Theratechnologies inc.
TSX : TH

Theratechnologies inc.

July 10, 2007 10:42 ET

Additional Milestones Achieved for Theratechnologies in Second Quarter 2007

- Positive TH9507 Phase 3 results presented at CROI and ENDO meetings - Last patient treated in the extension phase of the first Phase 3 trial - Confirmatory Phase 3 trial under way in Europe and North America - Paul Pommier Assumes Chairman's Role at Annual Meeting of Shareholders - Named "Biotech Company of the Year" by BIOTECanada

MONTREAL, QUEBEC--(Marketwire - July 10, 2007) - Theratechnologies (TSX:TH) announced today its financial results for the second quarter ended May 31, 2007 and reviewed recent highlights.

"Several important milestones have added fuel to the strong momentum gained in the first quarter," said Yves Rosconi, President and Chief Executive Officer. "Building on the positive Phase 3 clinical trial results announced last December, we were able to release additional positive data at scientific meetings in the second quarter," commented Mr. Rosconi. "In addition to the data supporting our development plans for TH9507, we believe that the metabolic parameters known to be risk factors for cardiovascular diseases may be lowered in HIV-infected patients using TH9507," noted Mr. Rosconi.

"As the data come out, it is becoming increasingly clear that TH9507 has potential as a treatment for excess visceral fat accumulation in HIV patients and has potential advantages over other approaches being developed," Mr. Rosconi continued. "For the balance of the year, we are looking forward to:

- the release of additional 26-week data next week at an HIV Lipodystrophy conference in Sydney, Australia;

- the release of the 52-week data from our first Phase 3 study in the fall 2007; and

- the steady progress on the confirmatory Phase 3 trial."

"We have a strong balance sheet and a clear business plan so the Company is enthusiastic about its future," Mr. Rosconi concluded.

Recent highlights:

Positive phase 3 clinical results presented at CROI and ENDO meetings

Dr. Steve Grinspoon, Associate Professor of Medicine, Harvard Medical School and lead investigator for the TH9507 trial in the United States presented Phase 3 results at two prestigious conferences this past quarter: the 14th Conference on Retroviruses and Opportunistic Infections (CROI) and the 89th annual meeting of the Endocrinology Society (ENDO).

At CROI, Dr. Grinspoon discussed the Phase 3 results announced in December. In summary, the Phase 3 study was powered to detect an 8% reduction in visceral adipose tissue (VAT) versus placebo. After 26 weeks, patients on TH9507 achieved a 15% reduction in VAT versus baseline and a 20% difference versus placebo. In addition, TH9507 was shown to be well tolerated by patients.

At ENDO, Dr. Grinspoon elaborated further on the Phase 3 results discussing the beneficial effects of TH9507 on key metabolic parameters known to be risk factors for cardiovascular diseases, suggesting that strategies using a growth hormone releasing factor may lower cardiovascular risk in HIV infected patients.

Last patient treated in the extension phase of the first Phase 3 trial

In May 2007, the last patient had completed 52 weeks of treatment in the extension phase of the first Phase 3 clinical study testing TH9507. The objective of the extension phase of the study is to obtain safety information with long-term use of TH9507. The Company expects to discuss the top-line 52 week results at a venue to be determined in the fall 2007.

Second Confirmatory Phase 3 trial under way in Europe and North America

The confirmatory Phase 3 trial is ongoing. The protocol for this second Phase 3 trial was reviewed by the US FDA under the Special Protocol Assessment (SPA) process last August. The end of enrolment is expected early in the fall of 2007.

Theratechnologies has obtained regulatory approval in five European countries for its confirmatory Phase 3 trial. Patients are being enrolled for the study in Belgium, France, Italy, Spain and the United Kingdom. North American recruitment previously began in the United States in January and Canadian recruitment began in May.

