This Management’s discussion and analysis (MD&A) comments on the Company’s operations, performance and financial condition as at and for the years ended December 31, 2008, 2007 and 2006. This MD&A should be read together with the audited Consolidated Financial Statements and the related notes. All amounts in this report are in U.S. dollars, unless otherwise noted.

All financial information contained in this MD&A and in the Consolidated Financial Statements has been prepared in accordance with Canadian generally accepted accounting principles (GAAP). The audited Consolidated Financial Statements and this MD&A were reviewed by the Company’s Audit and Finance Committee and were approved by our Board of Directors.

Additional information about the Company can be obtained on EDGAR at www.sec.gov or on SEDAR at www.sedar.com.


Overview


Corporate Profile


Nymox Pharmaceutical Corporation is a biopharmaceutical company with a significant R&D pipeline in development. Nymox is developing NX-1207, a novel treatment for benign prostatic hyperplasia which is in Phase 3. NX-1207 has shown positive results in several Phase 1 and 2 clinical trials in the U.S. The Company successfully completed a 43 site prospective randomized double-blinded placebo controlled Phase 2 U.S. clinical trial of NX-1207 in 2006, which showed statistically significant efficacy and a good safety profile. In February 2008, the Company reported positive results in a 32 site U.S. Phase 2 prospective randomized blinded clinical trial, with statistically significant improvement compared to an approved BPH drug (finasteride). Nymox reported positive results in six other follow-up studies of NX-1207 in BPH patients. The Company is developing new treatments for bacterial infections in humans and for the treatment of E. coli O157:H7 contamination in food products. Nymox has candidates which are under development as drug treatments aimed at the causes of Alzheimer’s disease, and has several other drug candidates in development. Nymox has U.S. and global patent rights for the use of statin drugs for the treatment and prevention of Alzheimer’s disease. Nymox developed the AlzheimAlert™ test, which is certified with a CE Mark in Europe. AlzheimAlert™ is an accurate, non-invasive aid in the diagnosis of Alzheimer’s disease. Nymox developed and markets NicAlert™ and TobacAlert™; which are tests that use urine or saliva to detect use of and exposure to tobacco products. NicAlert™ has received clearance from the U.S. Food and Drug Administration (FDA) and is also certified with a CE Mark in Europe. TobacAlert™ is the first test of its kind to accurately measure second and third hand smoke exposure in individuals.


Risk Factors


The business activities of the Company since inception have been devoted principally to research and development. Accordingly, the Company has had limited revenues from sales and has not been profitable to date. We refer to the Risk Factors section of this Form 20F and of our Annual Information Form filed on SEDAR for a discussion of the management and investment issues that affect the Company and our industry. The risk factors that could have an impact on the Company’s financial results are summarized as follows:


·

Our Clinical Trials for our Therapeutic Products in Development, such as NX-1207, May Not be Successful and We May Not Receive the Required Regulatory Approvals Necessary to Commercialize These Products

·

Our Clinical Trials for our Therapeutic Products, such as NX-1207, May be Delayed, Making it Impossible to Achieve Anticipated Development or Commercialization Timelines

·

A Setback in Any of our Clinical Trials Would Likely Cause a Drop in the Price of our Shares



37





·

We May Not be Able to Make Adequate Arrangements with Third Parties for the Commercialization of our Product Candidates, such as NX-1207

·

We May Not Achieve our Projected Development Goals in the Time Frames We Announce and Expect

·

Even If We Obtain Regulatory Approvals for our Product Candidates, We Will be Subject to Stringent Ongoing Government Regulation

·

It is Uncertain When, if Ever, We Will Make a Profit

·

We May Not Be Able to Raise Enough Capital to Develop and Market Our Products

·

We Face Challenges in Developing, Manufacturing and Improving Our Products

·

Our Products and Services May Not Receive Necessary Regulatory Approvals

·

We Face Significant and Growing Competition

·

We May Not Be Able to Successfully Market Our Products

·

Protecting Our Patents and Proprietary Information is Costly and Difficult

·

We Face Changing Market Conditions

·

Health Care Plans May Not Cover or Adequately Pay for our Products and Services

·

We Face Potential Losses Due to Foreign Currency Exchange Risks


Critical Accounting Policies


In December 2001, the Securities and Exchange Commission (“SEC”) released “Cautionary Advice Regarding Disclosure About Critical Accounting Policies”. According to the SEC release, accounting policies are among the “most critical” if they are, in management’s view, most important to the portrayal of the company’s financial condition and most demanding on their calls for judgment.


The consolidated financial statements of the Company have been prepared under Canadian generally accepted accounting principles and include a reconciliation to accounting principles generally accepted in the United States (see Canadian/US reporting differences in the Notes to the Consolidated Financial Statements). The Company’s functional and reporting currency is the United States dollar. Our accounting policies are described in the notes to our annual audited consolidated financial statements. We consider the following policies to be the most critical in understanding the judgments that are involved in preparing our financial statements and the matters that could impact our results of operations, financial condition and cash flows.


Revenue Recognition


The Company has generally derived its revenue from product sales, research contracts, license fees and interest. Revenue from product sales is recognized when the product or service has been delivered or obligations as defined in the agreement are performed. Revenue from research contracts is recognized at the time research activities are performed under the agreement. Revenue from license fees, royalties and milestone payments is recognized upon the fulfillment of all obligations under the terms of the related agreement. These agreements may include upfront payments to be received by the Company. Upfront payments are recognized as revenue on a systematic basis over the period that the related services or obligations as defined in the agreement are performed. Interest is recognized on an accrual basis. Deferred revenue presented in the balance sheet represents amounts billed to and received from customers in advance of revenue recognition. Revenues from agreements that include multiple elements are considered to be a revenue arrangement with multiple deliverables.  Under this type of arrangement, the identification of separate units of accounting is required and revenue is recognized for each unit as described above.


Valuation of Long-lived Assets


Property and equipment, patents and intellectual property rights acquired are stated at cost and are amortized on a straight-line basis over the estimated useful lives. The Company reviews the unamortized balance of property and equipment, intellectual property rights and patents and recognizes any impairment in carrying value when it is identified. Factors we consider important, which could trigger an impairment review include:




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·

Significant changes in the manner of our use of the acquired assets or the strategy for our overall business; and

·

Significant negative industry or economic trends.


Impairment is assessed by comparing the carrying amount of an asset with its expected future net undiscounted cash flows from use together with its residual value (net recoverable value). If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount exceeds its fair value. Management’s judgment regarding the existence of impairment indicators is based on legal factors, market conditions and operating performances. Future events could cause management to conclude that impairment indicators exist and that the carrying values of the Company’s property, equipment or intellectual property rights acquired are impaired. Any resulting impairment loss could have a material adverse impact on the Company’s financial position and results of operations.


Stock-based Compensation


Stock-based compensation is recorded using the fair value based method for stock options issued to employees and non-employees. Under this method, compensation cost is measured at fair value at the date of grant and is expensed over the award’s vesting period. The Company uses the Black-Scholes options pricing model to calculate stock option values, which requires certain assumptions, including the future stock price volatility and expected time to exercise. Changes to any of these assumptions, or the use of a different option pricing model, could produce different fair values for stock-based compensation, which could have a material impact on the Company’s earnings.


Valuation of Future Income Tax Assets


Management judgment is required in determining the valuation allowance recorded against net future tax assets. We have recorded a valuation allowance of $12.5 million as of December 31, 2008, due to uncertainties related to our ability to utilize all of our future tax assets, primarily consisting of net operating losses carried forward and other unclaimed deductions, before they expire. In assessing the realizability of future tax assets, management considers whether it is more likely than not that some portion or all of the future tax assets will not be realized. The ultimate realization of future tax assets is dependent upon the generation of future taxable income and tax planning strategies. The generation of future taxable income is dependent on the successful commercialization of the Company’s products and technologies.


Results of Operations




Selected Annual Information   2008     2007     2006  
Total revenues $ 428,409   $ 433,933   $ 442,861  
Net loss $ (4,590,345 ) $ (5,290,431 ) $ (4,893,685 )
Loss per share (basic & diluted) $ (0.15 ) $ (0.18 ) $ (0.18 )
Total assets $ 4,067,611   $ 4,260,346   $ 3,970,845  

Quarterly Results 2008   Q1     Q2     Q3     Q4  
Total revenues $ 105,521   $ 120,636   $ 82,357   $ 119,895  
Net loss $ (1,232,063 ) $ (1,138,139 ) $ (1,350,536 ) $ (869,607 )
Loss per share (basic & diluted) $ (0.04 ) $ (0.04 ) $ (0.05 ) $ (0.03 )





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Quarterly Results 2007   Q1     Q2     Q3     Q4  
Total revenues $ 138,666   $ 87,412   $ 70,226   $ 137,629  
Net loss $ (1,132,520 ) $ (1,464,950 ) $ (1,386,084 ) $ (1,306,878 )
Loss per share (basic & diluted) $ (0.04 ) $ (0.05 ) $ (0.05 ) $ (0.05 )


All amounts are in U.S. dollars.


Results of Operations – 2008 compared to 2007


Net losses were $869,607, or $0.03 per share, for the quarter and $4,590,345, or $0.15 per share, for the year ended December 31, 2008, compared to $1,306,878, or $0.05 per share, for the quarter and $5,290,431, or $0.18 per share, for the year ended December 31, 2007. The decrease in net losses is attributable to a reduction in expenditures relating to clinical trials during this period. The weighted average number of common shares outstanding for the year ended December 31, 2008 was 29,749,000 compared to 29,005,342 for the same period in 2007.


There have been no material adjustments or extraordinary items during the quarter ended or during the year ended December 31, 2008.


Revenues


Revenues from sales amounted to $119,826 for the quarter and $426,675 for the year ended December 31, 2008, compared with $135,002 for the quarter and $412,923 for the year ended December 31, 2007. The decrease for the quarter is due to timing differences and the increase for the year is due to increases in the number of customers for NicAlert in the US in 2008 compared to 2007.  The development of therapeutic candidates and moving therapeutic product candidates through clinical trials is a priority for the Company at this time. The growth of sales will become more of a priority once these candidates have reached the marketing stage. The Company expects that revenues will increase if and when product candidates pass clinical trials and are launched on the market.


Research and Development


Research and development expenditures were $318,161 for the quarter and $2,164,611 for the year ended December 31, 2008, compared with $720,869 for the quarter and $2,797,903 for the year ended December 31, 2007. Research and development expenditures include costs incurred in advancing Nymox’s BPH product candidate NX-1207 through clinical trials, as well as costs related to its R&D pipeline in development. The decrease in expenditures for the quarter and the year is principally attributable to a reduction in expenditures relating to clinical trials during this period. Research and development expenditures also include impairment costs relating to patents which have expired, or to patent applications which Management has decided to abandon entirely or to discontinue pursuing in certain jurisdictions. For the year 2008, impairment costs on patents amounted to $228,606 compared to $61,224 in 2007. For the year-ended 2008, research tax credits amounted to $111,243 compared to $68,041 in 2007 as a result of additional expenditures claimed for refundable tax credits in 2008 compared to 2007. The Company expects that research and development expenditures will decrease as product candidates finish development and clinical trials. However, because of the early stage of development of the Company’s R&D projects, it is impossible to outline the nature, timing or estimated costs of the efforts necessary to complete these projects, nor the anticipated completion dates for these projects. The facts and circumstances indicating the uncertainties that preclude us from making a reasonable estimate of the costs and timing necessary to complete projects include the risks inherent in any field trials, the uncertainty as to the nature and extent of regulatory requirements both for safety and efficacy, and the ability to manufacture the products in accordance with current good manufacturing requirements (cGMP) and in sufficient quantities both for large scale trials and for commercial use. A drug candidate that shows efficacy can take a long period (7 years or more) to achieve regulatory approval. There is also uncertainty whether we will be able to successfully adapt our patented technologies or whether any new products we develop will pass proof-of-principle testing both in the laboratory and in clinical trials, and whether we will be able to manufacture such products at a commercially competitive price. In addition, given the very high costs of development of therapeutic products, we anticipate having to partner with larger pharmaceutical companies to bring therapeutic products to market. The terms of such partnership arrangements along with our related financial obligations cannot be determined at this time and the timing of completion of the approval of such products will likely not be within our sole control.




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Marketing Expenses


Marketing expenditures amounted to $44,530 for the quarter and $187,868 for the year ended December 31, 2008, compared with $66,517 for the quarter and $236,395 for the year ended December 31, 2007. The decrease for the quarter and the year is due primarily to expenditures incurred for publicity and medical conferences in 2007, which were not repeated in 2008. The Company expects that marketing expenditures will increase if and when new products are launched on the market.


Administrative Expenses


General and administrative expenses amounted to $267,311 for the quarter and $1,064,903 for the year ended December 31, 2008, compared with $247,882 for the quarter and $970,919 for the year ended December 31, 2007. The increase for the quarter and the year is due to higher costs relating to compliance with United States securities laws, and in particular Section 404 of the Sarbanes-Oxley Act and related regulations, and to expenditures on investor meetings in 2008. The Company expects that general and administrative expenditures will increase as new product development leads to expanded operations.


Stock-based Compensation


The Company accounts for stock option grants using the fair value method, with compensation cost measured at the date of grant and amortized over the vesting period. In 2008, stock-based compensation costs of $817,000 were recorded for the 3,565,500 options granted in 2006 which vest quarterly over six years, compared to $818,720 in 2007. An additional $89,360 was recorded in the third quarter for options granted to the Company’s directors, and $18,860 was recorded in the fourth quarter for options granted to a consultant, which were fully vested at the date of grant, compared to $146,360 recorded in the third quarter for options granted to the Company’s directors, and $33,960 recorded in the fourth quarter for options granted to a consultant, in 2007.


Foreign Exchange


The Company incurs expenses in the local currency of the countries in which it operates, which include the United States and Canada. Approximately 73% of 2008 expenses (72% in 2007) were in U.S. dollars. Foreign exchange fluctuations had no meaningful impact on the Company’s results in 2008 or 2007.


Inflation


The Company does not believe that inflation has had a significant impact on its results of operations.


Results of Operations – 2007 compared to 2006


Net losses were $1,306,878, or $0.05 per share, for the quarter and $5,290,431, or $0.18 per share, for the year ended December 31, 2007, compared to $1,234,985, or $0.04 per share, for the quarter and $4,893,685, or $0.18 per share, respectively, for the corresponding periods in 2006. The increase in net losses for both the quarter and the year is attributable to increased expenditures in research and development of products in the Company’s pipeline and due to increased stock compensation expenses. The weighted average number of common shares outstanding for the year ended December 31, 2007 was 29,005,342 compared to 27,644,749 for the same period in 2006.




41





Revenues


Revenues from sales amounted to $135,002 for the quarter and $412,923 for the year ended December 31, 2007, compared with $83,478 for the quarter and $437,440 for the year ended December 31, 2006. The variance for the quarter is due to timing differences in the orders of products in 2007 compared to 2006. The variance for the year is due to a decrease in sales to Europe (AlzheimAlert decrease of 33.2% and NicAlert/TobacAlert decrease of 53.9%).


