Thallion Pharmaceuticals Inc.
TSX : TLN

Thallion Pharmaceuticals Inc.

July 10, 2008 17:14 ET

Thallion Announces 2008 Second Quarter Results

MONTREAL, QUEBEC--(Marketwire - July 10, 2008) - Thallion Pharmaceuticals Inc. (TSX:TLN) today announced its operational and financial results for the 2008 second quarter which ended on May 31, 2008.

Highlights

- Received authorization from the Therapeutic Products Directorate (TPD) of Health Canada to initiate a Phase II clinical trial of TLN-232, subsequent to the end of the quarter. The trial will evaluate TLN-232 as a monotherapy treatment for metastatic melanoma in patients that have failed at least one prior therapy.

- Also received authorization from the TPD of Health Canada to initiate a Phase II clinical trial of TLN-4601. The trial will evaluate TLN-4601 as a monotherapy treatment for patients with glioblastoma multiforme (GBM), an advanced form of brain cancer, as a second line therapy.

- Announced the deferral for initiation of the Shigamabs® Phase II/III multinational clinical trial.

- The Board of Directors has approved the nomination of two new members, Claude C. Bismuth, M.B.A., F.C.A. and Halvor Jaeger, M.D., F.C.P., who joined the Board effective July 10, 2008. Mr. Bismuth is a former Senior Life Sciences Partner at Ernst & Young and has also agreed to serve as a member of Thallion's Audit Committee. Dr. Jaeger is the Chief Executive Officer of Akela Pharma Inc. (TSX: AKL), a drug development company focused on developing therapies for the inhalation and pain markets.

- Expanded U.S. patent coverage on TLN-4601 having claims to methods of treating a broad range of solid and hematopoietic cancer conditions.

"We have now successfully advanced each of our two oncology candidates, TLN-4601 and TLN-232, into Phase II clinical trials for our chosen first indications. Each of our candidates has already demonstrated a clinical response in multiple cancer indications and work on targets that are gaining increased attention within the oncology field. As we advance these two trials we believe that each candidate represents an attractive licensing asset to potential partners. In the meantime, we will continue to set clear milestones and work to achieve them on schedule in order to advance our pipeline and further strengthen the confidence of our existing investors," said Lloyd M. Segal, Chief Executive Officer of Thallion Pharmaceuticals Inc. "We continue to engage potential partners that could support the development and commercialization of Shigamabs®. Obtaining the appropriate partner, or regional partners, is critical in order to offset the costs of a multinational pivotal trial in the current capital climate, as well as to provide the necessary point-of-care distribution that a successful Shigatoxin-producing bacterial infection therapy would require."

Financial Highlights

Total revenues for the three-month period ended May 31, 2008 were $176,754 compared with $1,731,093 for the corresponding period in 2007. Total revenues from the 2007 period included contract revenues related to Thallion's proteomics business which was sold on July 10, 2007 and as such, no longer formed part of the Company's revenues as of that date forward. Total revenues for the three-month period ended May 31, 2008 consisted entirely of interest revenues, compared with interest revenues of $295,493 during the same period in 2007. Contract and other revenues in the three-month period ended May 31, 2008 were nil compared with $1,435,600 for the same period last year.

Total revenues for the six-month period ended May 31, 2008 were $436,188 compared with $1,752,175 for the same period in 2007. Total revenues from the 2007 period included contract revenues related to Thallion's proteomics business which was sold on July 10, 2007 and as such, no longer formed part of the Company's revenues as of that date forward. Total revenues for the six-month period ended May 31, 2008 consisted entirely of interest revenue compared with $316,575 in interest revenues in the same period last year. Contract and other revenues in the six-month period ended May 31, 2008 were nil compared with $1,435,600 for the same period last year.

Research and development expenses before tax credits for the three-month period ended May 31, 2008 were $2,687,452 (including approximately $320,000 of external costs pertaining to Shigamabs®) compared with $3,904,575 for the three-month period ended May 31, 2007 (including approximately $235,000 of external costs pertaining to Shigamabs®). The change in research and development expenses before tax credits is a result of $1,335,483 of expenses during the three-month period ended May 31, 2007 related to the Company's proteomics business which was sold on July 10, 2007 and as such, no longer formed part of the Company's research and development expenses as of that date forward.