Shareholders Welcome Paul Pommier as New Company Chairman

At the Theratechnologies Shareholder Meeting this past March, the Company's Chairman, Mr. A. Jean de Grandpre, announced his retirement as chairman of the Board after ten years of distinguished service. Several shareholders took the opportunity to pay tribute to Mr. de Grandpre at the meeting, who remains a member of the Board of Directors. Mr. Pommier, former investment banker with National Bank Financial and long-time member of the Board of Directors, has assumed the Chairman's position.

Biotech of the Year Award

Theratechnologies was recognized this year by winning the "Biotech Company of the Year" award presented by BIOTECanada. This award recognizes the Canadian biotech company that has distinguished itself from its peers with strong overall performance as a company, demonstrated leadership and significant achievement over the last year. BIOTECanada is the national industry-funded association representing the broad spectrum of biotech constituents including emerging, established and related service companies in the health, agricultural, and industrial sectors.

MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE SECOND QUARTER

Revenues

Consolidated revenues for the three-month period ended May 31, 2007 increased to $805,000 compared to $395,000 in 2006. For the six-month period ended May 31, 2007, consolidated revenues were $1,092,000 compared to $870,000 for the same period in 2006. Revenues are mainly composed of interest from investments. The increase in interest revenue was due to higher liquidity balances in fiscal 2007 compared to 2006.

R&D activities

Consolidated research and development (R&D) expenditures, before tax credits, totalled $6,576,000 for the second quarter of 2007, compared to $5,361,000 in 2006. The R&D expenses for the six-month period ended May 31, 2007 amounted to $14,676,000 compared to $9,646,000 for the same period in 2006. The higher level of R&D expenditures in 2007 is essentially due to costs associated with the ongoing activities associated with the first Phase 3 study and the confirmatory Phase 3 study for TH9507.

Other expenses

For the second quarter of 2007, general and administrative expenses, selling and market development expenses, patents and amortization of other assets (SG&A) increased to $2,550,000, compared to $1,463,000 for the same period in 2006. For the six-month period ended May 31, 2007, the SG&A amounted to $4,938,000 compared to $3,276,000 for the same period in 2006. The increase is primarily attributable to increased foreign exchange losses, increased stock-based compensation expense and other expenses associated with the stock option program in fiscal 2007 compared to 2006. In addition, the higher expenses in 2007 reflect the Company's growth and increase in business development and commercialization activities.

Net results

Reflecting the changes in revenues and expenses described above, the Company recorded a second-quarter net loss of $8,089,000 ($0.15 per share), compared to $6,221,000 ($0.14 per share) for the same period in 2006. For the six-month period ended May 31, 2007, the loss was $17,528,000 ($0.35 per share), compared to losses of $11,668,000 ($0.29 per share) in 2006.

Quarterly financial information

The selected financial information provided below is derived from the Company's unaudited quarterly financial statements for each of the last eight quarters.



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2007 2006
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Q2 Q1 Q4 Q3 Q2 Q1
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Revenues $805 $287 $367 $412 $395 $475
Operating loss $(8,089) $(9,439) $(6,942) $(7,251) $(6,221) $(5,447)
Net loss $(8,089) $(9,439) $(6,942) $(7,251) $(6,221) $(5,447)
Basic and diluted
loss per share $(0.15) $(0.20) $(0.15) $(0.16) $(0.14) $(0.15)
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2005
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Q4 Q3
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Revenues $319 $409
Operating loss $(5,580) $(5,065)
Net loss $(5,651) $(5,218)
Basic and diluted loss per share $(0.16) $(0.15)
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Financial position

Theratechnologies maintains a sound financial position. At May 31, 2007, liquidities amounted to $76,305,000, which include cash and bonds of $74,462,000 and tax credits receivable of $1,843,000.

During the first quarter, the Company completed a public offering for the sale and issuance of 6,875,000 common shares, including those issued pursuant to the over-allotment option, for a cash consideration of $57,750,000. Issue costs totaled $3,238,000, resulting in net proceeds to the Company of $54,512,000. During the first half 2007, the Company issued 765,534 common shares following the exercise of stock options, for cash proceeds of $1,993,000. During the second quarter of 2007, the Company also issued 10,949 common shares to employees for a cash consideration of $104,000 in connection with its share purchase plan.