Research and Development


Research and development expenditures were $720,869 for the quarter and $2,797,903 for the year ended December 31, 2007, compared with $701,498 for the quarter and $2,594,714 for the year ended December 31, 2006. Research and development expenditures include costs incurred in advancing Nymox’s BPH product candidate NX-1207 through clinical trials, as well as costs related to its R&D pipeline in development. Management’s decision to increase expenditures in 2007 relating to general research on therapeutic candidates in the Company pipeline explains the increase for the quarter and year-to-date. Research and development expenditures also include impairment costs relating to patents which have expired, or to patent applications which Management has decided to abandon entirely or to discontinue pursuing in certain jurisdictions. For the year 2007, impairment costs on patents amounted to $61,224 compared to $0 in 2006. For the year-ended 2007, research tax credits amounted to $68,041 compared to $53,618 in 2006 as a result of additional expenditures claimed for refundable tax credits in 2007 compared to 2006.


Marketing Expenses


Marketing expenditures were $66,517 for the quarter and $236,395 for the year ended December 31, 2007, in comparison to expenditures of $66,513 for the quarter and $236,054 for the year ended December 31, 2006. Expenditures in 2007 were consistent compared to the same period in 2006.


Administrative Expenses


General and administrative expenses amounted to $247,882 for the quarter and $970,919 for the year ended December 31, 2007, compared with $192,723 for the quarter and $954,397 for the year ended December 31, 2006. The increase for the quarter and the year is due to higher professional fees relating to compliance with United States securities laws, and in particular Section 404 of the Sarbanes-Oxley Act and related regulations.


Stock-based Compensation


In 2007, stock-based compensation costs of $818,720 were recorded for the 3,565,500 options granted in 2006 which vest quarterly over six years, compared to $416,928 in 2006. An additional $146,360 was recorded in the third quarter for options granted to the Company’s directors, and which were fully vested at the date of grant, compared to $65,760 for options granted to the Company’s directors in 2006. In 2007, stock-based compensation also included the effect of a fully vested option grant to a consultant for an expense of $33,960 compared to expenses of $338,400 recorded in 2006 on option grants to a consultant and an employee of the Company. An amount of $16,220 was also recorded in 2006 for the 50,000 options granted in 2003 which vest annually over four years





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Contractual Obligations


Nymox has no financial obligations of significance other than long-term lease commitments for its premises in the United States and Canada of $22,102 per month.


Contractual Obligations   Total   Current   2-4 years   5+ years
Rent $ 442,033 $ 265,220 $ 176,813 $ 0
Operating Leases $ 79,821 $ 21,692 $ 44,777 $ 13,352
Total Contractual Obligations $ 521,854 $ 286,912 $ 221,590 $ 13,352


The Company has no binding commitments for the purchase of property, equipment, patents or intellectual property. The Company has no commitments that are not reflected in the balance sheet except for operating leases.


Contingency


A contractor has served the Company with a Statement of Claim filed with the California Superior Court claiming $2,000,000 in damages for injury to his reputation and business for alleged failure to pay for services rendered. The Company has paid in full for all contracted services and believes that the claim is wholly without merit, and intends to defend the action vigorously. Accordingly, no provision related to this matter has been recorded in these financial statements.


Transactions with Related Parties


The Company had no transactions with related parties in 2008 or 2007.


Financial Position


Liquidity and Capital Resources


As of December 31, 2008, cash totaled $275,858 and receivables including tax credits totaled $170,740. In November 2007, the Company signed a common stock private purchase agreement, whereby an investor is committed to purchase up to $15 million of the Company’s common shares over a twenty-four month period commencing November 16, 2007. As at December 31, 2008, 16 drawings were made under this purchase agreement, for total proceeds of $3,695,000. On January 30, 2008, 50,917 common shares were issued at a price of $4.91 per share. On February 12, 2008, 84,980 common shares were issued at a price of $5.06 per share. On March 4, 2008, 56,391 common shares were issued at a price of $5.32 per share. On March 28, 2008, 58,366 common shares were issued at a price of $5.14 per share. On May 6, 2008, 34,325 common shares were issued at a price of $4.37 per share. On May 27, 2008, 34,965 common shares were issued at a price of $4.29 per share. On June 23, 2008, 46,838 common shares were issued at a price of $4.27 per share. On July 24, 2008, 28,169 common shares were issued at a price of $3.55 per share. On August 6, 2008, 59,267 common shares were issued at a price of $4.64 per share. On August 22, 2008, 23,364 common shares were issued at a price of $5.35 per share. On September 10, 2008, 36,496 common shares were issued at a price of $5.48 per share. On September 17, 2008, 36,430 common shares were issued at a price of $5.49 per share. On September 26, 2008, 43,706 common shares were issued at a price of $5.72 per share. On October 23, 2008, 61,659 common shares were issued at a price of $4.46 per share. On November 26, 2008, 108,280 common shares were issued at a price of $3.14 per share. On December 22, 2008, 48,701 common shares were issued at a price of $3.08 per share.


The Company negotiated a new agreement with the same investor on November 10, 2008, which became effective December 23, 2008, under the same terms and conditions of the previous agreement. The Company can draw down $15,000,000 over 24 months under the new agreement. At December 31, 2008, the Company can draw down $15,000,000 over the remaining 22 months under the agreement. The Company intends to access financing under this agreement when appropriate to fund its research and development. The Company believes that funds from operations as well as from existing financing agreements will be sufficient to meet the Company’s cash requirements for the next twelve months.




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The Company must comply with general covenants in order to draw on its facility including maintaining its stock exchange listing and registration requirements and having no material adverse effects, as defined in the agreement, with respect to the business and operations of the Company.


Current Economic Environment


During the past year the capital markets have been characterized by significant volatility and by a marked reduction in the ability of companies in all sectors to obtain public financing, and in particular, those in the biotechnology sector. As previously indicated, the Company depends on an equity financing arrangement with a private investment company to fund its activities. Since January 2003, the Company has had a Common Stock Private Purchase Agreement with the same investment company (the "Purchaser") that establishes the terms and conditions for the purchase of common shares by the Purchaser. This 24 month agreement has been replaced annually since 2003 in order to ensure that the Company has funding in place at all times for at least the coming year. In November 2008, the previous agreement was terminated and a new agreement was concluded with the Purchaser. In general, the Company can, at its discretion, require the Purchaser to purchase up to $15 million of common shares over a 24-month period based on notices given by the Company. The Company may terminate the agreement before the 24-month term, if it has issued at least $8 million of common shares under the agreement. The Company made drawdowns for aggregate proceeds of $5,350,000 in 2007 and $3,695,000 in 2008 under the agreements, and has made two drawdowns in 2009 for aggregate proceeds of $450,000 under the current agreement. The Company is not aware of any information that would lead it to believe that the investor will not be able to meet its commitments under the current agreement.


Capital disclosures

 

The Company's objective in managing capital is to ensure a sufficient liquidity position to finance its research and development activities, general and administrative expenses, working capital and overall capital expenditures. The Company makes every attempt to manage its liquidity to minimize shareholder dilution when possible.

 

The Company defines capital as total shareholders’ equity. To fund its activities, the Company has followed an approach that relies almost exclusively on the issuance of common equity. Since inception, the Company has financed its liquidity needs primarily through private placements and since 2003 through a financing agreement with an investment company that has been replaced annually by a new agreement with the same investor. The Company intends to access financing under this agreement when appropriate to fund its research and development activities. The recent financial crisis in the United States and the global economic environment has had a negative impact on the availability of liquidity in the market and may have an effect on the liquidity of the Purchaser to our Common Stock Private Purchase Agreement.  Since 2003 through to January 2009, the Purchaser has always complied with the drawdowns made pursuant to the agreement. The Company believes that funds from operations as well as from existing financing agreements will be sufficient to meet the Company’s cash requirements for the next twelve months.


The capital management objectives remain the same as for the previous fiscal year. When possible, the Company tries to optimize its liquidity needs by non-dilutive sources, including sales, investment tax credits and interest income. The Company's general policy on dividends is to retain cash to keep funds available to finance its research and development and operating expenses.  The Company has no debt. The Company is not subject to any capital requirements imposed by external parties.



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Financial risk management

 

Foreign currency risk


The Company uses the US dollar as its measurement currency because a substantial portion of revenues, expenses, assets and liabilities of its Canadian and US operations are denominated in US dollars. The Company’s equity financing facility is also in US dollars.  Foreign currency risk is limited to the portion of the Company’s business transactions denominated in currencies other than the US dollar. The Canadian operation has transactions denominated in Canadian dollars, principally relating to salaries and rent.  Additional variability arises from the translation of monetary assets and liabilities denominated in currencies other than the US dollar at each balance sheet date.  Fluctuations in the currency used for the payment of the Company’s expenses denominated in currencies other than the US dollar (primarily Canadian dollars) could cause unanticipated fluctuations in the Company’s operating results but would not impair or enhance its ability to pay its Canadian dollar denominated obligations.  The Company’s objective in managing its foreign currency risk is to minimize its net exposures to foreign currency cash flows by transacting with parties in US dollars to the maximum extent possible.  The Company does not engage in the use of derivative financial instruments to manage its currency exposures.

  

Approximately 73% of expenses that occurred during the year ended December 31, 2008 (2007 - 72%) were denominated in US dollars. Foreign exchange fluctuations had no meaningful impact on the Company’s results in 2008, 2007 or 2006.


The following table provides significant items exposed to foreign exchange as at December 31, 2008:

 

      CA$   
 
Cash $ 8,343  
Accounts and other receivables and research tax credits receivable   145,045  
  Accounts payable and accrued liabilities   (265,563 ) 
 
    $ (112,175 )



The following exchange rates applied for the year ended December 31, 2008:

 

    Average rate Reporting date rate   
    (twelve months) December 31, 2008  
 
  US$ - CA$ 1.0660 1.2180   

 


Based on the Company’s foreign currency exposures noted above, varying the above foreign exchange rates to reflect a 5% strengthening of the US dollar would have increased the net loss by less than $10,000, assuming that all other variables remained constant.


An assumed 5% weakening of the US dollar would have had an equal but opposite effect to the amount shown above, on the basis that all other variables remain constant.



45






Credit risk


Credit risk results from the possibility that a loss may occur from the failure of another party to perform according to the terms of the contract. Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable. Cash is maintained with a high-credit quality financial institution. For accounts receivable, the Company performs periodic credit evaluations and typically does not require collateral. Allowances are maintained for potential credit losses consistent with the credit risk, historical trends, general economic conditions and other information.


The Company has a limited number of customers.  Accounts receivable on the consolidated balance sheet are trade receivables of $37,873, all of which were aged under 45 days. Four customers accounted for 74% of the trade receivables balance at December 31, 2008. An amount of $13,660 was recorded as bad debt expense for the period ended December 31, 2008 (nil for the period ended December 31, 2007).


At December 31, 2008, the Company’s maximum credit exposure corresponded to the carrying amount of cash and accounts and other receivables.


Interest rate risk


Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Cash bears interest at a variable rate. Accounts and other receivables, and accounts payable and accrued liabilities bear no interest. The Company has no other interest-bearing financial instruments.


Based on the value of variable interest-bearing cash during the year ended December 31, 2008, an assumed .5% increase or .5% decrease in interest rates during such period would have had no significant effect on the net loss.


Liquidity risk

 

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company manages liquidity risk through the management of its capital structure.  The Company does not have an operating credit facility and finances its activities through an equity financing agreement with an investment company, as previously discussed.

 

The following are the contractual maturities of financial liabilities as at December 31, 2008:

 

      Carrying Amount   Less than 1 year   1 year to 5 years  
 
  Accounts payable and accrued liabilities $ 1,240,847 $ 1,240,847 $  -  

 

 

Subsequent Events


As at March 13, 2009, two drawings were made under the common stock private purchase agreement, for total proceeds of $450,000. On January 27, 2009, 70,225 common shares were issued at a price of $3.56 per share. On February 27, 2009, 65,789 common shares were issued at a price of $3.04 per share.


Outstanding Share Data



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As at March 13, 2009, there were 30,314,621 common shares of Nymox issued and outstanding. In addition, 4,869,000 share options are outstanding, of which 2,943,375 are currently vested. There are no warrants outstanding.



Disclosure Controls and Procedures


Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed is accumulated and communicated to senior management on a timely basis so that appropriate decisions can be made regarding public disclosure. The Company’s Chief Executive Officer and its Chief Financial Officer are responsible for establishing and maintaining disclosure controls and procedures. They are assisted in this responsibility by the Company’s disclosure committee, which is composed of members of senior management. Based on an evaluation of the Company’s disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer have concluded that the disclosure controls and procedures were effective as of December 31, 2008.



Internal Control over Financial Reporting


Management’s Annual Report on Internal Control Over Financial Reporting


Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.


Under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting, as of December 31, 2008, based on the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its evaluation under this framework, management concluded that internal control over financial reporting was effective as of that date.


Internal control over financial reporting has inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore it is possible to design into the process safeguards to reduce, though not eliminate, this risk.


KPMG LLP, an independent registered public accounting firm, which audited and reported on our financial statements in this Annual Report, has issued an attestation report that we maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008.


Changes in Internal Controls Over Financial Reporting



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There have been no changes during fiscal 2008 in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



Changes to Accounting Policies


Accounting changes in 2007


Effective with the commencement of its 2007 fiscal year, the Company adopted the Canadian Institute of Chartered Accountants ("CICA") Handbook Section 1530, Comprehensive Income, CICA Handbook Section 3251, Equity, CICA Handbook Section 3855, Financial Instruments - Recognition and Measurement, CICA Handbook Section 3861, Financial Instruments - Disclosure and Presentation, and CICA Handbook Section 3865, Hedges. These new Handbook Sections provide comprehensive requirements for the recognition and measurement of financial instruments, as well as standards on when and how hedge accounting may be applied.  Handbook Section 1530 also establishes standards for reporting and displaying comprehensive income. Comprehensive income is defined as the change in equity from transactions and other events from non-owner sources. Other comprehensive income refers to items recognized in comprehensive income, but that are excluded from net income calculated in accordance with generally accepted accounting principles.


Under these new standards, all financial instruments are classified into one of the following five categories: held-for-trading, held-to-maturity investments, loans and receivables, available-for-sale financial assets or other financial liabilities.  All financial instruments, including derivatives, are included in the consolidated balance sheet and are measured at fair market value, with the exception of loans and receivables, held-to-maturity investments and other financial liabilities, which are measured at amortized cost.


The standards also require derivative instruments to be recorded as either assets or liabilities measured at their fair value unless exempted from derivative treatment as a normal purchase and sale. Certain derivatives embedded in other contracts must also be measured at fair value. All changes in the fair value of derivatives are recognized in earnings unless specific hedge criteria are met, which requires that a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting.


As a result of the adoption of these standards, the Company has classified its accounts receivable and long-term receivable as “loans and receivables”, and its accounts payable, accrued liabilities and notes payable as “other financial liabilities”.  These classifications had no impact on the Company’s financial position or results of operations.  In addition, the adoption of standards of Sections 1530, 3251, 3855 and 3861 had no impact on the financial statements for the year ended December 31, 2008.


Accounting Changes in 2008


Capital Disclosures and Financial Instruments - Disclosures and Presentation

Effective with the commencement of its 2008 fiscal year, the Company adopted the Canadian Institute of Chartered Accountants ("CICA") Handbook Section 1535, Capital Disclosures, ClCA Handbook Section 3862, Financial Instruments - Disclosures, and ClCA Handbook Section 3863, Financial Instruments - Presentation. The sections relate to disclosure and presentation only and did not have an impact on the Company’s financial results (see notes 11, 12 and 13).


