Thallion Pharmaceutiques Inc.
TSX : TLN

Thallion Pharmaceutiques Inc.

July 12, 2007 16:00 ET

Thallion Announces 2007 Second Quarter Results

MONTREAL, QUEBEC--(Marketwire - July 12, 2007) - Thallion Pharmaceuticals Inc. (TSX:TLN) today announced its operational and financial results for the 2007 second quarter which ended on May 31, 2007.

Corporate Highlights

- Ecopia BioSciences Inc. and Caprion Pharmaceuticals Inc. completed their amalgamation and announced the creation of a new entity called Thallion Pharmaceuticals Inc. (Thallion) effective March 14, 2007.

- Completed a private placement offering which raised gross proceeds to Thallion of approximately $45 million on March 14, 2007.

- Announced the sale of an 80% stake in the Company's wholly-owned proteomics business, including the CellCarta® discovery platform, to Caprion Proteomics Inc., a company formed by Great Point Partners, LLC, subsequent to the end of the quarter. The purchaser, Caprion Proteomics Inc., assumed $22,150,259 in long-term debt obligations from Thallion.

Development Highlights

- Participated in a joint advisory committee panel convened by the U.S. Food and Drug Administration (FDA) which discussed the clinical trial designs of products targeting Shiga Toxin-producing E. coli (STEC) infection and the Company's Shigamabs program.

- Presented three scientific posters at the American Association for Cancer Research (AACR). Two of the posters highlighted the dual mechanism of action of ECO-4601, as a potential inhibitor of the RAS pathway and as a binding agent to the PBR. The third poster reported the expression of M2PK, the primary target of CAP-232, in specific human tumor types.

- Reported preliminary data from 14 patients enrolled in the ECO-4601 Phase I/II trial at the American Society of Clinical Oncology (ASCO), subsequent to the end of the quarter. The results demonstrated the product to be safe and well tolerated in these patients with no maximum tolerated dose attained. Of the seven patients that received at least three cycles of treatment, six demonstrated stable disease.

Financial Highlights

The financial highlights compare Thallion's 2007 financial position and operating results to Ecopia's 2006 financial position and operating results due to the completion of the amalgamation between Ecopia and Caprion on March 14, 2007.

Total revenues for the three-month period ended May 31, 2007 were $1,731,093 compared with $38,635 for the corresponding period in 2006. Total revenues include contract revenues related to our proteomics business which was subsequently sold on July 10, 2007 and as such, will no longer form part of our revenues as of this date forward. Total revenues for the three-month period ended May 31, 2007 consisted primarily of $1,409,874 in contract revenues, compared with nil during the same period last year and $295,493 in interest revenue compared with $38,635 for the corresponding period last year.

Total revenues for the six-month period ended May 31, 2007 were $1,752,175 compared with $100,811 for the same period last year. Total revenues include contract revenues related to our proteomics business which was subsequently sold on July 10, 2007 and as such, will no longer form part of our revenues as of this date forward. The difference in total revenues for the respective three-month and six-month periods are primarily due to contract revenue from research collaborations and license agreements using the CellCarta® platform obtained through the acquisition of Caprion on March 14, 2007.

Costs and expenses for the three-month period ended May 31, 2007 were $6,337,132 compared with $2,207,576 for the corresponding period last year. Costs and expenses for the six-month period ended May 31, 2007 were $8,329,382 compared with $4,335,715 for the corresponding period last year. Costs and expenses include expenses related to the Company's proteomics business which was sold on July 10, 2007 and as such, will no longer form part of the Company's costs and expenses as of this date forward.

Research and development expenses for the three-month period ended May 31, 2007 were $3,904,575 compared with $1,205,131 for the three-month period ended May 31, 2006.

