Thallion Pharmaceuticals Inc.
TSX : TLN

Thallion Pharmaceuticals Inc.

February 23, 2009 16:05 ET

Thallion Announces 2008 Year End Results

MONTREAL, QUEBEC--(Marketwire - Feb. 23, 2009) - Thallion Pharmaceuticals Inc. (TSX:TLN) today announced its operational and financial results for the three-month and twelve-month periods ended November 30, 2008.

Operational Highlights

- Initiated enrollment in a Phase II clinical trial evaluating TLN-4601 as a second line, monotherapy treatment for glioblastoma multiforme (GBM), an advanced form of brain cancer.

- Initiated enrollment in a Phase II clinical trial evaluating TLN-232 as a second line monotherapy treatment for metastatic melanoma, an advanced form of skin cancer.

- Data was presented at the 20th EORTC-NCI-AACR Symposium on Molecular Targets and Cancer Therapeutics in Geneva, Switzerland demonstrating that TLN- 4601 inhibits both wild-type and mutated K-Ras signaling in cancer cells; mutations in K-Ras are implicated in many forms of cancer and have recently been shown to confer resistance to several marketed anti-cancer therapies.

- Presented final results from an open label, single arm Phase II trial of TLN-232 for patients with treatment-refractory advanced renal cell carcinoma. The main objectives of the study were to assess the safety and pharmacokinetics of a novel formulation and dosing regimen of TLN-232. The results demonstrated that TLN-232 was safe, well-tolerated and displayed pharmacokinetics appropriate for continued clinical development. Furthermore, of the three patients that had completed three full cycles of treatment, two achieved stable disease.

- Announced that a Special Committee of independent Directors was established to review the Company's strategic alternatives and make recommendations to the Board. The committee engaged a financial advisor to assist the Company in evaluating and considering such alternatives and their potential for enhancing shareholder value. No formal decision has been taken at this time.

"We have a series of important upcoming milestones for our three pipeline products that we expect to achieve in 2009. Our two ongoing Phase II trials are enrolling patients at multiple sites in the U.S. and Canada with data expected from each of these programs this year," said Lloyd M. Segal, Chief Executive Officer of Thallion Pharmaceuticals Inc. "We expect tumor imaging data and data from a planned interim safety and efficacy analysis from our TLN-4601 GBM trial late in the second quarter of calendar 2009. We also expect to receive interim patient safety and response data from the dose escalation portion of the TLN-232 metastatic melanoma trial in the fourth quarter of calendar 2009. The opportunity to deliver meaningful data from each of these trials with our existing cash resources represent important milestones for Thallion. We also continue to advance our discussions pertaining to the licensing and continued development of Shigamabs."

Financial Highlights

Contract and other revenues for the three-month period ended November 30, 2008 were $162,547 compared to nil for the corresponding period in 2007. Contract and other revenues for the twelve-month period ended November 30, 2008 were $162,547 compared with $2,053,195 for the same period last year. The 2007 revenues were related exclusively to the proteomics business obtained through the amalgamation with Caprion on March 14, 2007, which was sold on July 10, 2007 and as such, no longer forms part of our operating revenues as of that date forward.

Interest revenues for the three-month period ended November 30, 2008 were $94,474 compared with $375,193 for the corresponding period in 2007. Interest revenues for the twelve-month period ended November 30, 2008 were $658,109 compared with $1,096,174 for the same period last year. These decreases resulted from the maturity of short-term investments used to fund the Company's operations throughout each of the periods.

Research and development expenses for the three-month period ended November 30, 2008 were $1,879,421 compared with $2,308,084 for the three-month period ended November 30, 2007. Although the Company has launched two oncology Phase II clinical trials in 2008, it has incurred only minor start-up and patient recruitment costs to date, with an increase in expenses expected to begin in early 2009. Furthermore, spending on the Shigamabs® program was significantly reduced during the period as the Company is continues to seek a strategic partnership prior to developing this program further.

Research and development expenses for the twelve-month period ended November 30, 2008 were $9,504,964 compared with $11,274,389 for the corresponding period in 2007. Included in 2007 was $2,066,738 of R&D expenses related to the Company's proteomics business which was sold on July 10, 2007. When excluding the 2007 proteomics expenses, R&D expenses increased by $297,313 due primarily to development activities relating to three clinical programs in 2008 compared with only one program in the first quarter of 2007, following the acquisition of two clinical programs from Caprion on March 14, 2007, namely Shigamabs® and TLN-232. Furthermore, expenses in 2008 relating to the Shigamabs® program remained constant when compared to 2007 as the Company advanced the program in an effort to establish a regulatory path under which it can now proceed, subject to concluding a licensing transaction, with a multinational Phase II/III trial.