Research and development expenses before tax credits for the six-month period ended May 31, 2008 were $5,657,331 (including approximately $1,218,000 of external costs pertaining to Shigamabs®) compared with $5,513,332 for the six-month period ended May 31, 2007 (including approximately $235,000 of external costs pertaining to Shigamabs®). The research and development expenses before tax credits during the six-month period ended May 31, 2008 related entirely to Thallion's three clinical programs under development, compared to the corresponding period last year in which the Company completed the acquisition of Caprion's two clinical programs.

General and administrative expenses for the three-month period ended May 31, 2008 were $1,176,942 compared with $1,473,766 for the corresponding period last year. General and administrative expenses for the 2007 period included expenses related to Thallion's proteomics business which was sold on July 10, 2007 and as such, no longer formed part of the Company's general and administrative expenses as of that forward.

General and administrative expenses for the six-month period ended May 31, 2008 were $2,527,409 compared with $1,958,124 for the same period last year. The change in general and administrative expenses for the six-month period is primarily related to the addition of Caprion Pharmaceutical Inc.'s operations following the amalgamation of Ecopia BioSciences Inc. and Caprion on March 14, 2007.

The loss before non-recurring items for the second quarter of 2008 amounted to $3,549,261, compared to a loss before non-recurring items of $4,606,039 in the second quarter of 2007. The loss before non-recurring items for the six months ended May 31, 2008 was $7,563,348, compared to a loss before non-recurring items of $6,577,207 for the six months ended May 31, 2007. The changes in the Company's loss before non-recurring items are primarily due to changes in R&D and G&A expenses as a result of the amalgamation with Caprion on March 14, 2007 and the sale of the Company's proteomics business on July 10, 2007.

Net loss for the three-month period ended May 31, 2008 was $5,948,117 or $0.19 per share, compared to a net loss of $4,606,039 or $0.16 per share for the three-month period ended May 31, 2007. Net loss for the six-month period ended May 31, 2008 was $9,917,204 or 0.31 per share, compared to a net loss of $6,577,207 or $0.37 per share for the six-month period ended May 31, 2007. The increases in net loss are primarily due to non-recurring items, notably lease exit costs recorded in the second quarter of 2008 reflecting contractual lease obligations, reduced by expected sub-lease rentals, of a redundant facility as a result of the final operational integration completed at the end of the second quarter and related write-off of property, plant and equipment also recorded in the second quarter of 2008.

As at May 31, 2008, the Company's cash position amounted to $17,581,091, which consists of cash, cash equivalents and short-term investments. Tax credits receivable amounted to $1,326,999. Consequently, the Company's liquidity available amounted to $18,908,090 compared with $26,070,463 on November 30, 2007. The decrease in liquidity is primarily due to cash expenses relating to operations for the first six months of 2008.

As at July 10, 2008, the Company had 32,144,316 common shares outstanding, 9,530,000 warrants, and 2,508,505 options.

Outlook

Thallion is focused on advancing the development of its clinical assets to the next significant milestone events, specifically as it relates to its oncology candidates. These milestones include:

- Reporting final results from its TLN-232 Phase II renal cell carcinoma trial conducted in Europe at the European Society for Medical Oncology 2008 annual meeting in Stockholm, Sweden to be held in September.

- Initiating enrollment in its Phase II trial evaluating TLN-4601 as a monotherapy treatment for glioblastoma multiforme in the third quarter of 2008.

- Initiating enrollment in its Phase II trial of TLN-232 as a monotherapy for metastatic melanoma patients in the third quarter of 2008.

- Continuing its licensing discussions with the intent to complete a strategic partnership and initiate a multinational Phase II/III trial evaluating Shigamabs®.

- Continuing to pursue potential partners for each of the three programs to support development activities.