Research and development expenses for the six-month period ended May 31, 2007 were $5,513,332 compared with $2,693,029 for the six-month period ended May 31, 2006. The differences in research and development expenses for the respective three-month and six-month periods are primarily due to the development of two additional clinical programs acquired from Caprion, namely Shigamabs and CAP-232, research and development costs associated to the proteomics business acquired from Caprion, as well as costs related to the ECO-4601 program including GMP production, scale-up of the production process and the treatment of patients in the ongoing Phase I/II clinical trial.

General and administrative expenses for the three-month period ended May 31, 2007 were $1,473,766 compared with $1,082,387 for the corresponding period last year.

General and administrative expenses for the six-month period ended May 31, 2007 were $1,958,124 compared with $1,804,517 for the corresponding period last year. The differences in general and administrative expenses for the respective three-month and six-month periods are primarily due to the addition of Caprion's operations following the amalgamation on March 14, 2007.

Net loss for the three-month period ended May 31, 2007 was $4,606,039 or $0.16 per share, compared to a net loss of $2,168,941 or $0.31 per share for the three-month period ended May 31, 2006.

Net loss for the six-month period ended May 31, 2007 was $6,577,207 or $0.37 per share, compared to a net loss of $4,234,904 or $0.61 per share for the six-month period ended May 31, 2006

As at May 31, 2007, the Company's cash position amounted to $31,369,386 which consists of cash and cash equivalents and short-term investments. Tax credits receivable amounted to $3,117,146. Consequently, the Company's liquidity available amounted to $34,486,532 compared with $3,610,584 on November 30, 2006. The increase in liquidity is primarily due to the completion of a $45 million private placement on March 14, 2007 offset by cash expenses relating to operations for the first six months of 2007 as well as obligations existing at the time of the amalgamation.

As at July 11, 2007 the Company had 31,994,316 common shares outstanding, 9,945,417 warrants, and 2,159,310 options.

Outlook

With the amalgamation, financing and sale of the Company's proteomics business now completed, the Company can now apply its focus and resources on developing its clinical assets, with emphasis on its three therapeutic product candidates Shigamabs, ECO-4601 and CAP-232.

Notice of Conference Call

Thallion will hold a conference call today, July 12, 2007, at 4:30 p.m. (ET) hosted by Mr. Lloyd M. Segal, Chief Executive Officer and Mr. Michael Singer, Chief Financial Officer to discuss the Company's financial results and corporate developments. To access the conference call by telephone, dial 416-644-3415 or 1-800-732-9303. A live audio webcast of the call will be available at www.thallion.com. The webcast will be archived for 90 days.

About Thallion Pharmaceuticals Inc.

Thallion Pharmaceuticals Inc. (TSX:TLN) is a biotechnology company developing pharmaceutical products in the areas of infectious disease and oncology. Thallion's clinical-stage programs include: Shigamabs®, a dual antibody product for the treatment of Shigatoxin-producing E. coli bacterial infections; ECO-4601, a novel anticancer therapy derived from a nonpathogenic microorganism; and CAP-232, a targeted therapy with potential efficacy in multiple oncology indications. Thallion Pharmaceuticals was formed on March 14, 2007 by the amalgamation of Ecopia BioSciences Inc. and Caprion Pharmaceuticals Inc. Additional information about the Company can be obtained at www.thallion.com.

Forward-Looking Statements

This press release contains certain forward-looking statements, including, without limitation, statements containing the words "believe", "may", "plan", "will", "estimate", "continue", "anticipate", "intend", "expect" and other similar expressions which constitute "forward-looking information" within the meaning of applicable Canadian securities laws. Forward-looking statements reflect the Company's current expectation and assumptions, and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. These forward-looking statements involve risks and uncertainties including, but not limited to, changing market conditions, the successful and timely completion of clinical studies, the establishment of corporate alliances, the impact of competitive products and pricing, new product development, uncertainties related to the regulatory approval process and other risks detailed from time-to-time in the Company's ongoing filings with the Canadian securities regulatory authorities which filings can be found at www.sedar.com. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements either as a result of new information, future events or otherwise, except as required by applicable Canadian securities laws.



