Allon Therapeutics Inc.
TSX : NPC

Allon Therapeutics Inc.

August 11, 2006 08:30 ET

Allon Therapeutics Releases Second Quarter Operating Results

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Aug. 11, 2006) - Allon Therapeutics Inc. (TSX:NPC), The Neuro Protection Company™, reported today in its second quarter 2006 operating results that it continued to achieve all of its milestones during the second quarter, including the beginning of patient dosing in the Company's first Phase II clinical trial designed to show human efficacy.

The Phase II trial is evaluating the Company's product AL-208 as a treatment for the mild cognitive impairment (MCI) that commonly occurs following coronary artery bypass graft (CABG) surgery. This Phase II trial comes after three Phase I trials showing Allon's drugs to be safe and well tolerated in more than 100 subjects.

Other achievements during the quarter included completion of patient dosing for a Phase Ib human clinical trial evaluating the safety, tolerability and pharmacokinetics of AL-208 as a treatment for neurodegenerative indications where multiple doses are required.

Gordon McCauley, President and CEO of Allon, said the Phase II trial is particularly significant for Allon because it is the first trial to evaluate the effectiveness of one of the Company's drugs in patients.

"Although this trial will specifically determine whether AL-208 works to prevent or reduce MCI post-CABG, this is the first of several human clinical trials that will evaluate the effectiveness of our drugs in different neurodegenerative diseases and conditions," McCauley said.

McCauley said the Company was also on track to complete other milestones during the remainder of the year, including commencement of Phase Ib and Phase II clinical trials evaluating Allon's product AL-108 as a treatment for Alzheimer's disease.

"Our ultimate goal remains the development of drugs that halt or prevent serious degenerative diseases and injury to the central nervous system - in contrast to the therapies currently available that address only the symptoms," McCauley said.

The AL-208 Phase II trial is evaluating the drug's safety and effectiveness at preventing or reducing MCI on CABG surgery patients. Preventing or reducing MCI post-CABG has a potential market estimated at US$500-million for which there is no available treatment today.

During the first stage of the Phase II trial, the safety of AL-208 will be confirmed at medical centres in the United States at increasing doses.

Allon announced August 2, 2006 filing of a Clinical Trial Application with Health Canada for approval to add Canadian sites to the second stage of this trial. The second stage will be a placebo-controlled, double-blind, parallel-group evaluation to determine the efficacy of a single dose of AL-208 total number patients 200 at up to 20 medical centres in the U.S. and Canada.


RESULTS OF OPERATIONS

For the three months ended June 30, 2006, Allon reported a net loss of $1,984,335 ($0.06 per share) compared to a net loss of $1,261,196 ($0.05 per share) for the three months ended June 30, 2005 (Q2 2005). For the six months ended June 30, 2006 (YTD 2006), Allon reported a net loss of $3,629,174 ($0.11 per share) compared to a net loss of $2,465,011 ($0.09 per share) for the six months ended June 30, 2005 (YTD 2005).

The increased quarter over quarter loss of $723,139 includes a $157,286 difference relating to the Q2 2005 recognition of a future income tax asset to offset a tax liability incurred as a result of the 2004 purchase of medical technology. Each quarter the Company continued to recognize an income tax asset on net losses to the extent that the tax liability was fully offset in Q1 2006. The YTD comparative increased loss of $1,164,163 includes a $481,833 difference relating to the recognition of a future income tax asset. The 2006 increased pre-tax losses of $565,853 for the comparable three months and $682,330 for the comparable six months reflect the progression of the Company's clinical development programs and increased personnel requirements to support the clinical advancement of both AL-108 and AL-208.

RESEARCH AND DEVELOPMENT

For the three month period ended June 30, 2006, research and development (R&D) expenses were $1,215,810 compared to $830,576 in Q2 2005. The YTD 2006 research and development expenses were $2,390,841 compared to $2,146,291 for YTD 2005. The quarter over quarter and YTD increases relate to the timing of clinical trial expenses as well as the advancement and expansion of the clinical development programs for both AL-108 and AL-208.