Notice of Conference Call

Thallion will hold a conference call on Monday, July 14, 2008, 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 416-644-3414 or 800-733-7571. 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 oncology and infectious disease. Thallion has three clinical programs at a Phase II, or later, stage of development. Two late stage Phase II oncology trials which include: TLN-4601, a novel anti-cancer therapy derived from a nonpathogenic microorganism and TLN-232, a targeted therapy with potential efficacy in multiple oncology indications. The Company's third product candidate, Shigamabs®, is a dual antibody product for the treatment of Shigatoxin-producing E. coli bacterial infections. 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
May 31, 2008 and November 30, 2007
(Unaudited)

2008 2007
-------------------------------------------------------------------------
Assets (audited)
Current assets:
Cash and cash equivalents $7,822,022 $10,606,914
Short-term investments 9,759,069 12,976,047
Sales tax receivable and other 494,646 651,591
Accounts receivable 180,132 68,160
Tax credits receivable 1,326,999 2,487,502
Deposits and prepaid expenses 720,863 711,017
-------------------------------------------------------------------------
20,303,731 27,501,231

Long-term deposit 300,000 300,000
Property, plant and equipment 3,393,938 4,340,543
-------------------------------------------------------------------------
$23,997,669 $32,141,774
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $2,706,855 $3,191,749
Deferred revenues 82,750 -
Current portion of lease exit obligations 613,220 -
-------------------------------------------------------------------------
3,402,825 3,191,749

Long-term portion of lease exit obligations 1,115,330 -

Redeemable special preferred shares - 1

Shareholders' Equity:
Capital stock 115,502,723 115,450,222
Warrants 9,986,860 9,986,860
Contributed surplus 2,115,700 1,765,409

Deficit (108,115,046) (98,197,842)
Accumulated other comprehensive loss (10,723) (54,625)
-------------------------------------------------------------------------
(108,125,769) (98,252,467)
-------------------------------------------------------------------------
Total shareholders' equity 19,479,514 28,950,024

Commitments, contingencies and guarantees
-------------------------------------------------------------------------
$23,997,669 $32,141,774
-------------------------------------------------------------------------
-------------------------------------------------------------------------



THALLION PHARMACEUTICALS INC.
Consolidated Statements of Operations
(Unaudited)

Three-month period Six-month period
ended May 31 ended May 31
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2008 2007 2008 2007
-------------------------------------------------------------------------
Revenues
Contract revenues $- $1,409,874 $- $1,409,874
Interest revenues 176,754 295,493 436,188 316,575
Other revenues - 25,726 - 25,726
-------------------------------------------------------------------------
176,754 1,731,093 436,188 1,752,175
Costs and expenses
Research and
development 2,687,452 3,904,575 5,657,331 5,513,332
Tax credits (270,000) (350,883) (555,000) (554,420)
-------------------------------------------------------------------------
2,417,452 3,553,692 5,102,331 4,958,912

General and
administrative 1,176,942 1,473,766 2,527,409 1,958,124
Amortization of
property, plant
and equipment 169,371 160,078 335,595 250,166
Amortization of
intangible assets - 637,907 - 650,491
Financial expenses - 408,522 - 408,522
Foreign exchange
loss 7,250 103,167 34,201 103,167
-------------------------------------------------------------------------
3,771,015 6,337,132 7,999,536 8,329,382
-------------------------------------------------------------------------

Loss before
non-recurring
items (3,594,261) (4,606,039) (7,563,348) (6,577,207)

Non-recurring items
Lease exit costs 1,728,550 - 1,728,550 -
Write-off of
property, plant
and equipment 625,306 - 625,306 -
-------------------------------------------------------------------------
2,353,856 - 2,353,856 -
-------------------------------------------------------------------------
Net loss $(5,948,117) $(4,606,039) $(9,917,204) $(6,577,207)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net basic and
diluted loss
per share $(0.19) $(0.16) $(0.31) $(0.37)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted average
number of
outstanding
shares 32,144,316 28,185,401 32,104,972 17,702,753
-------------------------------------------------------------------------
-------------------------------------------------------------------------


THALLION PHARMACEUTICALS INC.
Consolidated Statements of Comprehensive Loss
(Unaudited)