THALLION PHARMACEUTICALS INC.
Consolidated Balance Sheets
(Unaudited)

------------------------------------------------------------------------
------------------------------------------------------------------------
May 31 November 30
2007 2006
------------------------------------------------------------------------
(Unaudited) (Audited)

Assets

Current assets :
Cash and cash equivalents $26,184,438 $411,621
Short-term investments 5,184,948 2,448,541
Sales tax receivable and other 823,689 78,441
Accounts receivable 202,849 -
Tax credits receivable 3,117,146 750,422
Deposits and prepaid expenses 304,948 124,359
Current assets held for sale 26,445,859 -
------------------------------------------------------------------------
62,263,877 3,813,384

Long-term deposit 400,000 -

Property, plant and equipment 4,664,757 1,653,408

Intangible assets and goodwill 27,331,128 941,155

Deferred costs - 48,313
------------------------------------------------------------------------
$94,659,762 $6,456,260
------------------------------------------------------------------------
------------------------------------------------------------------------

Liabilities and Shareholders' Equity

Current liabilities :
Accounts payable and accrued
liabilities $3,193,247 $1,096,456
Current liabilities - assets held
for sale 24,848,009 -
------------------------------------------------------------------------
28,041,256 1,096,456

Contingent payment in the form of
preferred shares 1 -

Shareholders' equity:
Capital stock 115,450,222 54,567,028
Warrants 9,986,860 -
Contributed surplus 1,127,370 846,046
Deficit (59,918,312) (50,053,270)
Accumulated other comprehensive loss (27,635) -
------------------------------------------------------------------------
66,618,505 5,359,804
Subsequent event
------------------------------------------------------------------------
$94,659,762 $6,456,260
------------------------------------------------------------------------
------------------------------------------------------------------------



THALLION PHARMACEUTICALS INC.
Consolidated Statements of Operations
(Unaudited)

------------------------------------------------------------------------
------------------------------------------------------------------------
Three-month period Six-month period
ended May 31 ended May 31
------------------------------------------------------------------------
2007 2006 2007 2006
------------------------------------------------------------------------

Revenues
Contract revenues $1,409,874 $- $1,409,874 $-
Interest revenues 295,493 38,635 316,575 100,811
Other revenues 25,726 - 25,726 -
------------------------------------------------------------------------
1,731,093 38,635 1,752,175 100,811
------------------------------------------------------------------------

Costs and expenses :
Research and
development 3,904,575 1,205,131 5,513,332 2,693,029
Tax credits and
grants (350,883) (219,252) (554,420) (436,742)
------------------------------------------------------------------------
3,553,692 985,879 4,958,912 2,256,287

General and
administrative 1,473,766 1,082,387 1,958,124 1,804,517
Amortization of
property, plant
and equipment 160,078 128,026 250,166 252,321
Amortization of
intangible assets 637,907 11,284 650,491 22,590
Financial expenses 408,522 - 408,522 -
Foreign exchange
loss 103,167 - 103,167 -
------------------------------------------------------------------------
6,337,132 2,207,576 8,329,382 4,335,715
------------------------------------------------------------------------
------------------------------------------------------------------------
Net loss $(4,606,039) $(2,168,941) $(6,577,207) $(4,234,904)
------------------------------------------------------------------------
------------------------------------------------------------------------

Net basic and
diluted loss
per share $(0.16) $(0.31) $(0.37) $(0.61)
------------------------------------------------------------------------
------------------------------------------------------------------------

Weighted average
number of
outstanding shares 28,185,401 6,987,158 17,702,753 6,987,158
------------------------------------------------------------------------



THALLION PHARMACEUTICALS INC.
Consolidated Statements of Deficit
(Unaudited)

Periods ended May 31, 2007 with comparative figures for 2006

------------------------------------------------------------------------
------------------------------------------------------------------------
2007 2006
------------------------------------------------------------------------
Deficit, beginning of period $(50,053,270) $(43,249,433)

Net loss (6,577,207) (4,234,904)