Inventories

Effective with the commencement of its 2008 fiscal year, the Company adopted the Canadian Institute of Chartered Accountants ("CICA") Handbook Section 3031, Inventories, which harmonizes the Canadian standards related to inventories with International Financial Reporting Standards ("IFRS"). This section provides changes to the measurement and more extensive guidance on the determination of cost, including allocation of overhead; narrows the permitted cost formulas; requires impairment testing; and expands the disclosure requirements to increase transparency. The adoption of this standard did not have an impact on the Company’s financial results.



48





Goodwill and intangible assets

In January 2008, the CICA issued Section 3064, Goodwill and Intangible Assets, which will replace Section 3062, Goodwill and Other Intangible Assets, and Section 3450, Research and Development Costs. The standard provides guidance on the recognition of intangible assets in accordance with the definition of an asset and the criteria for asset recognition, as well as clarifying the application of the concept of matching revenues and expenses, whether these assets are separately acquired or internally developed.  This standard applies to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2008. The Company will adopt this standard effective January 1, 2009.


As a result of this change in accounting standards, starting January 1, 2009, direct costs incurred to secure patents related to internally-generated assets will no longer by capitalized by the Company.  As well, subsequent financial statements for periods beginning on or after January 1, 2009 will provide comparative financial information for previous financial periods to reflect the financial position and results of operations that would have resulted if the patent costs had not been capitalized in those previous periods.  Thus, in order to provide an appropriate basis for comparison with 2009 financial figures, subsequent financial statements will present for comparison purposes only, an increase in the net loss figure for 2008, 2007 and 2006 of $46,758, $455,719 and $388,546, respectively, and an increase in the accumulated deficit by $2,426,709 on January 1, 2006.


Future Accounting Policies


International Financial Reporting Standards


In February 2008, Canada’s Accounting Standards Board (AcSB) confirmed that Canadian generally accepted accounting principles, as used by publicly accountable enterprises, will be fully converged into International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board (IASB).  The changeover date is for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. Therefore the Company will be required to report under IFRS for its 2011 interim and annual financial statements. The Company will convert to these new standards according to the timetable set within these new rules. The Company is currently assessing the future impact of these new standards on its consolidated financial statements.


As at December 31, 2008, Management has begun the process of change-over to IFRS as follows: (1) the significant accounting policy choices are being assessed, (2) expert outside consultants have been engaged and the training program commenced, (3) the scoping study has been prepared, (4) the review of GAAP related covenants and contracts has been completed, and (5) the accounting policy review and IFRS implementation plan process is underway.


Forward Looking Statements


Certain statements included in this MD&A may constitute “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Canadian securities legislation and regulations, and are subject to important risks, uncertainties and assumptions. This forward-looking information includes amongst others, information with respect to our objectives and the strategies to achieve these objectives, as well as information with respect to our beliefs, plans, expectations, anticipations, estimates and intentions. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “plan”, “foresee”, “believe” or “continue” or the negatives of these terms or variations of them or similar terminology. We refer you to the Company’s filings with the Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission, as well as the “Risk Factors” section of this MD&A, and of this Form 20F and of our Annual Information Form, for a discussion of the various factors that may affect the Company’s future results. The results or events predicted in such forward-looking information may differ materially from actual results or events.



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Forward-looking statements do not take into account the effect that transactions or non-recurring or other special items announced or occurring after the statements are made have on the Company’s business. For example, they do not include the effect of business disposi­tions, acquisitions, other business transactions, asset writedowns or other charges announced or occurring after forward-looking statements are made. The financial impact of such transactions and non-recurring and other special items can be complex and necessarily depends on the facts particular to each of them.

We believe that the expectations represented by our forward-looking statements are reasonable, yet there can be no assurance that such expectations will prove to be correct. Furthermore, the forward-looking statements contained in this report are made as of the date of this report, and we do not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise unless required by applicable legislation or regulation. The forward-looking statements contained in this report are expressly qualified by this cautionary statement.


Research and Development, Patents and Licensees


Nymox’s research and development policies are targeted at the development of novel therapeutic and diagnostic proprietary products that are subject to patent rights either directly owned by the Company or licensed to the Company through exclusive licensing agreements of patent rights. Over the last three financial years, the Company’s major research and development activities were in the following program areas:

·

Diagnostic products for Alzheimer’s disease. The major project in this area, the development and validation of a kit version of our AlzheimAlert™ product for sale to laboratories and hospitals was completed in 2004. We are currently marketing the kit in Europe under the CE mark.  The FDA has not approved our kit version for sale in the U.S. We are continuing to pursue further kit development and regulatory approvals. At this time, we cannot provide an estimate of the costs and timing to obtain FDA approval for such a kit as it is uncertain at this stage the nature and extent of FDA requirements for approval based on discussions with us.


·

Therapeutic products for enlarged prostate (benign prostatic hyperplasia or BPH). We have successfully completed several Phase 1 and Phase 2 multi-center, double-blind, placebo-controlled clinical trials, and follow-up studies, in the U.S. for NX-1207, our drug candidate for the treatment of enlarged prostate (benign prostatic hyperplasia or BPH), and are presently in Phase 3. We cannot predict with any certainty the outcome of any future trials nor estimate the costs of completing such trials, given the inherent uncertainties in conducting clinical trials, including as yet unknown response rates to our treatment candidate, unforeseeable safety issues, patient enrollment rates, manufacturing costs, and regulatory requirements. We anticipate starting a Phase 3 trial in the near future and subsequently filing a New Drug Application (NDA) with the FDA.  Given the inherent uncertainties with any Phase 3 clinical trial, we cannot provide a more precise estimate of the costs and timing of the completion of this project.  These uncertainties include the chances of success of any phase of the clinical trials, the nature and extent of FDA requirements to proceed with a Phase 3 and for filing an NDA, our ability to scale up manufacture in accordance with current good manufacturing requirements (cGMP) and in sufficient quantities for commercial use, and whether or when the FDA will ultimately grant us such approval.


·

Anti-infectives. Our anti-bacterial agent, NXC-4720, which is being developed as a treatment of meat at the processing stage, has shown to be capable of substantially reducing the level of potentially fatal E. coli O157:H7 contamination on fresh beef according to laboratory studies.  Other projects in this area, such as treating E. coli O157:H7 infection in livestock and treating bacterial infections in humans, are in preliminary stages of development with more uncertain prospects and timing and course of development. Because of the early stage of development of this project, it is impossible to outline the nature, timing or estimated costs of the efforts necessary to complete this project or the anticipated completion dates for this project. The facts and circumstances indicating the uncertainties that preclude us from making a reasonable estimate of the costs and timing necessary to complete this project include the risks inherent in any field trials of NXC-4720, the uncertainty as to the nature and extent of regulatory requirements both for safety and efficacy, and the ability to manufacture NXC-4720 in accordance with current good manufacturing requirements (cGMP) and in sufficient quantities both for large scale trials and for commercial use.  In addition, we anticipate that we may partner with a larger company in the food or agricultural sectors in order to finance and conduct field trials and to market any approved product; thus the timing of completion of the regulatory approval of such a product will not likely be within our sole control.




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·

Tobacco exposure and other diagnostic tests. We developed and validated NicAlert™, which is an FDA-cleared test for tobacco product use, and TobacAlert™, which is an over-the-counter test for second-hand smoke exposure. These are completed projects with any further research and development costs being related to product improvement and obtaining regulatory approvals where required in order to expand the market for these products. The development of other new diagnostic tests using our patented diagnostic technologies are in early stage development. Because of the early stage of development of these projects, it is not possible to outline the nature, timing or estimated costs of the efforts necessary to complete any of them nor their anticipated completion dates.  The facts and circumstances indicating the uncertainties that preclude us from making a reasonable estimate include the uncertainty whether we will be able to successfully adapt our patented diagnostic technologies to these new diagnostic indicators, whether any new diagnostic tests we develop will pass proof-of-principle testing both in the laboratory and in clinical trials, and whether we will be able to manufacture such tests at a commercially competitive price.


·

Therapeutic products for Alzheimer’s disease. We are conducting early stage research and development work into preclinical development of novel drug candidates and original research into the role spherons play in the Alzheimer’s disease process in order to pursue spheron-based therapeutics. Because of the early stage of development of this project, it is impossible to outline the nature, timing or estimated costs of the efforts necessary to complete this project, nor the anticipated completion dates for this project. The facts and circumstances indicating the uncertainties that preclude us from making a reasonable estimate include the inherent uncertainties in the pre-clinical and clinical development of therapeutic candidates. In addition, given the very high costs of development of a drug for Alzheimer’s disease, we anticipate having to partner with a larger pharmaceutical company to conduct and finance clinical trials. The terms of such a partnership arrangement along with our related financial obligations cannot be determined at this time and the timing of completion of the approval of such a drug will likely not be within our sole control. Most pre-clinical drug candidates do not meet necessary milestones to enter clinical trials; of those which do, only a small percentage ultimately achieve regulatory approval and enter the marketplace.  We also have global patent rights to the use of statins in the prevention or treatment of Alzheimer’s disease.  Various published epidemiological and other research studies have shown evidence that statins may help in the prevention or treatment of Alzheimer’s disease; other studies have shown otherwise. Other companies and organizations are currently carrying out clinical trials into the use of statin drugs for Alzheimer’s disease. The effect of the results of such trials on this program is uncertain.


·

Oncology products. We are in the early stages of developing therapeutic products for oncological indications.  Because of the early stage of development of this project, it is impossible to outline the nature, timing or estimated costs of the efforts necessary to complete this project nor its anticipated completion dates. The development of cancer therapeutics in particular is associated with high risks and many uncertainties and a drug candidate that shows efficacy can take a long period (7 years or more) to achieve regulatory approval.



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Research and development expenses allocated to our major research and development programs are as follows:


  Year ended Year ended Year ended Year ended Year ended
  Dec 31, 2008 Dec 31, 2007 Dec 31, 2006 Dec 31, 2005 Dec 31, 2004
Alzheimer’s Disease: $ 458,080 $ 467,367 $ 520,855 $ 488,361 $ 691,183
Diagnostics                     
Alzheimer’s Disease: $ 0 $ 91,398 $ 98,056 $ 2,866 $ 282,205
Therapeutics                    
Anti-Infectives $ 0 $ 29,091 $ 25,899 $ 28,934 $ 22,224
BPH (Enlarged Prostate) $ 1,209,041 $ 1,824,073 $ 1,739,183 $ 1,018,266 $ 615,454
Therapeutics                    
Tobacco Exposure Tests: $ 103,817 $ 64,251 $ 108,119 $ 67,164 $ 118,636
NicAlert™ and TobacAlert™                    
Oncology $ 393,673 $ 321,723 $ 102,602 $ 226,000 $ 131,537
Total $ 2,164,611 $ 2,797,903 $ 2,594,714 $ 1,831,591 $ 1,861,239



  Year ended Year ended Year ended Year ended Year ended Total for  
  Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, Periods
  2003 2002 2001 2000 1999 Presented
Alzheimer’s Disease: $    779,305 $ 332,254 $    491,051 $    657,924 $    253,015 $ 5,139,395
Diagnostics                        
Alzheimer’s Disease: $    496,658 $ 463,182 $    528,230 $    404,850 $    501,685 $ 2,869,130
Therapeutics                        
Anti-Infectives $      24,793 $ 1,563 $    134,098 $    313,884 $    195,427 $ 775,913
          See See See    
BPH (Enlarged Prostate) $    548,064 $ 523,926 General General General $ 7,478,007
Therapeutics         Research Research Research    
                         
Tobacco Exposure Tests: $    292,692 $ 308,161 $    122,159 $    116,872   - $ 1,301,871
NicAlert™ and TobacAlert™                        
Oncology $    368,539 $ 77,000   -   -   - $ 1,621,074
General Research (BPH   -   - $    224,116 $    590,702 $    186,995 $ 1,001,813
Therapeutics Included)                        
Total $  2,510,051 $ 1,706,086 $ 1,499,654 $ 2,084,232 $  1,137,122 $ 20,187,203


For the earlier periods from 1995 to 1998, the Company did not maintain a cost accounting system that tracked research and development costs on a project-by-project basis.  During the initial discovery stages, research and development is more general in nature and cannot be specifically categorized. During the periods 1995 to 1998, the general research expenses included primarily work on the Alzheimer’s diagnostic and therapeutic candidates. The breakdown of research and development costs for these periods is as follows: 1998: $2,091,745; 1997: $1,775,340; 1996: $2,060,841; and 1995: $395,770.  The total research and development expenditure for the 1995 to 1998 period was $6,323,696. Total research and development expenditures to date are $26,510,899.


The Company expenses all research and development costs as incurred but does not currently maintain a cost accounting system to track, record and allocate staffing time on a specific project-by-project basis.  We manage our ongoing research and development projects and programs in a dynamic, flexible manner. Our researchers, staff and management are typically involved in more than one of our research and development projects and the percentage of time an employee may be involved in a project varies according to the changing needs and progress of that project. As well, a significant portion of the Company's research and development expenses, such as laboratory supplies, travel, information systems and services and facilities costs, benefit multiple projects and are not necessarily individually tracked or allocated to a specific project when incurred. Research and development costs are allocated in reasonable and realistic proportion to the projects that benefited from those costs.




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According to industry statistics, on average it takes 10 to 15 years to research, develop and bring to market a new prescription medicine in the United States. In light of the steps and complexities involved, the successful development of our product candidates is highly uncertain. Actual product timelines and costs are subject to enormous variability and are very difficult to predict. Accordingly, we cannot provide reliable estimates of the nature, timing and estimated costs of the efforts necessary to complete our programs.  This is particularly the case for our programs in early stage development.  The risk of failure to complete any such program is high because of uncertain feasibility and commercial viability, long lead times to program completion and potentially high costs in relation to anticipated returns.  We update and change our product development programs to reflect the most recent preclinical and clinical data and other relevant information.  Many of our products under development require regulatory approval before being sold.  The process of obtaining such approvals is often lengthy and uncertain and requires the expenditure of substantial resources. Any failure by us to obtain, or any delay in obtaining, regulatory approvals could materially adversely affect our business. We cannot assure you that any such approvals required will be obtained on a timely basis, if at all.


Trend Information


The Company does not currently know of any material trends that would be material to our operations.


Off-Balance Sheet Arrangements


The Company has no existing off-balance sheet arrangements.


ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


Directors and Senior Management


Paul Averback, M.D., D.A.B.P., 58, President and Director since September 1995 and Chairman since June of 2001, is the founder of Nymox and the inventor of much of its initial technology. Prior to founding Nymox, Dr. Averback served as President of Nymox’s predecessor, DMS Pharmaceuticals Inc. He received his M.D. in 1975 and taught pathology at universities, including Cambridge University, England (1977-1980), during which time he initiated his research on Alzheimer’s disease. He has practiced medicine in numerous institutions as well as in private practice. Dr. Averback has published extensively in the scientific and medical literature.


Randall Lanham, Esquire, 45, has been a director since June 8, 2006. He attained his Juris Doctor from Whittier College School of Law in 1991 and a Bachelor of Science degree from the University of Delaware in 1987.  Mr. Lanham has vast experience in both domestic and international corporate legal matters. Currently Mr. Lanham manages his own law office in California specializing in corporate mergers and acquisitions.  In addition, Mr. Lanham has a broad base of entrepreneurial experience and currently owns and operates several small entertainment companies.