Three-month period Six-month period
ended May 31 ended May 31
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2008 2007 2008 2007
-------------------------------------------------------------------------
Net loss for
the period $(5,948,117) $(4,606,039) $(9,917,204) $(6,577,207)
Other comprehensive
income
Unrealized (loss)
gain on
available for
sale investments
arising during
the period (12,262) (27,835) 3,909 (27,635)
Reclassification
adjustment for
(gains) and
losses included
in net loss 4,303 - 39,993 -
-------------------------------------------------------------------------
Comprehensive
loss $(5,956,076) $(4,633,874) $(9,873,302) $(6,604,842)
-------------------------------------------------------------------------
-------------------------------------------------------------------------



THALLION PHARMACEUTICALS INC.
Consolidated Statements of Shareholders' Equity
Three and six-month periods ended May 31, 2008 and 2007
(Unaudited)

Number of Number of
shares Capital warrants
outstanding stock outstanding Warrants
--------------------------------------------------------------------------
Balance, November
30, 2007 31,994,316 $115,450,222 9,945,417 $9,986,860
Issuance of
share capital 150,000 52,501 - -
Expiry of warrants - - (415,417) -
Stock-based compensation - - - -
Net loss, first
quarter 2008 - - - -
Reclassification
adjustment for
gains and losses
included in net
income - - - -
Unrealized gains
on available for
sale investments
arising during
the period - - - -
--------------------------------------------------------------------------
Balance, February
29, 2008 32,144,316 $115,502,723 9,530,000 $9,986,860
Stock-based
compensation - - - -
Net loss, second
quarter 2008 - - - -
Reclassification
adjustment for
gains and losses
included in net
income - - - -
Unrealized gains on
available for sale
investments arising
during the period - - - -
--------------------------------------------------------------------------
Balance, May 31,
2008 32,144,316 $115,502,723 9,530,000 $9,986,860
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Accumulated
other
Contributed comprehensive
surplus Deficit loss Total
--------------------------------------------------------------------------
Balance, November
30, 2007 $1,765,409 $(98,197,842) $(54,625) $28,950,024
Issuance of
share capital - - - 52,501
Expiry of warrants - - - -
Stock-based compensation 191,225 - - 191,225
Net loss, first
quarter 2008 - (3,969,087) - (3,969,087)
Reclassification
adjustment for
gains and losses
included in net
income - - 35,690 35,690
Unrealized gains
on available for
sale investments
arising during
the period - - 16,171 16,171
--------------------------------------------------------------------------
Balance, February
29, 2008 $1,956,634 $(102,166,929) $(2,764) $25,276,524
Stock-based
compensation 159,066 - - 159,066
Net loss, second
quarter 2008 - (5,948,117) - (5,948,117)
Reclassification
adjustment for
gains and losses
included in net
income - - 4,303 4,303
Unrealized gains on
available for sale
investments arising
during the period - - (12,262) (12,262)
--------------------------------------------------------------------------
Balance, May 31,
2008 $2,115,700 $(108,115,046) $(10,723) $19,479,514
--------------------------------------------------------------------------
--------------------------------------------------------------------------


THALLION PHARMACEUTICALS INC.
Consolidated Statements of Shareholders' Equity
Three and six-month periods ended May 31, 2008 and 2007
(Unaudited)

Number of Number of
shares Capital warrants
outstanding stock outstanding Warrants
--------------------------------------------------------------------------

Balance, November
30, 2006 6,987,158 $54,567,028 782,084 $-
Stock-based
compensation - - - -
Net loss, first
quarter 2007 - - - -
Unrealized gains on
available for sale
investments arising
during the period - - - -
--------------------------------------------------------------------------
Balance, February 28,
2007 6,987,158 $54,567,028 782,084 $-
Issuance of
share capital 25,007,158 60,883,194 - -
Issuance of warrants - - 9,530,000 $9,986,860
Expiry of warrants - - (366,667) -
Stock-based compensation - - - -
Net loss, second
quarter 2007 - - - -
Share issue costs - - - -
Unrealized gains on
available for sale
investments arising
during the period - - - -
--------------------------------------------------------------------------
Balance, May 31,
2007 31,994,316 $115,450,222 9,945,417 $9,986,860
--------------------------------------------------------------------------
--------------------------------------------------------------------------