Share issue costs (3,287,835) -

------------------------------------------------------------------------
Deficit, end of period $(59,918,312) $(47,484,337)
------------------------------------------------------------------------



Consolidated Statements of Comprehensive Loss
(Unaudited)

------------------------------------------------------------------------
------------------------------------------------------------------------
Three-month period Six-month period
ended May 31 ended May 31
------------------------------------------------------------------------

2007 2006 2007 2006
------------------------------------------------------------------------

Net loss for
the period $(4,606,039) $(2,168,941) $(6,577,207) $(4,234,904)

Other
comprehensive
loss
Unrealized loss
on available for
sale investments (27,835) - (27,635) -
------------------------------------------------------------------------
Comprehensive loss $(4,633,874) $(2,168,941) $(6,604,842) $(4,234,904)
------------------------------------------------------------------------
------------------------------------------------------------------------



THALLION PHARMACEUTICALS INC.
Consolidated Statements of Cash Flows
(Unaudited)

------------------------------------------------------------------------
------------------------------------------------------------------------
Three-month period Six-month period
ended May 31 ended May 31
------------------------------------------------------------------------

2007 2006 2007 2006
------------------------------------------------------------------------

Cash flows from
operating
activities:
Net loss from
operations $(4,606,039) $(2,168,941) $(6,577,207) $(4,234,904)
Adjustments for :
Amortization of
property, plant
and equipment 160,078 128,026 250,166 252,321
Amortization of
Intangible
assets 637,907 11,284 650,491 22,590
Loss on disposal
of patents - - 2,512 13,402
Write-off of
patents - 6,089 - 6,089
Stock-based
compensation 191,834 232,929 281,324 290,750
------------------------------------------------------------------------
(3,616,220) (1,790,613) (5,392,714) (3,649,752)

Changes in
operating assets
and liabilities:
Interest receivable 110,415 26,317 120,865 85,749
Accounts receivable 7,540 - 7,540 -
Sales tax
receivable and
other (359,673) 30,188 (437,135) (20,988)
Tax credits
receivable (224,883) (219,252) (428,420) (436,742)
Deposits and
prepaid expenses 84,831 (141,724) 54,314 (215,935)
Current assets
held for sale (31,911) - (31,911) -
Current liabilities
- assets held for
sale (594,955) - (594,955) -
Accounts payable
and accrued
liabilities (3,889,149) 147,656 (3,356,673) (478,154)
------------------------------------------------------------------------
(4,897,785) (156,815) (4,666,375) (1,066,070)

------------------------------------------------------------------------
(8,514,005) (1,947,428) (10,059,089) (4,715,822)

Cash flows from
financing
activities:
Proceeds from
issuance of
shares and
warrants 45,040,000 - 45,040,000 -
Share issue
costs (3,272,843) - (3,272,843) -
Decrease in bank
indebtedness (1,720,803) - (1,720,803) -
------------------------------------------------------------------------
40,046,354 - 40,046,354 -

Cash flows from
investing
activities:
Acquisition of
short-term
investments (4,999,116) - (5,299,116) (1,341,450)
Proceeds from
disposal of
short-term
investments 731,116 2,028,740 2,414,211 6,182,459
Additions to
property, plant
and equipment (27,436) (6,798) (29,362) (66,192)
Costs relating to
intangible assets
and goodwill (168,496) (20,744) (259,638) (82,696)
Business
acquisition,
net of cash
acquired (961,833) - (1,040,543) -
------------------------------------------------------------------------
(5,425,765) 2,001,198 (4,214,448) 4,692,121
------------------------------------------------------------------------

Net increase
(decrease) in
cash 26,106,584 53,770 25,772,817 (23,701)

Cash and cash
equivalents,
beginning of
period 77,854 185,727 411,621 263,198

------------------------------------------------------------------------
Cash and cash
equivalents, end
of period $26,184,438 $239,497 $26,184,438 $239,497
------------------------------------------------------------------------
------------------------------------------------------------------------

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