For the three-month period ended May 31, 2007, the burn rate from operating activities, excluding changes in operating assets and liabilities, was $7,467,000, compared to $5,827,000 in 2006. For the six-month period ending May 31, 2007, the burn rate from operating activities, excluding changes in operating assets and liabilities, increased to $15,029,000, compared to $10,560,000 for the same period in 2006. The increased burn rate in 2007 is mostly the result of the planned increase in Phase 3 program activities which translated into higher R&D expenses as described above.

Changes in accounting policies

At the beginning of the fiscal year 2007, the Company adopted the following sections of the Canadian Institute of Chartered Accountants (CICA) Handbook: Section 1530 entitled "Comprehensive income", Section 3251 entitled "Equity", Section 3855 entitled "Financial instruments - Recognition and measurement", Section 3861 entitled "Financial Instruments - Presentation and Disclosure", and Section 3865 entitled "Hedges". The adoption of these standards had no material impact on the Company's operating results (see note 2 of the Consolidated Financial Statements).

Outstanding share data

Between June 1 and July 9, 2007, 48,333 options were exercised, at an average exercise price of $3.87 per share, for cash proceeds of $187,000. On July 9, 2007, the number of shares issued and outstanding was 54,475,175, while outstanding options granted under the stock option plan were 2,106,466.

Subsequent event

Sonomed Inc., formerly Andromed Inc., a public company in which Theratechnologies had invested, SND Energy Ltd. (a newly formed entity) and StoneBridge Merchant Capital Corp. entered into an Arrangement Agreement (the "Agreement"). The main purpose of the Agreement is to substantially distribute all of the assets of Sonomed to its sharehoders. The shareholders of Sonomed have exchanged all of their common shares into units, each unit being comprised of one new common share and one new preferred share of Sonomed. Subsequently, all Sonomed new common shares have been exchanged on a one for one basis for SND Energy common shares, and all new preferred shares have been redeemed for a cash consideration of approximately $0.10 per share. On July 3, 2007, the Company received a cash consideration of $609,000 as a result of the redemption of the new preferred shares of Sonomed held by the Company.

Contractual obligations

Apart from the financings mentioned above, there were no material changes in contractual obligations during the semester, other than in the ordinary course of business.

Economic and industry factors

Economic and industry factors were substantially unchanged from those reported in the Company's 2006 annual report.

About Theratechnologies

Theratechnologies (TSX:TH) is a Canadian biopharmaceutical company that discovers or acquires novel therapeutic products for development and commercialization. These products target unmet medical needs in commercially attractive specialty markets. The most advanced program is TH9507, in Phase 3 clinical development in HIV-associated lipodystrophy. The Company also has other projects at earlier stages of development.

Additional information about Theratechnologies

Further information about Theratechnologies is available on the Company's website at www.theratech.com. Additional information is also available on SEDAR at www.sedar.com.

Forward-looking statements

This press release contains forward-looking statements reflecting the Company's current expectations regarding the TH9507 Phase 3 clinical program including, among others, the nature of the results and their timing, and the future development of the Company. By their very nature, these statements involve uncertainties and inherent risks, both general and specific, which give rise to the possibility that predictions will not materialize. We therefore caution investors against placing undue reliance on these statements. We refer you to pages 15 to 19 of the 2006 Annual Information Form, which contain a more exhaustive analysis of the risks and uncertainties connected to the business of the Company. We have no obligation whatsoever to update forward-looking statements and we do not undertake to do so.




Consolidated Financial Statements of
(Unaudited)

THERATECHNOLOGIES INC.