Accumulated
other
Contributed comprehensive
surplus Deficit loss Total
--------------------------------------------------------------------------

Balance, November
30, 2006 $846,046 $(50,053,270) $- $5,359,804
Stock-based
compensation 89,490 - - 89,490
Net loss, first
quarter 2007 - (1,971,168) - (1,971,168)
Unrealized gains on
available for sale
investments arising
during the period - - 200 200
--------------------------------------------------------------------------
Balance, February 28,
2007 $935,536 $(52,024,438) $200 $3,478,326
Issuance of
share capital - - - 60,883,194
Issuance of warrants - - - 9,986,860
Expiry of warrants - - - -
Stock-based compensation 191,834 - - 191,834
Net loss, second
quarter 2007 - (4,606,039) - (4,606,039)
Share issue costs - (3,287,835) - (3,287,835)
Unrealized gains on
available for sale
investments arising
during the period - - (27,835) (27,835)
--------------------------------------------------------------------------
Balance, May 31,
2007 $1,127,370 $(59,918,312) $(27,635) $66,618,505
--------------------------------------------------------------------------
--------------------------------------------------------------------------



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

Three-month period Six-month period
ended May 31 ended May 31
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2008 2007 2008 2007
-------------------------------------------------------------------------
Cash flows from
operating activities:
Net loss $(5,948,117) $(4,606,039) $(9,917,204) $(6,577,207)
Adjustments for:
Lease exit costs 1,728,550 - 1,728,550 -
Write-off of
property, plant
and equipment 625,306 - 625,306 -
Amortization of
property, plant
and equipment 169,371 160,078 335,595 250,166
Amortization of
intangible assets - 637,907 - 650,491
Loss on disposal
of patents - - - 2,512
Stock-based
compensation 159,066 191,834 350,291 281,324
-------------------------------------------------------------------------
(3,265,824) (3,616,220) (6,877,462) $(5,392,714)
Changes in
operating assets
and liabilities:
Interest
receivable 81,287 110,415 181,434 120,865
Accounts
receivable (107,314) 7,540 (111,972) 7,540
Sales tax
receivable and
other (37,584) (359,673) (24,489) (437,135)
Tax credits
receivable (270,000) (224,883) 1,160,503 (428,420)
Deposits and
prepaid expenses 110,108 84,831 (9,846) 54,314
Current assets
held for sale - (31,911) - (31,911)
Current
liabilities -
assets held for
sale - (594,955) - (594,955)
Accounts payable
and accrued
liabilities (212,044) (3,889,149) (432,393) (3,356,673)
Deferred revenues 717 - 82,750 -
-------------------------------------------------------------------------
(434,830) (4,897,785) 845,987 (4,666,375)
-------------------------------------------------------------------------
(3,700,654) (8,514,005) (6,031,475) (10,059,089)
-------------------------------------------------------------------------

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)
Redemption of
special preferred
shares (1) - (1) -
Decrease in bank
indebtedness - (1,720,803) - (1,720,803)
-------------------------------------------------------------------------
(1) 40,046,354 (1) 40,046,354
-------------------------------------------------------------------------

Cash flows from
investing
activities:
Acquisition of
short-term
investments (2,553,518) (4,999,116) (3,546,040) (5,299,116)
Proceeds from
disposal of
short-term
investments 6,771,228 731,116 6,806,920 2,414,211
Additions to
property, plant
and equipment (5,585) (27,436) (14,296) (29,362)
Costs relating
to patent
acquisitions - (168,496) - (259,638)
Business
acquisition, net
of cash acquired - (961,833) - (1,040,543)
-------------------------------------------------------------------------
4,212,125 (5,425,765) 3,246,584 (4,214,448)
-------------------------------------------------------------------------

Net increase
(decrease) in
cash and cash
equivalents 511,470 26,106,584 (2,784,892) 25,772,817
Cash and cash
equivalents,
beginning of
period 7,310,552 77,854 10,606,914 411,621
-------------------------------------------------------------------------
Cash and cash
equivalents, end
of period $7,822,022 $26,184,438 $7,822,022 $26,184,438
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