General and administrative expenses for the three-month period ended November 30, 2008 were $1,045,173 compared with $1,759,821 for the corresponding period last year. The decrease is primarily due to approximately $350,000 in costs incurred in 2007 related to the settlement of the outstanding dispute with the Company's licensor of TLN-232. The remaining variance is primarily the result of reduced operating costs achieved once the final integration of the Company's two operating facilities was completed at the end of the second quarter of 2008.

General and administrative expenses for the twelve-month period ended November 30, 2008 were $4,440,896 compared with $5,585,763 for the corresponding period last year. The decrease is due primarily to approximately $350,000 in costs incurred in 2007 related to the settlement of the outstanding dispute with the Company's licensor of TLN-232, approximately $324,000 of expenses in 2007 related to the sale of the Company's proteomics business and a $262,848 decrease in stock-based compensation expense mainly resulting from the immediate vesting of certain options upon the sale of the Company's proteomics business in 2007. The remaining variance is primarily the result of reduced operating costs achieved once the final integration of the Company's two operating facilities was completed in 2008.

The loss before non-recurring items for the three-month period ended November 30, 2008 was $2,402,399 compared to $1,991,085 for the three-month period ended November 30, 2007. Included in the loss before non-recurring items for the fourth quarter of 2007 was a reverse charge of $1,405,713 following the reversal of a prior period amortization expense related to certain intangible assets when no value was attributed to these assets upon completing the final purchase price allocation. The loss before non-recurring items for the twelve-month period ended November 30, 2008 was $12,534,411 compared to $13,759,395 for the corresponding period in 2007. Included in the loss before non-recurring items for the year ended November 30, 2007 was a loss of $802,846 related to the Company's proteomics business which was sold on July 10, 2007 and financial expenses related to the Company's long-term debt eliminated as part of the sale and as such, no longer form part of the Company's results as of that date forward. The remaining changes in the Company's loss before non-recurring items are primarily due to changes in R&D and G&A expenses.

Non-recurring items for the year ended November 30, 2008 included lease exit costs of $1,948,243 and related write-off of capital assets of $625,306 as a result of the Company's final operational integration completed at the end of the second quarter of 2008.

Net loss for the three-month period ended November 30, 2008 was $2,622,092 or $0.08 per share, compared to $32,986,163 or $1.33 per share for the three-month period ended November 30, 2007. Net loss for the year ended November 30, 2008 was $15,107,960 or $0.47 per share, compared to $44,856,737 or $1.80 per share for the year ended November 30, 2007. The significant change in net loss is primarily due to the impairment losses on goodwill and intangible assets recorded in 2007, the write-off of the investment and proportionate share in the loss of a company under significant influence of $2,156,072 recorded in the fourth quarter of 2007, as well as to changes in R&D and G&A expenses.

As at November 30, 2008, the Company's cash position amounted to $13,031,924, which consists of cash and cash equivalents and short-term investments. Tax credits receivable amounted to $817,876. Consequently, the Company's liquidity availability amounted to $13,849,800 compared with $26,070,463 on November 30, 2007. The decrease in liquidity is primarily due to cash expenses relating to operations for the year ended November 30, 2008.

As at February 19, 2009 the Company had 32,144,316 common shares outstanding. The number of options and warrants outstanding at November 30, 2008 were 2,528,318 and 9,530,000 respectively.

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:

- Continuing enrollment in the Phase II clinical trials for TLN-4601 and TLN-232, as monotherapies for glioblastoma multiforme and metastatic melanoma patients, respectively.

- Reporting tumor imaging data and interim analyses from the Phase II TLN-4601 trial in the second quarter of calendar 2009.

- Reporting dose escalation data from the Phase II TLN-232 trial in the fourth quarter of calendar 2009.

- Continuing its licensing discussions for Shigamabs® with potential partners, with the intent to complete a strategic transaction prior to initiating the next stage of clinical development.

Notice of Conference Call

Thallion will hold a conference call today, February 23, 2009, 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 1-800-732-9307. 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
November 30, 2008 and 2007

2008 2007
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Assets
Current assets:
Cash and cash equivalents $8,863,383 $10,606,914
Short-term investments 4,168,541 12,976,047
Sales tax receivable and other 253,923 651,591
Accounts receivable 88,369 68,160
Tax credits receivable 817,876 2,487,502
Deposits and prepaid expenses 468,011 711,017
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14,660,103 27,501,231

Long-term deposit 200,000 300,000
Capital assets 3,258,947 4,340,543
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$18,119,050 $32,141,774
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $1,935,668 $3,191,749
Current portion of lease exit obligations 608,505 -
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2,544,173 3,191,749