Six-month periods ended May 31, 2007 and 2006



THERATECHNOLOGIES INC.
Consolidated Balance Sheets
(Unaudited)

May 31, 2007, with comparative figures as at November 30, 2006
(in thousands of dollars)

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May 31, November 30,
2007 2006
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(Audited)

Assets

Current assets:
Cash $12,647 $16
Bonds (note 2) 19,927 18,023
Accounts receivable 547 289
Tax credits receivable 1,843 1,911
Research supplies 2,616 850
Prepaid expenses 768 391
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38,348 21,480

Bonds (note 2) 41,888 17,641
Investments in public companies (market value:
$975 in 2007; $1,112 in 2006) (note 2) 975 836
Property and equipment 1,646 1,580
Other assets (note 3) 8,441 9,431

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$91,298 $50,968
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Liabilities and Shareholders' Equity


Current liabilities:
Accounts payable and accrued liabilities $6,351 $6,493

Shareholders' equity:
Capital stock (note 4) 238,315 177,552
Contributed surplus 4,522 3,486

Accumulated other comprehensive loss (note 2) (561) -
Deficit (157,329) (136,563)
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(157,890) (136,563)

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Total shareholders' equity 84,947 44,475

Subsequent event (note 6)

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$91,298 $50,968
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See accompanying notes to unaudited consolidated financial statements.


THERATECHNOLOGIES INC.
Consolidated Statements of Earnings
(Unaudited)

Periods ended May 31, 2007 and 2006
(in thousands of dollars, except per share amounts)

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May 31, May 31,
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2007 2006 2007 2006
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(3 months) (6 months)

Revenues:
Royalties, technologies and
other $5 $4 $9 $182
Interest 800 391 1,083 688
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805 395 1,092 870

Operating costs and expenses:
Research and development 6,576 5,361 14,676 9,646
Tax credits (273) (208) (1,035) (384)
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6,303 5,153 13,641 9,262
General and administrative 1,884 1,082 3,682 2,540
Selling and market development 466 228 861 432
Patents and amortization of
other assets 200 153 395 304
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8,853 6,616 18,579 12,538

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Operating loss before
undernoted item (8,048) (6,221) (17,487) (11,668)

Realized loss on disposal of
investments in public
companies (41) - (41) -

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Net loss $(8,089) $(6,221) $(17,528) $(11,668)
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Basic and diluted loss
per share (note 4 (c)) $(0.15) $(0.14) $(0.35) $(0.29)
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Weighted average number of
common shares outstanding 54,215,473 44,091,368 50,663,254 39,869,091
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See accompanying notes to unaudited consolidated financial statements.



THERATECHNOLOGIES INC.
Consolidated Statements of Comprehensive Loss
(Unaudited)

Periods ended May 31, 2007 and 2006
(in thousands of dollars)

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May 31, May 31,
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2007 2006 2007 2006
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(3 months) (6 months)

Net loss $(8,089) $(6,221) $(17,528) $(11,668)

Unrealized losses on
available-for-sale financial
assets (874) - (640) -

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Comprehensive loss $(8,963) $(6,221) $(18,168) $(11,668)
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See accompanying notes to unaudited consolidated financial statements.



THERATECHNOLOGIES INC.
Consolidated Statement of Shareholders' Equity
(Unaudited)

Six-month period ended May 31, 2007
(in thousands of dollars)

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Accumulated
other
compre-
Capital stock hensive
----------------- Contributed income
Number Dollars surplus (loss) Deficit Total
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Balance,
November 30,
2006 46,775,359 $177,552 $3,486 $- $(136,563) $44,475

Issuance of
share capital 6,885,949 57,854 - - - 57,854

Share issue
costs - - - - (3,238) (3,238)

Exercise of
stock options:
Cash proceeds 765,534 1,993 - - - 1,993
Ascribed value - 916 (916) - - -

Stock-based
compensation - - 1,952 - - 1,952

Changes in
accounting
policies
(note 2) - - - 79 - 79

Net loss - - - - (17,528) (17,528)

Unrealized
losses on
available-for-
sale financial
assets - - - (640) - (640)

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Balance, May 31,
2007 54,426,842 $238,315 $4,522 $(561)$(157,329) $84,947
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See accompanying notes to unaudited consolidated financial statements.



