Allon Therapeutics Inc.
TSX : NPC

Allon Therapeutics Inc.

November 10, 2009 18:40 ET

Allon Therapeutics Releases Third Quarter Operating Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 10, 2009) - Allon Therapeutics Inc. (TSX:NPC) continues to advance its Phase II clinical program to develop lead product davunetide as the first effective treatment for a number of brain disorders broadly categorized as frontotemporal dementia (FTD), the Company reported today in its Third Quarter 2009 operating results.

Gordon McCauley, President and CEO of Allon, said the Company expects a small pilot clinical trial in patients with FTD will begin in 2009 and a larger multi-centre clinical trial will begin in the first half of 2010.

"No effective treatment is currently available for FTD, an aggressive form of early-onset dementia. These patients are young, typically between 45 and 65 years of age, and suffer rapidly debilitating disease that is fatal typically about five years after diagnosis," said McCauley.

Other progress during the quarter included the following.

Partnership discussions

Active discussions are continuing with pharmaceutical companies toward completion of a partnership for the development and commercialization of davunetide. The Company remains confident that positive Phase IIa clinical trial results in patients with amnestic mild cognitive impairment, a precursor to Alzheimer's disease, and in patients with schizophrenia, will lead to a partnership that values davunetide appropriately. The Company intends to proceed with additional clinical trials in Alzheimer's or schizophrenia once a partnership has been concluded.

Schizophrenia data presentation

On July 9, 2009, Allon released top-line data from a PIIa clinical trial in patients with cognitive impairment associated with schizophrenia demonstrating that davunetide had a statistically significant positive impact on the capacity of schizophrenia patients to carry out important activities in their daily lives. Complete results from this trial will be presented by Dr. Daniel Javitt of the TURNS consortium in December 2009 to the annual meeting of the American College of Neuropsychopharmacology.

The Phase IIa schizophrenia trial was managed by TURNS (Treatment Units for Research on Neurocognition and Schizophrenia), with substantial financial support from the National Institute of Mental Health (NIMH), part of the U.S. National Institutes of Health. Data from a companion study to the Phase IIa trial that looked at changes in brain imaging in a small subset of the patients in the main trial has not yet been analyzed fully or received by the Company.

Product optimization

The Company is continuing its program to optimize the formulation of davunetide for use in future clinical trials. The optimization work is being done to enhance administration convenience and cost effectiveness prior to commercialization, and involves adjusting the dosing concentrations of the drug. This process was initiated following the previously successful Phase II clinical trials and will be completed prior to commencing the upcoming larger clinical trial in FTD or additional trials in Alzheimer's or schizophrenia.

Pipeline opportunities

The Company continues to explore opportunities to enhance its product pipeline by in-licensing or acquiring one or more promising technologies or products that are complementary to Allon's existing pipeline and business strategy. The Company will provide updates on these discussions if and when they advance materially.

Cash management

The Company continues to manage its financial resources prudently and expects the existing cash of $13 million at September 30, 2009 will be sufficient to fund clinical and corporate activities into the first half of 2011.

Phase II FTD program

There is a strong scientific rationale for the potential efficacy of davunetide in FTD. About half of FTD cases have pathologies involving impairment of the brain protein tau. Allon's preclinical and clinical data provides strong scientific evidence that davunetide is the most advanced tau therapy in the world and may be effective in treating this population.

The Phase II clinical program will begin in late 2009 with a pilot study treating a small number of patients with tau-related forms of FTD. This pilot study will help Allon and the clinical investigators validate the trial design and prepare for the larger Phase II clinical trial for the treatment of Progressive Supranuclear Palsy (PSP) expected to begin early in 2010. As previously described, the larger study is being developed in collaboration with leading experts in the field, including Drs. Bruce Miller and Adam Boxer of the Memory and Aging Center of the University of California, San Francisco.

PSP is a degenerative brain disease that is often characterized by progressive difficulty with balance and walking, eye movement abnormalities, and cognitive and personality changes.

The pathology of Alzheimer's disease and many forms of FTD has some similarities, including the presence of impaired forms of the brain protein tau. In Alzheimer's, altered tau forms tangles, part of the well-established plaques and tangles hallmarks of Alzheimer's pathology.

PSP is also associated with tau pathology, but unlike Alzheimer's disease plaques are not a prominent feature of the pathology.

Allon has shown that decreasing the levels of impaired forms of tau with davunetide preserved the memory of mice bred to replicate Alzheimer's or PSP pathology. Allon's preclinical studies have also shown that davunetide preserved the memory and learning function of mice bred to replicate the impaired tau pathology associated with PSP.

McCauley said the Company expects that efficacy in PSP will define the opportunity to use davunetide in other FTD subtypes that are tauopathies.

"Physicians and researchers who specialize in FTD are enthusiastic about evaluating davunetide in FTD patients, primarily because about 50% of FTD and related disorders are tauopathies, or tau-related diseases — and Allon's technology is recognized as the most clinically advanced tau-related therapy," McCauley said.

In addition to PSP, FTD encompasses several cognitive disorders, including behavioral variant-frontotemporal dementia, semantic dementia, progressive nonfluent aphasia, and corticobasal degeneration.