GENERAL AND ADMINISTRATIVE

For the three month period ended June 30, 2006, general and administrative expenses were $453,584 compared to $360,867 in Q2 2005. The increase of $92,717 over Q2 2005 relates to increased staff and infrastructure required to support Allon's drug development programs.

For the six month period ended June 30, 2006, general and administrative expense were $984,831 compared to $681,762 for YTD 2005. The YTD 2006 increase of $303,069 over YTD 2005 relates to increased staff and infrastructure and compensation expenses incurred in the first quarter, but related to the achievement of 2005 milestones.

AMORTIZATION

Amortization expenses for the three month period ended June 30, 2006 were $134,070 compared to $135,851 in Q2 2005. For the six month period ended June 30, 2006, amortization expenses were $291,155 compared to $271, 260 for YTD 2005. The YTD 2006 increase of $19,895 over YTD 2005 primarily resulted from a one-time adjustment of $23,092 to amortization expense in Q1 2006 relating to a change in estimate of the salvage value of depreciable tangible assets.

OTHER INCOME/(EXPENSES)

For the three month period ended June 30, 2006, the Company incurred other expenses of $180,871 compared to $91,188 in Q2 2005. The increased expense of $89,683 primarily relates to increases in foreign exchange losses that are partially offset by increased interest income from investments. Foreign exchange losses were $190,601 in Q2 2006 compared to $71,403 in Q2 2005 and resulted from loss on US dollar investments, partially offset by gain on translation of US balances compared to the same period last year when foreign exchange losses were limited to translation of US balances. In Q2 2006 net interest earned on short term investments and cash balances was $59,020 compared to $25,241 in Q2 2005. The increased income of $33,779 is due to improved rates of return on short term investments and cash.

For the six month period ended June 30, 2006, the Company incurred other expenses of $111,884 compared to other income of $2,932 for YTD 2005. The increased expense of $114,816 primarily relates to increases in foreign exchange loss and stock based compensation that are partially offset by increases in net interest income. A YTD increase of $138,494 in foreign exchange loss over YTD 2005 resulted from loss on US dollar investments, partially offset by gain on translation of US balances compared to the same period last year when foreign exchange loss was limited to translation of US balances. An increase of $29,800 in stock based compensation expense for YTD 2006 over YTD 2005 reflects the issuance of options to new and existing employees and directors in accordance with Allon's compensation policy and increased staffing levels required to support the advancement of the Company's drug development programs. Net interest from short term investments and cash balances increased by $51,318 due to improved rates of return on short term investments.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2006, the Company had cash and short-term investments of $5,068,574 compared to $7,308,466 at March 31, 2006 and $9,519,838 at December 31, 2005. Short-term investments are held in high-grade, liquid commercial paper and other low risk investments. As investments mature, balances may be re-invested for periods of up to one year to match the Company's future cash requirements. At June 30, 2006 maturities on investments ranged from 30 days to 2 months.

At June 30, 2006, the Company had working capital of $5.2 million. There were 2.2 million stock options exercisable at prices between $0.001 and $1.72 per share. If all outstanding stock options were exercised, proceeds of $1.4 million would be generated.

The Company believes that its cash and short-term investments as at June 30, 2006 and expected interest income will be sufficient to fund operations and commitments into the second half of 2007.

About Allon

Allon Therapeutics Inc. is a clinical-stage Canadian biotechnology company developing drugs that protect against neurodegenerative conditions such as Alzheimer's, cognitive impairment, stroke, traumatic brain injury, multiple sclerosis and neuropathy. The Company is listed on the Toronto Stock Exchange under the trading symbol "NPC" (Neuro Protection Company™) and based in Vancouver.

Forward-Looking Statements

There are forward-looking statements contained herein that are not based on historical fact, including without limitation statements containing the words "believes", "may", "plans", "will", "estimate", "continue", "anticipates", "intends", "expects", and similar expressions. Such forward-looking statements involve 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 such forward-looking statements. Such factors include, among others, Allon's stage of development, lack of product revenues, additional capital requirements, risks associated with the completion of clinical trials and obtaining regulatory approval to market Allon's products, the ability to protect its intellectual property and dependence on collaborative partners. These factors should be considered carefully and readers are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future results, events or developments.

Contact Information