Long-term portion of lease exit
obligations 1,042,769 -

Redeemable special preferred shares - 1

Shareholders' Equity:
Capital stock 115,502,723 115,450,222
Warrants 9,986,860 9,986,860
Contributed surplus 2,348,592 1,765,409

Deficit (113,305,802) (98,197,842)
Accumulated other comprehensive loss (265) (54,625)
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(113,306,067) (98,252,467)
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Total shareholders' equity 14,532,108 28,950,024

Commitments, contingencies and guarantees
Subsequent event
-----------------------------------------------------------------------
$18,119,050 $32,141,774
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THALLION PHARMACEUTICALS INC.
Consolidated Statements of Operations
Years ended November 30, 2008 and 2007

2008 2007
-----------------------------------------------------------------------
Revenues
Contract revenues $162,547 $2,027,469
Interest revenues 658,109 1,096,174
Other revenues - 25,726
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820,656 3,149,369

Costs and expenses
Research and development 9,504,964 11,274,389
Tax credits (1,207,532) (1,389,486)
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8,297,432 9,884,903

General and administrative 4,440,896 5,585,763
Amortization of capital assets 592,995 620,514
Amortization of intangible assets - 68,459
Financial expenses - 605,260
Foreign exchange loss 23,744 143,865
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13,355,067 16,908,764
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Loss before non-recurring items (12,534,411) (13,759,395)

Non-recurring items
Impairment loss on goodwill - 27,374,700
Impairment loss on intangible assets - 1,464,306
Lease exit costs 1,948,243 -
Write-off of capital assets 625,306 -
Write-off of investment and
proportionate share in loss
of company under significant
influence - 2,258,336
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2,573,549 31,097,342
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Net loss $(15,107,960) $(44,856,737)
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Net basic and diluted
loss per share $(0.47) $(1.80)
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Weighted average number
of outstanding shares 32,124,644 24,868,057
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THALLION PHARMACEUTICALS INC.
Consolidated Statements of Comprehensive Loss
Years ended November 30, 2008 and 2007

-----------------------------------------------------------------------
-----------------------------------------------------------------------
2008 2007
-----------------------------------------------------------------------
Net loss $(15,107,960) $(44,856,737)
Other comprehensive loss
Unrealized gain/(loss) on available
for sale investments 54,360 (54,625)
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Comprehensive loss $(15,053,600) $(44,911,362)
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THALLION PHARMACEUTICALS INC.
Consolidated Statements of Cash Flows
Years ended November 30, 2008 and 2007

2008 2007
-----------------------------------------------------------------------
Cash flows from operating activities:
Net loss $(15,107,960) $(44,856,737)
Adjustments for:
Accretion in carrying value of lease
liability 143,952 -
Write-off of investment and proportionate
share in loss of company under
significant influence - 2,258,336
Accretion in carrying value of note
receivable - (73,436)
Lease exit costs 1,948,243 -
Write-off of capital assets 625,306 -
Amortization of capital assets 592,995 620,514
Amortization of intangible assets - 68,459
Impairment loss on intangible assets - 1,464,306
Impairment loss on goodwill - 27,374,700
Loss on disposal of patents - 2,512
Loss on disposal of short-term investments 63,670 -
Stock-based compensation 583,183 919,363
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(11,150,611) (12,221,983)
Changes in operating assets and
liabilities:
Interest receivable 292,444 27,471
Accounts receivable (20,209) 142,229
Sales tax receivable and other 105,224 (296,174)
Tax credits receivable 1,669,626 201,224
Deposits and prepaid expenses 243,006 (351,755)
Current assets held for sale - 1,153,468
Current liabilities - assets held for sale - (3,292,705)
Accounts payable and accrued liabilities (1,203,580) (3,023,720)
Payment of lease exit obligations (440,921) -
-----------------------------------------------------------------------
645,590 (5,439,962)
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(10,505,021) (17,661,945)
-----------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of shares and
warrants - 45,040,000
Share issue costs - (3,287,835)
Redemption of special preferred shares (1) -
Decrease in bank indebtedness - (1,720,803)
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(1) 40,031,362
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Cash flows from investing activities:
Decrease in long-term deposit 100,000 100,000
Acquisition of short-term investments (6,712,821) (14,190,021)
Proceeds from disposal of short-term
investments 15,511,017 3,580,419
Additions to capital assets (136,705) (75,495)
Costs relating to intangible assets - (529,266)
Business acquisition, net of cash acquired - (1,059,761)
-----------------------------------------------------------------------
8,761,491 (12,174,124)
-----------------------------------------------------------------------
Net (decrease) increase in cash and cash
equivalents (1,743,531) 10,195,293
Cash and cash equivalents, beginning of
year 10,606,914 411,621
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Cash and cash equivalents, end of year $8,863,383 $10,606,914
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