Paul F. McDonald, 83, has been a director since June 8, 2006. A graduate in law of McGill University, he has had a long and varied career as a member of the Canadian investment industry. Mr. McDonald was previously Vice-President of the Montreal Exchange, and he was principal owner and president of a stock exchange firm. His principal focus has been in the financing and development of growth companies in the high-tech and resources sectors, and he has had numerous appointments to corporate boards. He has devoted much time to committee work in the investment sector, as well as to public affairs, including a lengthy tenure as a director of the Quebec Industrial Development Company. Mr. McDonald currently works as a private consultant.


Professor David Morse, Ph.D., 52, has been a director since June 8, 2006. He is a world expert in the biochemistry, proteomics and genomics of cell function particularly as it relates to circadian regulation in single cell organisms.  He received a Ph.D. from McGill University in 1984, completed a post-doctoral fellowship at Harvard University in 1989 and has been a Full Professor at the University of Montreal since 2001.  He has published extensively in the peer-reviewed scientific literature, including papers in journals such as Science, Cell, Proceedings of the National Academy of Science, Journal of Biological Chemistry, and Nature.  Dr. Morse has previously collaborated with Nymox scientists in research and development projects.




53





Roger Guy, M.D., 58, has been a director since June 8, 2006. He received his B.Sc., M.Sc. and M.D degrees from Memorial University of Newfoundland. He is a highly experienced medical doctor who has served as a national examiner.  Dr. Guy has broad human clinical trial and business experience.


Jack Gemmell, 57, has been a Director since June, 2001 and is Nymox’s General Counsel and Chief Information Officer.  He graduated from the Faculty of Law at the University of Toronto in 1977 and was called to the bar in 1979.  He practiced in private practice primarily in the area of litigation for over 19 years before joining Nymox in July, 1998.


Roy M. Wolvin, 54, has been Secretary-Treasurer and Chief Financial Officer since September 1995. Prior to September 1995, Mr. Wolvin was Account Manager, private business, for a Canadian chartered bank. Mr. Wolvin holds a degree in Economics from the University of Western Ontario.


Brian Doyle, B.Sc., M.B.A., 54, has been Senior Manager Global Sales and Marketing since May 2003. He received his B.Sc. in Microbiology and Immunology from McGill University, in 1979. He worked in the Experimental Surgery department at McGill in cancer research, before completing his MBA at Concordia University, in 1983. He has wide sales, marketing and merchandising experience and spent the last 15 years at a technical sales representative firm, where he was National Sales Manager before joining Nymox.


Celine Dupuis, MD, CMSQ, DABP, 50, Chief Clinical Officer since October 2004, received her MD from Laval University in 1982, and completed her residency in Anatomical Pathology at McGill University and the University of Montreal in 1987. Dr. Dupuis has practiced family medicine, as well as pathology, managed medical and laboratory facilities, and has publications in the scientific and patent literature.


Compensation


Named Executive Officers

The Summary Compensation Table and Outstanding Incentive Plan Awards tables below for Named Executive Officers  summarize the total compensation paid during the Company’'s financial year ending on December 31, 2008  to the Named Executive Officers of the Corporation and all incentive plan awards outstanding at December 31, 2008 for the Named Executive Officers:  The Named Executive Officers are the Company’s Chief Executive Officer, Chief Financial Officer, and three most highly compensated executive officers.

During the financial year ended December 31, 2008, no executive officer received any option-based or share-based awards, or any bonuses or other non-equity incentive compensation. The Company does not have a share-based incentive plan, non-equity incentive plan nor pension plan for its executive officers. The Company has not made any agreements or arrangements with any of its executive officers in connection with any termination or change of employment or change of control of the Company.


Directors


The Summary Compensation Table and Outstanding Incentive Plan Awards tables below for the directors of the Company summarize the total compensation paid during the Company's financial year ending on December 31, 2008 to the directors of the Company and all incentive plan awards outstanding at December 31, 2008 for the directors. Two current directors, Dr. Paul Averback, the President and CEO of the Corporation, and Jack Gemmell, General Counsel, are members of the senior management of the Corporation and do not receive any compensation for acting as a director.  Their compensation as Named Executive Officers is summarized in the summary tables for compensation and incentive plans for Named Executive Officers below.




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Compensation Discussion and Analysis


The Human Resources and Compensation Committee of the Board of Directors oversees the compensation of executive officers of the Company. The members of the Human Resources and Compensation Committee for the financial year ending December 31, 2008 were Dr. Roger Guy, Paul McDonald and Randall Lanham.

The Company’s current compensation policy for its executive officers, including the Chief Executive Officer and the Named Executive Officers, emphasizes the granting of options over base salary as a means of attracting, motivating and retaining talented individuals. Such a policy is believed to better further the Company’s business goals by allocating more financial resources to the Company’s ongoing product development programs. Given the current stage of the Company’s development, the Company has not established and does not use formal benchmarks, performance goals, review processes or other qualitative or quantitative criteria or targets relating to the performance of the Company or the individual in order to determine compensation. The Company does not have a non-equity incentive plan or a policy of annually granting performance bonuses or salary increases to its executive officers.

The Company grants option-based awards to its executive officers in accordance with a stock option plan approved by the shareholders.  Further details of the stock option plan are provided below. The stock option plan provides long-term incentives to the Company’s officers and employees to advance the Company’s drug development programs towards commercialization and to enhance shareholder value. The Company endeavors to provide salaries and option grants that are internally equitable and that are consistent with both job performance and ongoing progress towards corporate goals. The amount of option grants is determined in part by the amount and terms of outstanding and expiring options, the experience and expertise of each executive officer and the needs of the Corporation, among other factors. The Human Resources and Compensation Committee of the Board of Directors reviews all proposals for awards of stock options to executive officers and decides on the appropriateness of the awards.  In doing so, the Committee relies solely on discussion among the independent board members on the Committee without any formal pre-determined objectives, criteria or analytic processes but with a view to attracting and retaining executive officers who can help further the Company’s business plan.

By relying on option grants as a primary means of compensating its executive officers, the Company’s intention is to provide a direct link between corporate performance and executive compensation while maximizing shareholder value and controlling cash expenditures.


Summary Compensation Table: Named Executive Officers


          Non-equity incentive plan      
       Share- Option- compensation ($)      
Name and Year  Salary based based Annual Long-term Pension All Other Total
principal position   ($) awards awards incentive incentive value Compensation Compensation
        ($) ($) plans plans ($) ($) ($)
                   
Dr. Paul Averback 2008 190,000             190,000
CEO and President                  
                   
Mr. Roy Wolvin 2008 93,808             93,808
CFO                  
Dr. Celine Dupuis                  
Chief Clinical 2008 140,713             140,713
Officer                  
Mr. Brian Doyle                  
Global Sales 2008 138,859             138,859
Manager                  
Mr. Jack Gemmell                  
General Counsel, 2008 112,570             112,570
CIO                  


Salaries are payable in Canadian dollars, but expressed above in US$.




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Outstanding Incentive Plan Awards as of December 31, 2008: Named Executive Officers


Name

Option-based Awards

Number of securities underlying unexercised options
(#)

Option exercise price
($)

Option
expiration date
(mm/dd/yy)

Value of unexercised in-the-money options
($)

Total

Unvested(1)

Vested

Dr. Paul Averback

500,000

 

500,000

$3.00

10/24/13

$200,000

3,000,000

1,750,000

1,250,000

$3.00

08/24/16

$500,000

Mr. Roy Wolvin

20,000

 

20,000

$3.12
(C$4.50)

05/13/09

$5,600

5,000

 

5,000

$2.62

09/09/13

$3,900

50,000

 

50,000

$2.82

06/09/16

$29,000

150,000

87,500

62,500

$3.00

08/24/16

$25,000

Mr. Jack Gemmell

50,000

 

50,000

$6.93
(C$10.00)

01/22/09

$0

25,000

 

25,000

$3.875

05/01/10

$0

25,000

 

25,000

$1.93

04/23/11

$36,750

20,000

 

20,000

$2.62

09/09/13

$15,600

210,000

122,500

87,500

$3.00

08/24/16

$35,000

Mr. Brian Doyle

50,000

 

50,000

$3.75

04/28/13

$0

50,000

26,250

23,750

$3.00

08/24/16

$9,500

Dr. Celine Dupuis

150,000

87,500

62,500

$3.00

08/24/16

$25,000


Option exercise prices and the values of unexercised in-the-money options are expressed in US$.  The Company does not have a share-based award plan.


(1) Unvested options vest over a 6 year period beginning in August 2006.



Summary Compensation Table: Directors


Name

Year

Fees Earned
($)

Share-based awards
($)

Option-based awards
(4)

Non-equity incentive plan compensation
($)

Pension value
($)

All other compensation
($)

Total
($)

Paul McDonald

2008

$16,500

 

 

 

 

 

$16,500

Randall Lanham

2008

$16,500

 

 

 

 

 

$16,500

Roger Guy, MD

2008

$16,500

 

 

 

 

 

$16,500

David Morse, Ph.D.

2008

$14,500

 

 

 

 

 

$14,500



Outstanding Incentive Plan Awards as of December 31, 2008: Directors


Name

Option-based Awards

Number of securities underlying unexercised options
(#)

Option exercise price

($)

Option expiration date

(mm/dd/yy)

Value of unexercised in-the-money options
($)

Paul McDonald

10,000

$2.74

07/17/16

$6,600

10,000

$5.95

08/23/17

$0

10,000

$3.61

07/16/18

$0

Randall Lanham

10,000

$2.74

07/17/16

$6,600

10,000

$5.95

08/23/17

$0

10,000

$3.61

07/16/18

$0

Roger Guy, MD

10,000

$2.74

07/17/16

$6,600

10,000

$5.95

08/23/17

$0

10,000

$3.61

07/16/18

$0

David Morse, Ph.D.

10,000

$2.74

07/17/16

$6,600

10,000

$5.95

08/23/17

$0

10,000

$3.61

07/16/18

$0




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During the same period from 2000 to 2008, the salaries of Named Executive Officers increased 45% from $465,805US (2000) to $675,950US (2008), an increase of 5% per annum over that nine year period, or 45% in total.  During the same period, the Corporation’s stock price has increased approximately 250%.


Share Ownership

As of March 13, 2009, the number of common shares owned or controlled by directors and senior officers of the Company were as follows:


  Common Shares Owned Percentage of Common Shares
Name and Controlled Owned and Controlled
Paul Averback, M.D. 13,115,395 43.3%
Randall Lanham 0 *
Paul McDonald 0 *
David Morse, Ph.D. 462 *
Roger Guy, MD 51,979 *
Jack Gemmell 13,725 *
 
Roy Wolvin 9,966 *
Brian Doyle 10,000 *
Celine Dupuis, MD 848,172 2.8%


* Denotes less than 1%.


Options


Nymox has created a stock option plan for its employees, officers and directors, and for consultants. The board of directors of Nymox administers the stock option plan and authorizes the granting of options in accordance with the terms of the plan. Each option gives the individual granted the option the right to purchase a common share of the Company at a fixed price during a specified period of no more than ten years. The board may also make all or a portion of the options granted effective only as of a specific future date or dates. The option price must not be less than the market price of the common shares when the option is granted. The total number of shares under option to any one individual may not exceed fifteen percent of the total number of issued common shares of the Company. The options may not be assigned, transferred or pledged, and expire within three months of the termination of employment or active office with the Company and six months of the death of the individual.


No more than 5,500,000 common shares may be under option at any time and a maximum of 5,500,000 common shares are available to be issued under the stock option plan as the result of the exercise of options. Options that expire or terminate without being exercised become available to be granted again. Material changes to the stock option plan such as the number of shares available to be optioned require shareholder approval. On June 21, 2007, the shareholders approved amendments to the plan that included increasing the maximum number of shares that could be issued in total under the plan from 2,500,000 to 5,500,000, and to any one individual from 5% to 15% of the total number of issued shares. Since the inception of the stock option plan in 1995, 346,400 common shares have been issued as a result of the exercise of options granted under the plan.






57





Board Practices


Directors are elected at each annual meeting for a term of office until the next annual meeting. Executive officers are appointed by the board of directors and serve at the pleasure of the board. Other than Dr. Averback, no other officer or director previously was affiliated with DMS Pharmaceuticals Inc.


Dr. Celine Dupuis is the wife of Dr. Paul Averback.  Otherwise, there are no family relationships between any director or executive officer and any other director or executive officer.


Nymox does not have written contracts with any of the directors named above. We do not have any pension plans or other type of plans providing retirement or similar benefits for directors, nor any benefits upon termination of service as a director.


Nymox’s Audit Committee consists of three directors appointed by the Board who are independent of management and who are generally knowledgeable in financial and auditing matters.  The Chairman of the Audit Committee is Paul McDonald; the other members are Randall Lanham and Roger Guy. The primary role of the Audit Committee is to provide independent oversight of the quality and integrity of the accounting, auditing, and reporting practices of Nymox with a particular focus on financial statements and financial reporting to shareholders. The Committee is responsible for the appointment, compensation, and oversight of the public accounting firm engaged to prepare or issue an audit report on our financial statements. It oversees all relationships between Nymox and the auditor, including reviewing on an ongoing basis any non-audit services and special engagements that may impact the objectivity or independence of the auditors. The auditors report directly to the Audit Committee. The Audit Committee reviews the scope and results of the audit with the independent auditors.


The Audit Committee meets at least four times a year to review with management and the independent auditors the Company's interim and year-end financial condition and results of operations. Its review includes an assessment of the adequacy of the internal accounting, bookkeeping and control procedures of the Company. The Audit Committee also has the responsibility for reviewing on an ongoing basis all material transactions between Nymox and its affiliates and other related parties such as officers, directors, other key management personnel, major shareholders and their close family members, affiliated companies or associated enterprises.


The Audit Committee has the power to conduct or authorize investigations into any matters within the Committee's scope of responsibilities, including the power and authority to retain and determine funding for independent counsel, accountants, or other advisors as it determines necessary to carry out its duties.


The Human Resources and Compensation Committee consists of the independent directors of the Board. The Chairman of the Committee is Roger Guy; the other members are Randall Lanham and Paul McDonald. The Committee establishes and reviews overall policy and structure with respect to compensation and employment matters, including the determination of compensation arrangements for directors, executive officers and key employees of the Company. The Committee is also responsible for the administration and award of options to purchase shares pursuant to our option and share purchase plans.


The Corporate Governance Committee consists of the independent directors of the Board. The Chairman of the Committee is Randall Lanham; the other members are Paul McDonald and David Morse.  This Committee has the general mandate of providing an independent and regular review of the management, business and affairs of Nymox, including our corporate governance. This Committee also reviews and approves director nominations to ensure each nominee meets the requisite requirements under applicable corporate and securities laws, rules and regulations and otherwise possesses the skills, judgment and independence appropriate for a director of a public corporation.



58






Employees


In addition to the employees in its Hasbrouck Heights and St.-Laurent laboratories and offices, Nymox carries out its work with the assistance of an extensive group of research collaborators, out-sourced manufacturing teams, research suppliers, research institutions, service providers and research consultants. To help carrying out its marketing, Nymox has independent medical representatives detailing its products.