THERATECHNOLOGIES INC.
Consolidated Statements of Cash Flows
(Unaudited)

Periods ended May 31, 2007 and 2006
(in thousands of dollars)

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May 31, May 31,
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2007 2006 2007 2006
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(3 months) (6 months)

Cash flows from operating
activities:
Net loss $(8,089) $(6,221) $(17,528) $(11,668)
Adjustments for:
Depreciation of property
and equipment 129 151 245 293
Amortization of other assets 135 102 261 225
Stock-based compensation 317 141 1,952 590
Realized loss on disposal of
investments in public
companies 41 - 41 -
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(7,467) (5,827) (15,029) (10,560)
Changes in operating assets
and liabilities:
Interest receivable on
bonds (830) (312) (630) (67)
Accounts receivable 25 63 (233) (114)
Tax credits receivable (273) (186) 68 (362)
Research supplies (295) 455 (974) (959)
Prepaid expenses (262) (135) (377) (213)
Accounts payable and
accrued liabilities (266) (739) (396) (154)
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(1,901) (854) (2,542) (1,869)
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(9,368) (6,681) (17,571) (12,429)

Cash flows from financing
activities:
Share issuance 1,334 21,850 59,847 21,850
Share issue costs (63) (1,270) (3,049) (1,270)
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1,271 20,580 56,798 20,580

Cash flows from investing
activities:
Additions to property and
equipment (202) (68) (266) (145)
Additions to other assets (34) (47) (68) (114)
Disposal of other assets - 80 - 80
Acquisition of bonds (34,379) (16,082) (34,379) (16,082)
Disposal of bonds 301 3,853 8,076 8,728
Disposal of investments in
public companies 41 - 41 -
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(34,273) (12,264) (26,596) (7,533)

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Net (decrease) increase in
cash (42,370) 1,635 12,631 618

Cash, beginning of period 55,017 70 16 1,087

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Cash, end of period $12,647 $1,705 $12,647 $1,705
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See note 5 (a) for supplemental cash flow information.

See accompanying notes to unaudited consolidated financial statements.



THERATECHNOLOGIES INC.
Notes to Consolidated Financial Statements
(Unaudited)

Periods ended May 31, 2007 and 2006
(in thousands of dollars, except per share amounts)
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1. Basis of presentation:

The financial statements included in this report are unaudited and reflect normal and recurring adjustments which are, in the opinion of the Company, considered necessary for a fair presentation. These financial statements have been prepared in conformity with Canadian generally accepted accounting principles. The same accounting policies as described in the Company's latest annual report have been used, except as described in note 2 below. However, these financial statements do not include all disclosures required under generally accepted accounting principles and, accordingly, should be read in connection with the financial statements and the notes thereto included in the Company's latest annual report. These interim financial statements have not been reviewed by auditors.

2. Changes in accounting policies:

Effective the commencement of its 2007 fiscal year, the Company has 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, which apply to fiscal years beginning on or after October 1, 2006, 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. A new financial statement has been presented in relation to the new standards.

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 on the consolidated balance sheet and are measured either at fair market value with the exception of loans and receivables, investments held-to-maturity and other financial liabilities, which are measured at amortized cost. Subsequent measurement and recognition of changes in fair value of financial instruments depend on their initial classification. Held-for-trading financial investments are measured at fair value and all gains and losses are included in net income in the period in which they arise. Available-for-sale financial instruments are measured at fair value with revaluation gains and losses included in other comprehensive income until the assets are removed from the balance sheet.

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 bonds and investments in public companies as available-for-sale financial assets and are now measured at fair market value. Previously, these investments were recorded at the lower of cost and fair market value. On December 1, 2006, the impact of $79 of these changes in accounting policies is included in the opening balance of accumulated other comprehensive income.

The adoption of standards of Sections 3251, 3861 and 3855 has no impact on the financial statements for the period ended May 31, 2007.