Results of Operations

Allon reported a net loss of $1,550,965 ($0.02 per share) for the three months ended September 30, 2009, compared to a net loss of $2,309,735 ($0.03 per share) for the three months ended September 30, 2008, representing a decrease in net loss of $758,770. For the nine months ended September 30, 2009, Allon reported a net loss of $4,765,494 ($0.06 per share), compared to a net loss of $9,373,295 ($0.15 per share) for the nine months ended September 30, 2008, representing a decrease in net loss of $4,607,801.

For the three and nine months ended September 30, 2009, research and development expenses were $715,867 and $2,456,448 compared to $1,673,805 and $7,129,114 for the three and nine months ended September 30, 2008. The decline in research and development expenses resulted from a decrease in clinical trial activity. During the first nine months of 2008, the Company had as many as three ongoing Phase II clinical programs, two of which were completed in the first and third quarters of 2008 respectively.

For the three and nine months ended September 30, 2009, general and administrative expenses were $650,527 and $1,949,392 compared to $872,355 and $2,463,100 for the three and nine months ended September 30, 2008. The decrease of $221,828 and $513,708 compared to 2008 resulted from reduced expenditures on corporate travel and consulting fees.

Amortization expense for the three and nine months ended September 30, 2009 was $136,490 and $409,950 compared to $136,570 and $411,935 for the three and nine months ended September 30, 2008. Allon amortizes tangible assets and intellectual property on a straight-line basis.

The small decline compared to the previous year was primarily the result of certain assets being fully amortized.

Allon earned interest revenue of $16,110 and $91,714 during the three and nine months ended September 30, 2009 compared to $142,172 and $305,247 for the same period in 2008. Reduced interest earnings resulted from significantly lower interest rates in 2009 compared to the same period in 2008. Foreign exchange translation loss was $64,191 and $41,418 for the three and nine months ended September 30, 2009 as a result of the decline of the U.S. dollar against the Canadian dollar. This compared to gains of $239,701 and $346,172 for the same periods in 2008 when the U.S. dollar appreciated against the Canadian dollar.

At September 30, 2009, the Company had cash and cash equivalents of $13,016,738 compared to $19,093,499 of cash and cash equivalents at December 31, 2008. The company's cash equivalents are held in high-grade, liquid and low risk investments which may include commercial paper, government bonds and money market funds and are recorded at fair value.

About Allon's neuroprotective platforms

Allon's two neuroprotective technology platforms are based on naturally occurring proteins produced by the brain in response to a range of insults. The platforms are activity-dependent neuroprotective protein (ADNP) and activity-dependent neurotrophic factor (ADNF). Because the two platforms are based on different proteins, the drugs from each are different molecules with different therapeutic mechanisms and distinct commercial opportunities. Clinical-stage drugs davunetide intranasal (AL-108) and davunetide intravenous (AL-208) are derived from ADNP, while preclinical stage drugs AL-209 and AL-309 are derived from ADNF. ADNP drugs davunetide intranasal (AL-108) and davunetide intravenous (AL-208) are focused on Alzheimer's disease, frontotemporal dementias, and cognitive impairment. ADNF drug candidate AL-309 is being developed for the treatment of peripheral neuropathies and is administered orally or subcutaneously.

About Allon

Allon Therapeutics Inc. is a clinical-stage biotechnology company focused on developing the first drugs that impact the progression of neurodegenerative diseases. Allon's drug davunetide has demonstrated human efficacy in amnestic mild cognitive impairment, a precursor to Alzheimer's disease, and schizophrenia-related cognitive impairment. Allon has Phase II human efficacy programs pursuing large underserved markets: Alzheimer's disease, frontotemporal dementia, and schizophrenia-related cognitive impairment. The Company is listed on the Toronto Stock Exchange under the trading symbol "NPC" (Neuro Protection Company(TM)) and based in Vancouver. For additional information please visit the Company's website: www.allontherapeutics.com.

Forward Looking Statements

Statements contained herein, other than those which are strictly statements of historical fact may include forward-looking information. Such statements will typically contain words such as "believes", "may", "plans", "will", "estimate", "continue", "anticipates", "intends", "expects", and similar expressions. While forward-looking statements represent management's outlook based on assumptions that management believes are reasonable, forward-looking statements by their nature are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, events or developments to be materially different from any future results, events or developments expressed or implied by them. Such factors include, among others, the inherent uncertainty involved in scientific research and drug development, Allon's early stage of development, lack of product revenues, its additional capital requirements, the risks associated with successful completion of clinical trials and the long lead-times and high costs associated with obtaining regulatory approval to market any product which Allon may eventually develop. Other risk factors include the limited protections afforded by intellectual property rights, rapid technology and product obsolescence in a highly competitive environment and Allon's dependence on collaborative partners and contract research organizations. These factors can be reviewed in Allon's public filings at www. SEDAR.com and should be considered carefully. Readers are cautioned not to place undue reliance on such forward-looking statements and Allon disclaims any obligation to update or announce changes in any such factors except in its periodic filings.

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