In its Hasbrouck Heights and St.-Laurent laboratories and offices, for the year 2008, the Company employed on the average twenty-one persons with seventeen in research and development and four in administration and marketing; for the year 2007, the Company employed on the average nineteen persons (fifteen in research and development and four in administration and marketing); for the year 2006, nineteen persons (fifteen in research and development and four in administration and marketing).

 

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS


Major Shareholders


The following table sets out as of March 13, 2009, the number of common shares owned and controlled by Dr. Paul Averback, the President and CEO of Nymox and a member of the Nymox board of directors, and by all directors and officers as a group.


Name of Shareholder

 

Number of Common Shares owned by Shareholder

 

Percent of Class of Common Shares

Dr. Paul Averback

 

13,115,395

 

43.3 %

All directors and officers as a group

 

14,049,699

 

46.3 %


As of March 13, 2009, Dr. Celine Dupuis, Dr. Averback's wife, owned 848,172 common shares (2.8 %).


The above shareholders have the same voting rights as all other shareholders. There has been no significant change in ownership for any of the persons listed above over the past three years.


Southpoint Capital Advisors reported in a February 18, 2009 filing that it had dispositive power over 2,932,780 shares of Nymox or approximately 9.68 % of Nymox shares. Hal Pettigrew reported in a March 14, 2008 filing that he had dispositive power over 1,532,960 shares of Nymox or approximately 5.06 % of Nymox’s shares. Michael Starcher reported in a November 20, 2008 filing that he had dispositive power over 1,795,000 shares of Nymox or approximately 5.93 % of Nymox’s shares. The number of shares owned by Southpoint Capital Advisors and its related parties represents an increase of 251,640 shares from the number of shares reported as beneficially owned in the Schedule 13G filed with the Securities and Exchange Commission on March 30, 2006. The Company first received notice of the beneficial ownership of the shares reported by Messrs. Pettigrew and Starcher upon the filing of their respective Schedules 13G on March 14, 2008 and November 20, 2008. Nymox does not know of any other shareholders that beneficially own or hold dispositive power over more than 5% of its shares.


According to information furnished to Nymox by the transfer agent for the common shares, as of March 13, 2009, total shares outstanding were 30,314,621. There were 211 holders of record of the common shares and 3,394 beneficial shareholders in total. Of these, 87 were holders of record of the common shares and 2,841 were beneficial shareholders with addresses in the United States and such holders owned an aggregate of 13,440,080 shares, representing approximately 44.34 % of the outstanding shares of common stock.


Related Party Transactions


The Company did not have any related party transactions for the years ended December 31, 2008, 2007 & 2006.



59






ITEM 8. FINANCIAL INFORMATION


In 2008, revenues of Nymox Pharmaceutical Corporation’s US company were $347,764 and revenues of its Canadian company were $80,645. We refer to Note 15 of the financial statements below.


Dividends


The Company has not issued dividends since inception.


Cease Trade Orders, or Bankruptcies


To the knowledge of the Company, no director or officer of the Company or shareholder of the Company holding a sufficient number of securities of the Company to affect materially the control of the Company is, or has been within the past 10 years, a director or officer of any other company that, while such person was acting in that capacity, was the subject of a cease trade or similar order or an order that denied such company access to any exemptions under Canadian securities legislation for a period of more than 30 consecutive days, or was declared bankrupt or made a voluntary assignment in bankruptcy, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets.


Penalties or Sanctions


To the knowledge of the Company, no director, officer or control person of the Company has been subject to any penalties or sanctions imposed by a court relating to U.S. or Canadian securities legislation or by a U.S. or Canadian securities regulatory authority or has entered into a settlement agreement with a U.S. or Canadian securities authority, nor has any director, officer or control person of the Company been subject to any penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision.


Personal Bankruptcies


To the knowledge of the Company, no director, officer or control person of the Company, nor any personal holding company of any such person, has within the past 10 years, been declared bankrupt or made a voluntary assignment in bankruptcy, made a proposal under any legislation relating to bankruptcy or insolvency or been subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of that individual.


Conflicts of Interest


To the knowledge of the Company, there are no existing or potential material conflicts of interest between the Company, or subsidiary of the Company, and any director, officer or control person of the Company.


Legal Proceedings

A contractor has served the Company with a Statement of Claim filed with the California Superior Court claiming $2,000,000 in damages for injury to his reputation and business for alleged failure to pay for services rendered. The Company has paid in full for all contracted services and believes that the claim is wholly without merit, and intends to defend the action vigorously. Accordingly, no provision related to this matter has been recorded in the Company’s financial statements.



60




 

 

Consolidated Financial Statements of

NYMOX PHARMACEUTICAL
CORPORATION

Years ended December 31, 2008, 2007 and 2006

 

 

61



  KPMG LLP Telephone (514) 840-2100
Chartered Accountants Fax (514) 840-2187
600 de Maisonneuve Blvd. West Internet www.kpmg.ca
Suite 1500    
Tour KPMG    
Montréal Québec H3A 03A    

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of Nymox Pharmaceutical Corporation

We have audited the accompanying consolidated balance sheets of Nymox Pharmaceutical Corporation (the "Corporation") and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2008. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards and in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Corporation and subsidiaries as of December 31, 2008 and 2007 and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2008 in conformity with Canadian generally accepted accounting principles.

Canadian generally accepted accounting principles vary in certain respects from US generally accepted accounting principles. Information relating to the nature and effect of such differences is presented in note 14 to the consolidated financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Corporation's internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 12, 2009 expressed an unqualified opinion on the effectiveness of the Corporation’s internal control over financial reporting.

 

/s/ KPMG LLP

Chartered Accountants

Montréal, Canada

February 12, 2009 (except for note 17 (b), which is as of
    February 27, 2009)
 

*CA Auditor permit no 14114  
  KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network
  of independent member firms affiliated with KPMG International, a Swiss cooperative.
  KPMG Canada provides services to KPMG LLP.

62



  KPMG LLP Telephone (514) 840-2100
Chartered Accountants Fax (514) 840-2187
600 de Maisonneuve Blvd. West Internet www.kpmg.ca
Suite 1500    
Tour KPMG    
Montréal Québec H3A 03A    

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of Nymox Pharmaceutical Corporation

We have audited Nymox Pharmaceutical Corporation's (the "Corporation") internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Corporation's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting as presented in the section entitled “Internal Control over Financial Reporting” [included in the accompanying Management’s Discussion and Analysis]. Our responsibility is to express an opinion on the Corporation's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

*CA Auditor permit no 14114  
  KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network
  of independent member firms affiliated with KPMG International, a Swiss cooperative.
  KPMG Canada provides services to KPMG LLP.

63



 

In our opinion, the Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) and the Canadian generally accepted auditing standards, the consolidated balance sheets of the Corporation as of December 31, 2008 and 2007 and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2008, and our report dated February 12, 2009 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Chartered Accountants

 

Montréal, Canada

February 12, 2009

 

64


NYMOX PHARMACEUTICAL CORPORATION
Consolidated Financial Statements

Years ended December 31, 2008, 2007 and 2006

 

Financial Statements  
         Consolidated Balance Sheets 66
         Consolidated Statements of Operations 67
         Consolidated Statements of Shareholders' Equity 68
         Consolidated Statements of Cash Flows 69
         Notes to Consolidated Financial Statements 70

 

65


NYMOX PHARMACEUTICAL CORPORATION
Consolidated Balance Sheets

December 31, 2008 and 2007
(in US dollars)

    2008     2007  
 
Assets            
 
Current assets:            
         Cash $ 275,858   $ 273,108  
         Accounts receivable   37,873     29,253  
         Other receivables   21,624     31,127  
         Research tax credits receivable   111,243     68,041  
         Inventories   33,907     29,431  
    480,505     430,960  
Long-term security deposit   26,994     26,994  
Long-term receivables   -     70,000  
Property and equipment (note 4)   21,525     19,710  
Patents and intellectual property (note 5)   3,538,587     3,712,682  
 
  $ 4,067,611   $ 4,260,346  
 
Liabilities and Shareholders' Equity            
 
Current liabilities:            
         Accounts payable $ 1,078,897   $ 1,082,182  
         Accrued liabilities   161,950     183,569  
         Deferred lease inducement (note 8 (a))   9,623     9,623  
         Deferred revenue       3,333  
    1,250,470     1,278,707  
Deferred lease inducement (note 8 (a))   6,415     16,038  
Non-controlling interest (note 6)   800,000     800,000  
 
Shareholders' equity:            
         Share capital (note 7)   53,850,147     50,155,147  
         Additional paid-in capital   3,403,201     2,477,981  
         Deficit   (55,242,622 )   (50,467,527 )
    2,010,726     2,165,601  
Commitments and contingencies (note 8)            
Subsequent events (note 17)            
 
  $ 4,067,611   $ 4,260,346  

 

See accompanying notes to consolidated financial statements.

On behalf of the Board:

  /s/ Paul Averback MD          Director

 /s/ Paul McDonald                Director

66


NYMOX PHARMACEUTICAL CORPORATION
Consolidated Statements of Operations

Years ended December 31, 2008, 2007 and 2006
(in US dollars)

    2008     2007     2006  
 
Revenues:                  
         Sales $ 426,675   $ 412,923   $ 437,440  
         Interest   1,734     21,010     5,421  
    428,409     433,933     442,861  
 
Expenses:                  
         Research and development   2,164,611     2,797,903     2,594,714  
         Less research tax credits   (111,243 )   (68,041 )   (53,618 )
    2,053,368     2,729,862     2,541,096  
         General and administrative   1,064,903     970,919     954,397  
         Marketing   187,868     236,395     236,054  
         Cost of sales   262,331     241,443     241,398  
         Depreciation of property and equipment   9,957     7,242     3,624  
         Amortization of patents and intellectual property   509,641     503,549     462,642  
         Stock-based compensation (note 7 (c))   925,220     1,015,260     837,308  
         Interest and bank charges   5,466     19,694     60,027  
    5,018,754     5,724,364     5,336,546  
 
Net loss and comprehensive loss $ (4,590,345 ) $ (5,290,431 ) $ (4,893,685 )
 
Basic and diluted loss per share (note 10) $ (0.15 ) $ (0.18 ) $ (0.18 )
                 
Weighted average number of common shares outstanding   29,749,000     29,005,342     27,644,749  

See accompanying notes to consolidated financial statements.

 

67


NYMOX PHARMACEUTICAL CORPORATION
Consolidated Statements of Shareholders' Equity

Years ended December 31, 2008, 2007 and 2006
(in US dollars)

          Additional              
  Share capital paid-in              
  Number   Dollars   capital     Deficit     Total  
Balance, December 31, 2005 26,728,781 $ 39,488,350 $ 626,525   $ (39,702,738 ) $ 412,137  
Issuance of share capital  1,593,472   4,955,000           4,955,000  
Share issue costs                             (284,227 )   (284,227 )
Stock-based compensation                         837,308         837,308  
Net loss                             (4,893,685 )   (4,893,685 )
Balance, December 31, 2006 28,322,253   44,443,350   1,463,833     (44,880,650 )   1,026,533  
Issuance of share capital (note 7 (a))      952,500   5,350,000           5,350,000  
Share issue costs                             (296,446 )   (296,446 )
Exercise of stock options (note 7 (b)):                        
      Cash          91,000   360,685           360,685  
      Ascribed value                       1,112   (1,112 )        
           91,000   361,797   (1,112 )       360,685  
Stock-based compensation                         1,015,260         1,015,260  
Net loss                             (5,290,431 )   (5,290,431 )
Balance, December 31, 2007 29,365,753   50,155,147   2,477,981     (50,467,527 )   2,165,601  
Issuance of share capital (note 7 (a))      812,854   3,695,000           3,695,000  
Share issue costs                             (184,750 )   (184,750 )
Stock-based compensation                         925,220         925,220  
Net loss                             (4,590,345 )   (4,590,345 )
Balance, December 31, 2008 30,178,607 $ 53,850,147 $ 3,403,201   $ (55,242,622 ) $ 2,010,726  

See accompanying notes to consolidated financial statements.

 

68


NYMOX PHARMACEUTICAL CORPORATION
Consolidated Statements of Cash Flows

Years ended December 31, 2008, 2007 and 2006
(in US dollars)

    2008     2007     2006  
 
Cash flows from operating activities:                  
      Net loss $ (4,590,345 ) $ (5,290,431 ) $ (4,893,685 )
      Adjustments for:                  
            Depreciation of property and equipment   9,957     7,242     3,624  
Amortization of patents and intellectual property   509,641     503,549     462,642  
            Stock-based compensation   925,220     1,015,260     837,308  
            Write-down of patent costs   228,606     61,224     -  
            Write-down of long-term receivable   70,000     -     -  
            Amortization of lease inducement   (9,623 )   (9,623 )   (9,623 )
      Changes in operating assets and liabilities:                  
            Accounts and other receivables   883     (14,073 )   16,414  
            Research tax credits receivable   (43,202 )   (14,423 )   (50,543 )
            Inventories   (4,476 )   14,714     30,037  
            Long-term security deposit   -     8,999     -  
            Accounts payable and accrued liabilities   (373,561 )   46,300     (577,356 )
            Deferred revenue   (3,333 )   (15,907 )   (32,962 )
    (3,280,233 )   (3,687,169 )   (4,214,144 )
 
Cash flows from financing activities:                  
      Proceeds from issuance of share capital   3,695,000     5,710,685     4,955,000  
      Share issue costs   (184,750 )   (296,446 )   (284,227 )
      Repayment of notes payable   -     (500,000 )   -  
    3,510,250     4,914,239     4,670,773  
 
Cash flows from investing activities:                  
      Additions to property and equipment   (11,772 )   (19,113 )   -  
      Additions to patent costs   (215,495 )   (1,169,973 )   (372,981 )
    (227,267 )   (1,189,086 )   (372,981 )
 
Net increase in cash   2,750     37,984     83,648  
 
Cash, beginning of year   273,108     235,124     151,476  
 
Cash, end of year $ 275,858   $ 273,108   $ 235,124  
 
Supplemental disclosure to statements of cash flows:                  
      (a)   Interest paid $ -   $ 40,276   $ 50,289  
      (b)   Non-cash transactions:                  
Additions to patent costs included in accounts payable and accrued liabilities at year-end   561,174     212,517     582,854  
                   

See accompanying notes to consolidated financial statements.

69


NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
 
Years ended December 31, 2008, 2007 and 2006
(in US dollars)
 

1. Business activities:

Nymox Pharmaceutical Corporation (the "Corporation"), incorporated under the Canada Business Corporations Act, including its subsidiaries, Nymox Corporation, a Delaware Corporation, and Serex Inc. of New Jersey, is a biopharmaceutical corporation, which specializes in the research and development of products for the aging population. The Corporation is currently marketing AlzheimAlertTM, a urinary test that aids physicians in the diagnosis of Alzheimer’s disease. The Corporation also markets NicAlertTM and TobacAlertTM, tests that use urine or saliva to detect use of tobacco products. The Corporation is also developing therapeutics for the treatment of Alzheimer’s disease, new treatments for benign prostate hyperplasia, and new anti-bacterial agents for the treatment of urinary tract and other bacterial infections in humans, including a treatment for E-coli O157:H7 bacterial contamination in meat and other food and drink products.