3. Other assets:



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May 31,
2007
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Accumulated Net book
Cost amortization value
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Intellectual property $7,670 $2,520 $5,150
Patent costs 1,825 944 881
Research supplies 2,360 - 2,360
Other assets 50 - 50

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$11,905 $3,464 $8,441
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November 30,
2006
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Accumulated Net book
Cost amortization value
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Intellectual property $7,670 $2,327 $5,343
Patent costs 1,737 876 861
Research supplies 3,152 - 3,152
Other assets 75 - 75

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$12,634 $3,203 $9,431
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4. Capital stock:

During the first quarter of 2007, the Company concluded a public offering for the sale and issue of 6,875,000 common shares, including the over-allotment option, for cash proceeds of $57,750. The issuance costs amounted to $3,238.

During the second quarter of 2007, the Company also issued 10,949 common shares to employees for a consideration of $104, in connection with its share purchase plan.

(a) Share option plan:

Changes in outstanding options granted under the Company's stock option plan for the year ended November 30, 2006 and the six-month period ended May 31, 2007 were as follows:



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Weighted
average
Number exercise price
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Options as at November 30, 2005 (audited) 2,300,664 $5.50
Granted 840,000 1.69
Cancelled (234,664) 6.70
Expired (355,000) 4.60

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Options as at November 30, 2006 (audited) 2,551,000 4.26

Granted 373,500 8.24
Cancelled (4,167) 1.59
Exercised (765,534) 2.60

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Options as at May 31, 2007 2,154,799 $5.54
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Between June 1, 2007 and July 9, 2007, 48,333 stock options were exercised at a weighted average price of $3.87 per share for a cash consideration of $187.

(b) Stock-based compensation and other stock-based payments:

The fair value of the options granted was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:



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2007 2006
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Risk-free interest rate 4.03% 4.06%
Expected volatility 68% 50%
Expected average option life in years 6 6
Expected dividend yield Nil Nil
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Dividend yield was excluded from the calculation, since it is the present
policy of the Company to retain all earnings to finance operations and
future growth.

The following table summarizes the weighted average fair value of stock
options granted during the periods ended May 31, 2007 and 2006:

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Weighted
average
grant-date
Number fair value
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Periods ended May 31 (6 months):
2007 373,500 $5.32
2006 785,000 0.88

Periods ended May 31 (3 months):
2007 85,000 5.35
2006 135,000 0.99
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(c) Diluted loss per share:


Diluted loss per share was not presented as the effect of options and
warrants would have been anti-dilutive. Furthermore, the exercise of
396,500 options (2006 - 3,761,000 options and warrants) has not been
considered in such computation since their exercise prices were higher than
the average market price during the reporting periods of 2007 and 2006.

5. Supplemental information:

(a) The following transactions were conducted by the Company and did not
impact cash flows:

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May 31, November 30,
2007 2006
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Additions to property and equipment included in
accounts payable and accrued liabilities $47 $2

Additions to other assets included in accounts
payable and accrued liabilities 56 36

Share issue costs included in accounts payable
and accrued liabilities 194 5

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(b) General and administrative expenses include a loss on exchange of $408
for the six-month period ended May 31, 2007 (gain of $76 for the same
period in 2006).

(c) The Company has reclassified in the net loss $64 of realized losses on
available-for-sale financial assets previously recorded in accumulated
other comprehensive income.

(d) In December 2006, the Company received tax credits of $1,103.


6. Subsequent event:

Sonomed Inc., formerly Andromed Inc., a public company in which Theratechnologies had invested, SND Energy Ltd. (a newly formed entity) and StoneBridge Merchant Capital Corp. entered into an Arrangement Agreement (the "Agreement"). The main purpose of the Agreement is to substantially distribute all of the assets of Sonomed to its shareholders. The shareholders of Sonomed have exchanged all of their common shares into units, each unit being comprised of one new common share and one new preferred share of Sonomed. Subsequently, all Sonomed new common shares have been exchanged on a one-for-one basis for SND Energy common shares, and all new preferred shares have been redeemed for a cash consideration of approximately $0.10 per share. On July 3, 2007, the Company received a cash consideration of $609 as a result of the redemption of the new preferred shares of Sonomed held by the Company.

Contact Information