Since 1989, the Corporation’s activities and resources have been primarily focused on developing certain pharmaceutical technologies. The Corporation is subject to a number of risks, including the successful development and marketing of its technologies and maintaining access to existing financing arrangements under the Common Stock Private Purchase Agreement referred to in note 7 (a). The Corporation depends on this financing to fund its operations. In order to achieve its business plan and the realization of its assets and liabilities in the normal course of operations, the Corporation anticipates the need to raise additional capital and/or achieve sales and other revenue generating activities. Management believes that funds from operations as well as existing financing facilities will be sufficient to meet the Corporation's requirements for the next year.

The Corporation is listed on the NASDAQ Stock Market.

2. Significant accounting policies:

  (a) Consolidation:

The consolidated financial statements of the Corporation have been prepared under Canadian generally accepted accounting principles (“GAAP”) and include the accounts of its US subsidiaries, Nymox Corporation and Serex Inc. Intercompany balances and transactions have been eliminated on consolidation.

Consolidated financial statements prepared under US GAAP would differ in some respects from those prepared in Canada. A reconciliation of shareholders’ equity reported in accordance with Canadian GAAP and with US GAAP is presented in note 14.

70


NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
 
Years ended December 31, 2008, 2007 and 2006
(in US dollars)
 

2.      Significant accounting policies (continued):
 
  (b)      Financial assets and liabilities:
 
   

Under new standards adopted effective with the commencement of the 2007 fiscal period as described in note 3 (a), all financial instruments are classified into one of the following five categories: held-for-trading, held-to-maturity investments, loans and receivables, available-for-sale financial assets or other financial liabilities. All financial instruments, including derivatives, are included in the consolidated balance sheet and are measured at fair market value, with the exception of loans and receivables, held-to-maturity investments and other financial liabilities, which are measured at amortized cost.

 
   

As a result of the adoption of these standards, the Corporation has classified its accounts receivable, other receivables and long-term receivable as “loans and receivables”, and its accounts payable and accrued liabilities as “other financial liabilities”.

 
  (c)      Inventories:
 
   

Inventories consist of finished goods and are carried at the lower of cost and net realizable value. Cost is determined on the basis of weighted average cost.

 
  (d)      Property and equipment, patents and intellectual property:
 
   

Property and equipment, patents and intellectual property are recorded at cost. Depreciation and amortization are provided using the straight-line method at the following rates:

 
  Asset Rate  
 
Laboratory equipment 20%  
Computer equipment 33 1/3%  
Office equipment and fixtures 20%  
Intellectual property rights acquired 10%  
     

Direct costs incurred in connection with securing the patents are capitalized. Patents are being amortized using the straight-line method over the shorter of their economic useful lives or their legal terms of existence ranging from 17 to 20 years.

  (e) Impairment and disposal of long-lived assets:

Long-lived assets, consisting of property and equipment and intangible assets with definite useful lives, are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for long-lived assets, when the carrying amount of an asset to be held and used exceeds the sum of the undiscounted cash flows expected from its use and disposal; the impairment recognized is measured as the amount by which the carrying amount of the net asset exceeds its fair value.

71


NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
 
Years ended December 31, 2008, 2007 and 2006
(in US dollars)
 

2.      Significant accounting policies (continued):
 
  (f)      Revenue recognition:
 
    Revenue from product sales is recognized when the product or service has been delivered or obligations as defined in the agreement are performed. Revenue from research contracts is recognized at the time research activities are performed under the agreement. Revenue from license fees, royalties and milestone payments is recognized upon the fulfillment of all obligations under the terms of the related agreement. These agreements may include upfront payments to be received by the Corporation. Upfront payments are recognized as revenue on a systematic basis over the period during which the related services or obligations as defined in the agreement are performed. Interest is recognized on an accrual basis.
 
    Revenues from agreements that include multiple elements are considered to be a revenue arrangement with multiple deliverables. Under this type of arrangement, the identification of separate units of accounting is required and revenue is recognized for each unit as described above.
 
    Deferred revenue represents amounts billed to and received from customers in advance of revenue recognition.
 
  (g)      Research and development expenditures:
 
    Research expenditures, net of research tax credits, are expensed as incurred. Development expenditures, net of tax credits, are expensed as incurred, except if they meet the criteria for deferral in accordance with generally accepted accounting principles. At December 31, 2008 and 2007, no development expenditures have been deferred.
 
  (h)      Foreign currency translation:
 
    The Corporation’s measurement currency is the United States dollar. Monetary assets and liabilities of the Canadian and foreign operations denominated in currencies other than the United States dollar are translated at the rates of exchange prevailing at the balance sheet dates. Other assets and liabilities denominated in currencies other than the United States dollar are translated at the exchange rates prevailing when the assets were acquired or the liabilities incurred. Revenues and expenses denominated in currencies other than the United States dollar are translated at the average exchange rate prevailing during the year, except for depreciation and amortization which are translated at the same rates as those used in the translation of the corresponding assets. Foreign exchange gains and losses resulting from the translation are included in the determination of net earnings.
 
    Foreign exchange gains/losses included in the consolidated statements of operations for fiscal 2008 amounted to $(23,020) (2007 - $7,381; 2006 - $8,092).
 

72


NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
 
Years ended December 31, 2008, 2007 and 2006
(in US dollars)
 

2.      Significant accounting policies (continued):
 
  (i)      Stock-based compensation:
 
   

The Corporation records stock-based compensation relating to employee and non-employee stock options granted using the fair value based method estimated using the Black-Scholes model. Under this method, compensation cost is measured at the date of grant and is expensed over the award's vesting period.

 
  (j)      Income taxes:
 
   

The Corporation accounts for income taxes using the asset and liability method of accounting for income taxes. Under this method, future income tax assets and liabilities are determined based on “temporary differences” (differences between the accounting basis and the tax basis of the assets and liabilities), and are measured using the currently enacted, or substantively enacted, tax rates and laws expected to apply when these differences reverse. A valuation allowance is recorded against any future income tax asset, if it is more likely than not that the asset will not be realized.

 
  (k)      Earnings per share:
 
   

Basic earnings per share are determined using the weighted average number of common shares outstanding during the period. Diluted earnings per share are computed in a manner consistent with basic earnings per share, except that the weighted average shares outstanding are increased to include additional shares from the assumed exercise of options and warrants, if dilutive. The number of additional shares is calculated by assuming that outstanding options were exercised, and that the proceeds from such exercises were used to acquire shares of common stock at the average market price during the reporting period.

 
  (l)      Use of estimates:
 
   

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant areas requiring the use of management estimates include estimating the useful lives of long-lived assets, including property and equipment and intangible assets, as well as estimating the recoverability of research tax credits receivable and future tax assets. The reported amounts and note disclosure are determined to reflect the most probable set of economic conditions and planned courses of action. Actual results could differ from those estimates.

 

73


NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
 
Years ended December 31, 2008, 2007 and 2006
(in US dollars)
 

3. Changes in accounting policies:

  (a) Accounting changes in 2007:

Effective with the commencement of its 2007 fiscal year, the Corporation adopted the Canadian Institute of Chartered Accountants ("CICA") Handbook Section 1530, Comprehensive Income, CICA Handbook Section 3251, Equity, CICA Handbook Section 3855, Financial Instruments - Recognition and Measurement, CICA Handbook Section 3861, Financial Instruments - Disclosure and Presentation, and CICA Handbook Section 3865, Hedges. These new Handbook Sections provide comprehensive requirements for the recognition and measurement of financial instruments, as well as standards on when and how hedge accounting may be applied. Handbook Section 1530 also establishes standards for reporting and displaying comprehensive income. Comprehensive income is defined as the change in equity from transactions and other events from non-owner sources. Other comprehensive income refers to items recognized in comprehensive income, but that are excluded from net income calculated in accordance with generally accepted accounting principles. The adoption of these standards did not have an effect on the Corporation’s consolidated financial statements.

  (b) Accounting changes in 2008:

Capital Disclosures and Financial Instruments - Disclosures and Presentation

Effective with the commencement of its 2008 fiscal year, the Corporation adopted the Canadian Institute of Chartered Accountants ("CICA") Handbook Section 1535, Capital Disclosures, ClCA Handbook Section 3862, Financial Instruments - Disclosures, and ClCA Handbook Section 3863, Financial Instruments - Presentation. The sections relate to disclosure and presentation only and did not have an impact on the Corporation’s financial results (see notes 11, 12 and 13).

Inventories

Effective with the commencement of its 2008 fiscal year, the Corporation adopted the Canadian Institute of Chartered Accountants ("CICA") Handbook Section 3031, Inventories, which harmonizes the Canadian standards related to inventories with International Financial Reporting Standards ("IFRS"). This section provides changes to the measurement and more extensive guidance on the determination of cost, including allocation of overhead; narrows the permitted cost formulas; requires impairment testing; and expands the disclosure requirements to increase transparency. The adoption of this standard did not have an impact on the Corporation’s financial results.

74


NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
 
Years ended December 31, 2008, 2007 and 2006
(in US dollars)
 

3. Changes in accounting policies (continued):

  (c) Future accounting changes:

Goodwill and intangible assets

In January 2008, the CICA issued Section 3064, Goodwill and Intangible Assets, which will replace Section 3062, Goodwill and Other Intangible Assets, and Section 3450, Research and Development Costs. The standard provides guidance on the recognition of intangible assets in accordance with the definition of an asset and the criteria for asset recognition, as well as clarifying the application of the concept of matching revenues and expenses, whether these assets are separately acquired or internally developed. This standard applies to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2008. The Corporation will adopt this standard effective January 1, 2009.

As a result of this change in accounting standards, starting January 1, 2009, direct costs incurred to secure patents related to internally-generated assets will no longer be capitalized by the Corporation. As well, subsequent financial statements for periods beginning on or after January 1, 2009 will provide comparative financial information for previous financial periods to reflect the financial position and results of operations that would have resulted if the patent costs had not been capitalized in those previous periods. Thus, in order to provide an appropriate basis for comparison with 2009 financial figures, subsequent financial statements will present, for comparison purposes only, an increase in the net loss figure for 2008, 2007 and 2006 of $46,758, $455,719 and $388,546, respectively, and an increase in the accumulated deficit by $2,426,709 on January 1, 2006.

International Financial Reporting Standards

In February 2008, Canada’s Accounting Standards Board (AcSB) confirmed that Canadian generally accepted accounting principles, as used by publicly accountable enterprises, will be fully converged into International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board (IASB). The changeover date is for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. Therefore, the Corporation will be required to report under IFRS for its 2011 interim and annual financial statements. The Corporation will convert to these new standards according to the timetable set within these new rules. The Corporation is currently assessing the future impact of these new standards on its consolidated financial statements.

75


NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
 
Years ended December 31, 2008, 2007 and 2006
(in US dollars)
 

4. Property and equipment:

              2008
 
        Accumulated    
        depreciation   Net book
    Cost   and amortization   value
 
Laboratory equipment $ 434,751 $ 420,840 $ 13,911
Computer equipment   22,802   17,960   4,842
Office equipment and fixtures   91,635   88,863   2,772
 
  $ 549,188 $ 527,663 $ 21,525
 
 
            2007
 
        Accumulated    
        depreciation   Net book
    Cost   and amortization   value
 
Laboratory equipment $ 435,322 $ 418,882 $ 16,440
Computer equipment   17,623   14,353   3,270
Office equipment and fixtures   88,170   88,170   -
 
  $ 541,115 $ 521,405 $ 19,710
 
 
5. Patents and intellectual property:

              2008
 
        Accumulated   Net book
    Cost   amortization   value
Patent costs $ 4,818,243 $ 1,500,511 $ 3,317,732
Intellectual property rights acquired   2,222,661   2,001,806   220,855
             
  $ 7,040,904 $ 3,502,317 $ 3,538,587

76


NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
 
Years ended December 31, 2008, 2007 and 2006
(in US dollars)
 

5. Patents and intellectual property (continued):

              2007
 
        Accumulated   Net book
    Cost   amortization   value
Patent costs $ 4,645,279 $ 1,374,305 $ 3,270,974
Intellectual property rights acquired   2,222,661   1,780,953   441,708
 
  $ 6,867,940 $ 3,155,258 $ 3,712,682

The estimated aggregate amortization expense for 2009 is approximately $220,000, after consideration of the change in accounting policy described in note 3 (c) that the Corporation will adopt on January 1, 2009.

6. Non-controlling interest:

Non-controlling interest relates to redeemable, convertible preferred shares of Serex in the amount of $800,000. Up to 50% of the preferred shares are redeemable at any time at the option of the preferred shareholders for their issue price, subject to holders with at least 51% of the face value of the preferred shares asking for redemption, and sufficient funds being available in Serex. The preferred shares are also convertible into common shares of Serex at a price of $3.946 per share.

7. Share capital:

      2008   2007
 
Authorized:        
         An unlimited number of common shares        
 
Issued and outstanding:        
         30,178,607 common shares (2007 - 29,365,753 shares) $ 53,850,147 $ 50,155,147

  (a) Common Stock Private Purchase Agreement:

In November 2007, the Corporation entered into a Common Stock Private Purchase Agreement with an investment company (the "Purchaser") that established the terms and conditions for the purchase of common shares by the Purchaser. In November 2008, this agreement was terminated and a new agreement was concluded with the Purchaser. In general, the Corporation can, at its discretion, require the Purchaser to purchase up to $15 million of common shares over a 24-month period based on notices given by the Corporation. The Corporation must comply with general covenants in order to draw on its facility, including maintaining its stock exchange listing and registration requirements and having no material adverse effects, as defined in the agreement, with respect to the business and operations of the Corporation.

77


NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
 
Years ended December 31, 2008, 2007 and 2006
(in US dollars)
 

7. Share capital (continued):

  (a) Common Stock Private Purchase Agreement (continued):

The number of shares to be issued in connection with each notice shall be equal to the amount specified in the notice, divided by 97% of the average price of the Corporation's common shares for the five days preceding the giving of the notice. The maximum amount of each notice is $500,000 and the minimum amount is $100,000. The Corporation may terminate the agreement before the 24-month term, if it has issued at least $8 million of common shares under the agreement.

In 2008, the Corporation issued 812,854 (2007 - 952,500) common shares to the Purchaser for aggregate proceeds of $3,695,000 (2007 - $5,350,000) under the agreements. At December 31, 2008, the Corporation can require the Purchaser to purchase up to $15,000,000 of common shares over the remaining 22 months of the agreement, provided the Corporation adheres to its covenants.

  (b) Stock options:

The Corporation has established a stock option plan (the “Plan”) for its key employees, its officers and directors, and certain consultants. The Plan is administered by the Board of Directors of the Corporation. The Board may from time to time designate individuals to whom options to purchase common shares of the Corporation may be granted, the number of shares to be optioned to each, and the option price per share. The option price per share cannot involve a discount to the market price at the time the option is granted. The maximum number of shares is 5,500,000 and the maximum number of shares which may be optioned to any one individual is 15% of the total issued and outstanding common shares. Options under the Plan expire ten years after the grant and vest either immediately or over periods up to five years.

The following table provides the activity of stock option awards during the period and for options outstanding and exercisable at the end of the period, the weighted average exercise price, the weighted average years to expiration and the aggregate intrinsic value. The aggregate intrinsic value represents the pre-tax intrinsic value based on the Corporation’s closing stock price at December 31, 2008 of $3.40, which would have been received by option holders had they exercised their options at that date and sold their shares at market price.

78


NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
 
Years ended December 31, 2008, 2007 and 2006
(in US dollars)
 

7. Share capital (continued):

  (b) Stock options (continued):

          Options outstanding   Non-vested options
 
        Weighted Weighted           Weighted
        average average   Aggregate       average
        exercise years to   intrinsic       grant date
  Number     price expiration   value   Number     fair value
 
Balance, December 31, 2005 1,811,500   $ 3.41       20,000   $ 1.62
Granted 3,805,500     2.94       3,565,500     3.00
Expired/cancelled (450,000 )   4.35          
Vested             (313,000 )   3.02
 
Outstanding, December 31, 2006 5,167,000     3.17       3,272,500     3.00
Exercised (91,000 )   3.96          
Granted 50,000     5.86          
Expired (307,000 )   4.49          
Vested           (605,000 )   3.01
 
Outstanding, December 31, 2007 4,819,000     3.11 7.8 $ 12,852,015 2,667,500     3.00
Exercised              
Granted 50,000     3.49          
Expired              
Vested           (593,750 )   3.00
 
Outstanding, December 31, 2008 4,869,000   $ 3.11 6.9 $ 1,868,920   2,073,750   $ 3.00
 
Options exercisable 2,795,250   $ 3.19 6.2 $ 1,039,420   N/A     $ N/A

79


NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
 
Years ended December 31, 2008, 2007 and 2006
(in US dollars)
 

7. Share capital (continued):

  (b) Stock options (continued):

At December 31, 2008, options outstanding and exercisable were as follows:

  Options outstanding Options exercisable   Exercise price per share Expiry date
 
50,000 50,000 $ 6.93 January 22, 2009
2,000 2,000   6.41 March 23, 2009
20,000 20,000   3.12 May 13, 2009
75,000 75,000   3.12 June 1, 2009
125,000 125,000   3.88 May 1, 2010
28,000 28,000   1.93 April 23, 2011
1,500 1,500   4.20 November 8, 2011
75,000 75,000   4.33 November 13, 2011
50,000 50,000   3.75 April 28, 2013
37,000 37,000   2.62 September 9, 2013
500,000 500,000   3.00 October 24, 2013
200,000 200,000   2.82 June 9, 2016
40,000 40,000   2.74 July 17, 2016
3,565,500 1,491,750   3.00 August 24, 2016
10,000 10,000   5.51 March 1, 2017
40,000 40,000   5.95 August 23, 2017
40,000 40,000   3.61 July 16, 2018
10,000 10,000   3.03 November 26, 2018
 
4,869,000 2,795,250 $ 3.11  

On January 22, 2009, 50,000 options expired unexercised.

  (c) Stock-based compensation:

      2008   2007   2006
             
Stock-based compensation pertaining to general and administrative $ 171,920 $ 228,920 $ 360,840
Stock-based compensation pertaining to marketing   12,040   29,980   107,700
Stock-based compensation pertaining to research and development   741,260   756,360   368,768
 
  $ 925,220 $ 1,015,260 $ 837,308

At December 31, 2008, the unrecognized compensation cost related to non-vested awards was $2,853,480 and the remaining weighted average recognition period is approximately 42 months.

80


NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
 
Years ended December 31, 2008, 2007 and 2006
(in US dollars)
 

7. Share capital (continued):

  (c) Stock-based compensation (continued):

The fair value of the options granted during the year was determined using the Black-Scholes pricing model using the following weighted average assumptions:

    2008   2007   2006  
 
Risk-free interest rate 3.16 % 4.23 % 4.14 %
Expected volatility 73.37 % 70.83 % 66.04 %
Expected life in years 5   5   5  
Dividend yield 0 % 0 % 0 %
             

The weighted average grant-date fair value of options granted during the year ended December 31, 2008 was $2.16 per share (2007 - $3.61 per share).

Dividend yield was excluded from the calculation, since it is the present policy of the Corporation to retain all earnings to finance operations.

8. Commitments and contingencies:

  (a) Operating leases:

Minimum lease payments under operating leases that were entered into by the Corporation for the next five years are as follows:

       
2009 $ 287,000
2010   196,000
2011   13,000
2012   13,000
2013   13,000
 
  $ 522,000

In 2005, the Corporation entered into new operating lease agreements for its Canadian and US premises, both of which will expire on August 31, 2010. In connection with these agreements, the Corporation received lease inducements totaling $48,101. These amounts are being taken into income on a straight-line basis as a reduction of rental expense over the term of the leases. At December 31, 2008, the remaining deferred lease inducement was $16,038 (2007 - $25,661), of which $9,623 has been classified in current liabilities and $6,415 (2007 - $16,038) has been classified as long-term.

81


NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
 
Years ended December 31, 2008, 2007 and 2006
(in US dollars)
 

8.      Commitments and contingencies (continued):
 
  (b)      Contingencies:
 
    (i)     

In 2005 and 2006, the Corporation received proposed notices of assessment relating to its 2001, 2002 and 2003 taxation years from the Canadian taxation authorities, reducing the Corporation's claim for research and development tax credits in those taxation years. The reductions include refundable tax credits totalling $66,864, which were previously received by the Corporation, and non-refundable tax credits totalling $122,121, which are available to reduce future federal income taxes payable over the carryforward period to 2013. The non- refundable credits were not previously recognized for financial statement purposes. The Corporation filed a notice of objection to the assessments with the taxation authorities. This matter was settled in 2008 in the Corporation’s favour and no amounts will have to be refunded to the tax authorities.

 
    (ii)     

A contractor has served the Corporation with a Statement of Claim filed with the California Superior Court claiming $2,000,000 in damages for injury to his reputation and business for alleged failure to pay for services rendered. The Corporation has paid in full for all contracted services and believes that the claim is wholly without merit, and intends to defend the action vigorously. Accordingly, no provision related to this matter has been recorded in these financial statements.

 
9.      Income taxes:
 
  Details of the components of income taxes are as follows:
 
      2008     2007     2006  
 
Loss before income taxes:                  
         Canadian operations $ (4,016,077 ) $ (4,691,371 ) $ (4,316,579 )
         US operations   (574,268 )   (599,060 )   (577,106 )
    (4,590,345 )   (5,290,431 )   (4,893,685 )
 
Basic income tax rate   30.9 %   32 %   32 %
 
Income tax recovery at statutory rates   (1,418,417 )   (1,692,938 )   (1,565,979 )
 
Adjustments in income taxes resulting from:                  
         Non-recognition of losses and other unclaimed deductions   1,145,055     1,368,055     1,442,041  
 
Effect of change in rates:                  
         Decrease in future tax assets       (1,155,509 )   (964,000 )
         Decrease in valuation allowance       1,155,509     964,000  
         Permanent differences   273,362     324,883     123,938  
 
Income taxes $ -   $ -   $ -  

82


NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
 
Years ended December 31, 2008, 2007 and 2006
(in US dollars)
 

9. Income taxes (continued):

The income tax effect of temporary differences that give rise to the net future tax asset is presented below:

      2008     2007  
 
Future tax assets:            
         Non-capital losses $ 10,251,000   $ 11,374,000  
         Scientific research and experimental development expenditures   1,081,000     1,318,000  
         Capital losses   428,000     899,000  
         Property and equipment and patents   655,000     618,000  
         Share issue costs   121,000     160,000  
    12,536,000     14,369,000  
 
         Less valuation allowance   (12,477,000 )   (14,235,000 )
    59,000     134,000  
 
Future tax liabilities:            
         Intellectual property rights   (59,000 )   (134,000 )
 
Net future tax asset $ -   $ -  

In assessing the realizability of future tax assets, management considers whether it is more likely than not that some portion or all of the future tax assets will not be realized. The ultimate realization of future tax assets is dependent upon the generation of future taxable income. The generation of future taxable income is dependent on the successful commercialization of the Corporation's products and technologies.

The Corporation has non-capital losses carried forward and accumulated scientific research and development expenditures, which are available to reduce future years’ taxable income. These expire as follows:

      Federal   Provincial
 
Non-capital losses:        
         2009 $ 3,167,000 $ 3,040,000
         2010   3,351,000   3,303,000
         2014   3,587,000   3,571,000
         2015   2,863,000   2,875,000
         2026   3,089,000   3,038,000
         2027   2,927,000   2,863,000
         2028   2,715,000   2,715,000
 
Scientific research and development expenditures:        
         Indefinitely   2,651,000   5,744,000
         

83


NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
 
Years ended December 31, 2008, 2007 and 2006
(in US dollars)
 

9. Income taxes (continued):

The Corporation also has investment tax credits available in the amount of approximately $377,000 to reduce future years’ Canadian federal taxes payable. These credits expire as follows:

       
2009 $ 9,000
2010   19,000
2011   19,000
2012   43,000
2013   56,000
2014   18,000
2015   29,000
2026   54,000
2027   60,000
2028   70,000
 
  $ 377,000
 
 
In addition, the Corporation’s US subsidiaries have losses carried forward of approximately $11,122,000 which expire as follows:
 
 
2010 $ 51,000
2011   1,035,000
2012   1,932,000
2018   2,781,000
2019   1,078,000
2020   813,000
2021   664,000
2022   522,000
2023   565,000
2024   353,000
2025   264,000
2026   355,000
2027   373,000
2028   336,000
 
  $ 11,122,000

10. Earnings per share:  

Diluted loss per share was not presented as the effect of options would have been dilutive because the Corporation incurred losses in each of the last three fiscal years. All outstanding options could potentially be dilutive in the future.

84


NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
 
Years ended December 31, 2008, 2007 and 2006
(in US dollars)
 

11. Capital disclosures:  

The Corporation's objective in managing capital is to ensure a sufficient liquidity position to finance its research and development activities, general and administrative expenses, working capital and overall capital expenditures, including those associated with patents. The Corporation makes every attempt to manage its liquidity to minimize shareholder dilution when possible.

The Corporation defines capital as total shareholders’ equity. To fund its activities, the Corporation has followed an approach that relies almost exclusively on the issuance of common equity. Since inception, the Corporation has financed its liquidity needs primarily through private placements and since 2003 through a financing agreement with an investment company that has been replaced annually by a new agreement with the same purchaser (see note 7 (a) -Common Stock Private Purchase Agreement). The Corporation intends to access financing under this agreement when appropriate to fund its research and development activities. The recent financial crisis in the United States and the global economic environment have had a negative impact on the availability of liquidity in the market and may have an effect on the liquidity of the Purchaser to our Common Stock Private Purchase Agreement. Since 2003 through to January 2009, the Purchaser has always complied with the drawdowns made pursuant to the agreement. The Corporation believes that funds from operations as well as from existing financing agreements will be sufficient to meet the Corporation’s cash requirements for the next twelve months.

The capital management objectives remain the same as for the previous fiscal year. When possible, the Corporation tries to optimize its liquidity needs by non-dilutive sources, including sales, investment tax credits and interest income. The Corporation's general policy on dividends is to retain cash to keep funds available to finance its research and development and operating expenses. The Corporation has no debt.

The Corporation is not subject to any capital requirements imposed by external parties.

12. Financial risk management:  

This note provides disclosures relating to the nature and extent of the Corporation’s exposure to risks arising from financial instruments, including foreign currency risk, credit risk, interest rate risk and liquidity risk, and how the Corporation manages those risks.

85


NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
 
Years ended December 31, 2008, 2007 and 2006
(in US dollars)
 

12. Financial risk management (continued):  

  (a) Foreign currency risk:

The Corporation uses the US dollar as its measurement currency because a substantial portion of revenues, expenses, assets and liabilities of its Canadian and US operations are denominated in US dollars. The Corporation’s equity financing facility is also in US dollars. Foreign currency risk is limited to the portion of the Corporation’s business transactions denominated in currencies other than the US dollar. The Canadian operation has transactions denominated in Canadian dollars, principally relating to salaries and rent. Additional variability arises from the translation of monetary assets and liabilities denominated in currencies other than the US dollar at each balance sheet date. Fluctuations in the currency used for the payment of the Corporation’s expenses denominated in currencies other than the US dollar (primarily Canadian dollars) could cause unanticipated fluctuations in the Corporation’s operating results but would not impair or enhance its ability to pay its Canadian dollar denominated obligations. The Corporation’s objective in managing its foreign currency risk is to minimize its net exposures to foreign currency cash flows by transacting with parties in US dollars to the maximum extent possible. The Corporation does not engage in the use of derivative financial instruments to manage its currency exposures.

Approximately 73% of expenses that occurred during the year ended December 31, 2008 (2007 - 72%) were denominated in US dollars. Foreign exchange fluctuations had no meaningful impact on the Corporation’s results in 2008, 2007 or 2006.

The following table provides significant items exposed to foreign exchange as at December 31, 2008:

        CA$  
 
Cash   $ 8,343  
Accounts, other receivables and research tax credits receivable   145,045  
Accounts payable and accrued liabilities   (265,563 )
 
    $ (112,175 )
 
The following exchange rates were applied for the year ended December 31, 2008:      
 
  Average rate   Reporting date rate  
  (twelve months)   December 31, 2008  
 
US$ - CA$ 1.0660   1.2180  

Based on the Corporation’s foreign currency exposures noted above, varying the above foreign exchange rates to reflect a 5% strengthening of the US dollar would have increased the net loss by less than $10,000, assuming that all other variables remained constant.

86


NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
 
Years ended December 31, 2008, 2007 and 2006
(in US dollars)
 

12.      Financial risk management (continued):
 
  (a)      Foreign currency risk (continued):
 
   

An assumed 5% weakening of the US dollar would have had an equal but opposite effect on the amount shown above, on the basis that all other variables remain constant.

 
  (b)      Credit risk:
 
   

Credit risk results from the possibility that a loss may occur from the failure of another party to perform according to the terms of the contract. Financial instruments that potentially subject the Corporation to concentrations of credit risk consist primarily of cash and accounts receivable. Cash is maintained with a high-credit quality financial institution. For accounts receivable, the Corporation performs periodic credit evaluations and typically does not require collateral. Allowances are maintained for potential credit losses consistent with the credit risk, historical trends, general economic conditions and other information.

 
   

The Corporation has a limited number of customers. Included in the consolidated balance sheet are trade receivables of $37,873, all of which were aged under 45 days. Four customers accounted for 74% of the trade receivables balance at December 31, 2008. An amount of $13,660 was recorded as bad debt expense for the year ended December 31, 2008 (nil for the year ended December 31, 2007).

 
   

At December 31, 2008, the Corporation’s maximum credit exposure corresponded to the carrying amount of cash, accounts receivable and other receivables.

 
  (c)      Interest rate risk:
 
   

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Cash bears interest at a variable rate. Accounts receivable, other receivables, accounts payable and accrued liabilities bear no interest. The Corporation has no other interest-bearing financial instruments.

 
   

Based on the value of variable interest-bearing cash during the year ended December 31, 2008, an assumed 0.5% increase or 0.5% decrease in interest rates during such period would have had no significant effect on the net loss.

 
  (d)      Liquidity risk:
 
   

Liquidity risk is the risk that the Corporation will not be able to meet its financial obligations as they fall due. The Corporation manages liquidity risk through the management of its capital structure, as outlined in note 11 to the audited consolidated financial statements ("Capital disclosures"). The Corporation does not have an operating credit facility.

87


NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
 
Years ended December 31, 2008, 2007 and 2006
(in US dollars)
 

12. Financial risk management (continued):  

  (d) Liquidity risk (continued):

The following are the contractual maturities of financial liabilities as at December 31, 2008:

      Carrying   Less than    
    amount   1 year    1 year to 5 years
 
Accounts payable and accrued liabilities $ 1,240,847 $ 1,240,847 $  –

13. Financial instruments:

Fair value disclosure:

      December 31, 2008   December 31, 2007
    Carrying       Carrying    
    amount   Fair value   amount   Fair value
 
Loans and receivables:                
         Accounts receivable and other receivables $ 59,497 $ 59,497 $ 60,380 $ 60,380
 
Financial liabilities, at amortized cost:                
         Accounts payable   1,078,897   1,078,897   1,082,182   1,082,182
         Accrued liabilities   161,950   161,950   183,569   183,569
                 

The Corporation has determined that the carrying value of its short-term financial assets and liabilities approximates their fair value due to the immediate or short-term maturity of these financial instruments.

88


NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
 
Years ended December 31, 2008, 2007 and 2006
(in US dollars)
 

14. Canadian/US reporting differences:  

  (a) Consolidated shareholders' equity:

The reconciliation of shareholders' equity reported in accordance with Canadian GAAP and with US GAAP is as follows:

      2008     2007     2006  
 
Shareholders' equity, Canadian GAAP $ 2,010,726   $ 2,165,601   $ 1,026,533  
 
Adjustments:                  
Stock-based compensation - options granted to non-employees (ii):                  
            Cumulative compensation expense   (1,425,143 )   (1,425,143 )   (1,425,143 )
            Additional paid-in capital   1,477,706     1,477,706     1,477,706  
      Change in reporting currency (i)   (62,672 )   (62,672 )   (62,672 )
    (10,109 )   (10,109 )   (10,109 )
 
Shareholders' equity, US GAAP $ 2,000,617   $ 2,155,492   $ 1,016,424  

  (i) Change in reporting currency:

The Corporation adopted the US dollar as its reporting currency effective January 1, 2000. For Canadian GAAP purposes, the financial information for 1999 was translated into US dollars at the December 31, 1999 exchange rate. For United States GAAP reporting purposes, assets and liabilities for all years presented have been translated into US dollars at the ending exchange rate for the respective year, and the statement of earnings, at the average exchange rate for the respective year.

  (ii) Stock-based compensation:

For US GAAP purposes, the Corporation adopted Statement of Financial Accounting Standards (SFAS) No-123R, Share-Based Payments, on January 1, 2006, which requires the expensing of all options issued, modified or settled based on the grant date fair value over the period during which the employee is required to provide services. The Corporation adopted SFAS 123R using the modified prospective approach, which requires application of the standard to all awards granted, modified or cancelled after January 1, 2006 and to all awards for which the requisite service has not been rendered at such date.

89


NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
 
Years ended December 31, 2008, 2007 and 2006
(in US dollars)
 

14. Canadian/US reporting differences (continued):  

  (a) Consolidated shareholders' equity (continued):

  (ii) Stock-based compensation (continued):

Previously, the Corporation elected to follow the intrinsic value method of accounting under ABP 25, Accounting for Stock Issued to Employees, in accounting for stock options granted to employees and directors. Under the intrinsic value method, compensation cost is recognized for the difference between the quoted market price of the stock at the grant date and the amount the individual must pay to acquire the stock. In addition, in accordance with FAS 123, Accounting for Stock-Based Compensation, compensation related to the stock options granted to non-employees has been recorded in the accounts based on the fair value of the stock options at the measurement date.

For Canadian GAAP purposes, the Corporation has been applying the fair value based method since January 1, 2004 to account for employee stock options. Prior to January 1, 2004, the Corporation applied the fair value based method only to stock-based payments to non-employees and applied the settlement method of accounting for employee stock options. Under the settlement method, any consideration paid by employees on the exercise of stock options was credited to share capital and no compensation cost was recognized.

 

90


NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
 
Years ended December 31, 2008, 2007 and 2006
(in US dollars)
 

14. Canadian/US reporting differences (continued):  

  (b) Additional US GAAP disclosures:

  (i) Development stage company:

The Corporation is in the process of developing unique patented products, which are subject to approval by the regulatory authorities. The Corporation has had limited revenues to date on the sale of its products under development. Accordingly, the Corporation is a development stage company as defined in Statement of Financial Accounting Standards No. 7, and the following additional disclosures under US GAAP are provided:

      Cumulative     Cumulative  
    since the date of     since the date of  
    inception of     inception of  
    the Corporation     the Corporation  
    to December 31,     to December 31,  
    2008     2007  
 
Revenues:            
         Sales $ 3,246,882   $ 2,820,207  
         Interest revenue   538,563     536,829  
         License revenue   97,403     97,403  
         Research contract   30,000     30,000  
 
Expenses:            
         Gross research and development expenditures   26,510,899     24,346,288  
         Other expenses   30,497,038     27,642,895  
 
         Cash outflows   (45,415,649 )   (42,135,416 )
         Investing activities   (4,773,956 )   (4,546,689 )
         Financing activities   50,465,464     46,955,214  
             

 

91


NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
 
Years ended December 31, 2008, 2007 and 2006
(in US dollars)
 

14. Canadian/US reporting differences (continued):  

  (b) Additional US GAAP disclosures (continued):

  (i) Development stage company (continued):

The statement of shareholders' equity since date of inception under US GAAP is presented below:

              Additional            
  Number of       paid-in   Accumulated        
  shares     Consideration   capital   deficit     Total  
 
Year ended July 31, 1990:                        
         Common shares issued 2,500,000   $ 172,414 $  - $ -   $ 172,414  
         Net loss -     -   -   (109,241 )   (109,241 )
 
Balance, July 31, 1990 2,500,000     172,414   -   (109,241 )   63,173  
 
Year ended July 31, 1991:                        
         Net loss -     -   -   (21,588 )   (21,588 )
Cumulative translation adjustment -     1,499   -   (950 )   549  
 
Balance, July 31, 1991 2,500,000     173,913   -   (131,779 )   42,134  
 
Year ended July 31, 1992:                        
         Common shares issued 9,375     31,468   -   -     31,468  
         Net loss -     -   -   (45,555 )   (45,555 )
Cumulative translation adjustment -     (6,086 ) -   5,598     (488 )
 
Balance, July 31, 1992 2,509,375     199,295   -   (171,736 )   27,559  
 
Year ended July 31, 1993:                        
         Common shares issued 201,250     159,944   -   -     159,944  
         Common shares cancelled (500,000 )   -   -   -     -  
         Net loss -     -   -   (38,894 )   (38,894 )
Cumulative translation adjustment -     (13,994 ) -   12,830     (1,164 )
 
Balance, July 31, 1993 2,210,625     345,245   -   (197,800 )   147,445  
 
Year ended July 31, 1994:                        
         Common shares issued 2,500     7,233   -   -     7,233  
         Net loss -     -   -   (53,225 )   (53,225 )
Cumulative translation adjustment -     (25,173 ) -   15,808     (9,365 )
 
Balance, July 31, 1994 2,213,125     327,305   -   (235,217 )   92,088  
 
Year ended July 31, 1995:                        
         Common shares issued 78,078     303,380   -   -     303,380  
         Net loss -     -   -   (285,910 )   (285,910 )
Cumulative translation adjustment -     5,196   -   (7,221 )   (2,025 )
 
Balance, July 31, 1995 carried forward 2,291,203     635,881   -   (528,348 )   107,533  

92


NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
 
Years ended December 31, 2008, 2007 and 2006
(in US dollars)
 

14. Canadian/US reporting differences (continued):  

  (b) Additional US GAAP disclosures (continued):

  (i) Development stage company (continued):

The statement of shareholders' equity since date of inception under US GAAP is presented below (continued):

              Additional              
  Number of     paid-in     Accumulated        
  shares   Consideration     capital     deficit     Total  
                         
Balance, July 31, 1995 brought forward  2,291,203 $ 635,881   $ -   $ (528,348 ) $ 107,533  
 
Period ended December 31, 1995:                          
Adjustment necessary to increase the number of common shares 12,708,797   -     -     -     -  
                                   
Adjusted number of common shares 15,000,000   635,881     -     (528,348 )   107,533  
         Common shares issued  2,047,082   2,997,284     -     -     2,997,284  
         Net loss              -   -     -     (1,194,226 )   (1,194,226 )
         Share issue costs              -   (153,810 )   -     -     (153,810 )
Cumulative translation adjustment              -   2,858     -     (6,328 )   (3,470 )
 
Balance, December 31, 1995 17,047,082   3,482,213     -     (1,728,902 )   1,753,311  
 
Year ended December 31, 1996:                          
         Common shares issued      882,300   3,852,364     -     -     3,852,364  
         Net loss              -   -     -     (3,175,587 )   (3,175,587 )
         Share issue costs              -   (170,699 )   -     -     (170,699 )
         Stock-based compensation              -   -     434,145     -     434,145  
Cumulative translation adjustment              -   (16,769 )   (2,217 )   24,544     5,558  
 
Balance, December 31, 1996 17,929,382   7,147,109     431,928     (4,879,945 )   2,699,092  
 
Year ended December 31, 1997:                          
Common shares issued      703,491   3,180,666     -     -     3,180,666  
         Net loss              -   -     -     (3,755,409 )   (3,755,409 )
         Share issue costs              -   (161,482 )   -     -     (161,482 )
         Capital stock subscription              -   352,324     -     -     352,324  
         Stock-based compensation              -   -     108,350     -     108,350  
Cumulative translation adjustment              -   (299,275 )   (21,578 )   325,364     4,511  
 
Balance, December 31, 1997 18,632,873   10,219,342     518,700     (8,309,990 )   2,428,052  
 
Year ended December 31, 1998:                          
Common shares issued  1,095,031   5,644,638     -     -     5,644,638  
         Net loss              -   -     -     (4,979,562 )   (4,979,562 )
         Share issue costs              -   (54,131 )   -     -     (54,131 )
         Stock-based compensation              -   -     274,088     -     274,088  
Cumulative translation adjustment              -   (685,156 )   (43,750 )   720,173     (8,733 )
 
Balance, December 31, 1998 carried forward 19,727,904   15,124,693     749,038     (12,569,379 )   3,304,352  

93


NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
 
Years ended December 31, 2008, 2007 and 2006
(in US dollars)
 

14. Canadian/US reporting differences (continued):  

  (b) Additional US GAAP disclosures (continued):

  (i) Development stage company (continued):

The statement of shareholders' equity since date of inception under US GAAP is presented below (continued):

              Additional              
  Number of     paid-in     Accumulated        
  shares   Consideration     capital     deficit     Total  
 
Balance, December 31, 1998 brought forward 19,727,904 $ 15,124,693   $ 749,038   $ (12,569,379 ) $ 3,304,352  
 
Year ended December 31, 1999:                          
Common shares issued      275,900   969,253     -     -     969,253  
         Net loss              -   -     -     (3,409,166 )   (3,409,166 )
         Share issue costs              -   (35,041 )   -     -     (35,041 )
         Stock-based compensation              -   -     198,815     -     198,815  
Cumulative translation adjustment              -   943,133     52,563     (884,178 )   111,518  
 
Balance, December 31, 1999 20,003,804   17,002,038     1,000,416     (16,862,723 )   1,139,731  
 
Year ended December 31, 2000:                          
Common shares issued  1,373,817   5,909,340     -     -     5,909,340  
         Warrants and options              -   421,638     -     -     421,638  
         Net loss              -   -     -     (4,272,308 )   (4,272,308 )
         Share issue costs              -   (353,204 )   -     -     (353,204 )
Stock-based compensation              -   -     257,690     -     257,690  
 
Balance, December 31, 2000 21,377,621   22,979,812     1,258,106     (21,135,031 )   3,102,887  
Year ended December 31, 2001:                          
         Common shares issued      919,904   2,554,254     -     -     2,554,254  
         Net loss              -   -     -     (3,095,133 )   (3,095,133 )
         Share issue costs              -   (120,944 )   -     -     (120,944 )
         Stock-based compensation              -   -     55,040     -     55,040  
 
Balance, December 31, 2001 22,297,525   25,413,122     1,313,146     (24,230,164 )   2,496,104  
Year ended December 31, 2002:                          
Common shares issued      723,429   3,031,043     -     -     3,031,043  
         Net loss              -   -     -     (3,453,749 )   (3,453,749 )
         Share issue costs              -   (166,842 )   -     -     (166,842 )
Stock-based compensation              -   -     41,140     -     41,140  
 
Balance, December 31, 2002 23,020,954   28,277,323     1,354,286     (27,683,913 )   1,947,696  
Year ended December 31, 2003:                          
Common shares issued  1,380,205   4,096,000     -     -     4,096,000  
         Net loss              -   -     -     (4,395,428 )   (4,395,428 )
         Share issue costs              -   (220,819 )   -     -     (220,819 )
Stock-based compensation              -   -     41,140     -     41,140  
 
Balance, December 31, 2003 24,401,159   32,152,504     1,395,426     (32,079,341 )   1,468,589  
Year ended December 31, 2004:                          
Common shares issued  1,102,903   4,049,750     (375,717 )   -     3,674,033  
         Net loss              -   -     -     (3,770,545 )   (3,770,545 )
         Share issue costs              -   (210,939 )   -     -     (210,939 )
Stock-based compensation              -   -     41,140     -     41,140  
 
Balance, December 31, 2004 carried forward 25,504,062   35,991,315     1,060,849     (35,849,886 )   1,202,278  

94


NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
 
Years ended December 31, 2008, 2007 and 2006
(in US dollars)
 

14. Canadian/US reporting differences (continued):  

  (b) Additional US GAAP disclosures (continued):

  (i) Development stage company (continued):

The statement of shareholders' equity since date of inception under US GAAP is presented below (continued):

              Additional            
  Number of     paid-in   Accumulated        
  shares   Consideration     capital   deficit     Total  
                       
Balance, December 31, 2004 brought forward 25,504,062 $ 35,991,315   $ 1,060,849 $ (35,849,886 ) $ 1,202,278  
 
Year ended December 31, 2005:                        
Common shares issued 1,224,719   2,935,000                           2,935,000  
         Net loss                                         (3,609,448 )   (3,609,448 )
         Share issue costs                   (166,942 )                         (166,942 )
Stock-based compensation                       41,140       41,140  
 
Balance, December 31, 2005 26,728,781   38,759,373     1,101,989   (39,459,334 )   402,028  
 
Year ended December 31, 2006:                        
Common shares issued 1,593,472   4,955,000                           4,955,000  
         Net loss                                         (4,893,685 )   (4,893,685 )
         Share issue costs                   (284,227 )                         (284,227 )
Stock-based compensation                       837,308       837,308  
 
Balance, December 31, 2006 28,322,253   43,430,146     1,939,297   (44,353,019 )   1,016,424  
 
Year ended December 31, 2007:                        
Common shares issued 1,043,500   5,710,685                           5,710,685  
         Net loss                                         (5,290,431 )   (5,290,431 )
         Share issue costs                   (296,446 )                         (296,446 )
Stock-based compensation