Thallion Pharmaceuticals Inc.
TSX : TLN

Thallion Pharmaceuticals Inc.

February 24, 2011 16:15 ET

Thallion Announces 2010 Year End Results

MONTREAL, QUEBEC--(Marketwire - Feb. 24, 2011) - Thallion Pharmaceuticals Inc. (TSX:TLN) today announced its operational and financial results for the three-month and twelve-month periods ended November 30, 2010.

Fourth Quarter Operational Highlights

  • Successfully initiated patient enrollment for SHIGATEC, a Phase II trial evaluating Shigamabs® as a treatment for E. coli infection, in South America .

  • Completed the manufacturing and release of new lots of clinical grade material necessary for the conduct of the SHIGATEC trial.

  • Relocated the company to its new corporate headquarters in Dorval, Quebec.

2010 Operational Highlights

  • Signed a definitive development and commercialization agreement with LFB Biotechnologies (LFB) for Shigamabs®, under which Thallion is eligible to receive up to €95 million from LFB. The funding included an upfront licensing fee of €1.5 million, funding for substantially all future clinical development costs, as well as potential milestone payments. The agreement grants LFB an exclusive license for the commercial rights to Shigamabs® in Europe, South America and other territories of strategic interest to LFB, including Russia, Turkey, China, South Korea and Northern African countries, while Thallion retains the rights for North America and the rest of world. Thallion is eligible to receive tiered, double digit royalties based on product sales in the LFB territories.

  • Obtained regulatory approvals in Argentina, Chile and Peru to conduct the SHIGATEC Phase II trial.

  • Activated the SHIGATEC trial on November 26, 2010 and recruited its first patient on November 29, 2010.

  • Expanded IP coverage for Shigamabs®, including patents issued in select European countries and Japan, covering Shigamabs® pharmaceutical compositions.

  • Discontinued its Phase II trial evaluating TLN-4601 as a treatment for glioblastoma multiforme (GBM) due to a lack of measurable efficacy after analysis of the interim data.

  • Received notification from the Secretariat of the International Chamber of Commerce International Court of Arbitration that the Arbitral Tribunal had rendered a partial award in favour of the licensor of TLN-232 and also established that the license agreement was duly terminated by the licensor. As a result, Thallion terminated the TLN-232 development program, and all rights related to the license agreement and licensor materials have been returned to the licensor.

  • Entered into a binding lease cancellation agreement with the landlord of its corporate headquarters to cancel the remaining six years of its fifteen-year lease obligation, eliminating a remaining commitment of approximately $8,000,000, for total consideration paid by Thallion of $2,400,000.

  • Signed a binding lease cancellation agreement related to its redundant facility for a one-time cash payment of $1.15 million.

"2010 was a year of great achievement for Thallion. Since we signed the Shigamabs® partnership with LFB in February, we successfully obtained all the elements required to initiate the SHIGATEC Phase II trial on time to benefit from the high incidence STEC infection season in South America. Furthermore, we had taken a series of steps to streamline our operations and reduce costs to become a leaner, more focused company. With a solid balance sheet, a strong partner and data expected later this year, we are in a great position to execute our clinical plan and business strategies in 2011," said Dr. Allan Mandelzys, Chief Executive Officer of Thallion Pharmaceuticals Inc. "Our SHIGATEC trial in South America is well underway and we have already completed enrollment of the 21 patients for the low dose cohort. Following a review by an Independent Data Monitoring Committee to assess Shigamabs® safety, we anticipate the initiation of the high dose cohort (21 patients) in the second quarter of 2011 and expect top line data from the core portion of the trial in the fourth quarter of calendar 2011."

Financial Highlights

Collaboration and licensing revenues for the three-month period ended November 30, 2010 were $1,513,550 compared to nil for the corresponding period in 2009. Collaboration and licensing revenues for the twelve-month period ended November 30, 2010 were $3,843,654 compared to nil for the same period last year. Revenue recognized in 2010 was related to the development and license agreement signed with LFB in February 2010 for the Company's ongoing development of Shigamabs®.

Research and development (R&D) expenses before tax credits for the three-month period ended November 30, 2010 were $1,941,406 compared with $946,910 for the three-month period ended November 30, 2009. The change is attributable to greater R&D activity related to the development of Shigamabs® as the Company prepared for the initiation of its Phase II study in November 2010, partially offset by reduced personnel costs related to restructuring of the Company's research activities in the fourth quarter of 2009. Research and development expenses for the twelve-month period ended November 30, 2010 were $5,516,648 compared with $6,452,562 for the corresponding period in 2009. The change in fiscal 2010 is primarily due to suspension of the development activities of TLN-232 and TLN-4601 in July 2009 and December 2009, respectively, partially offset by greater R&D activity related to the development of Shigamabs®.

General and administrative (G&A) expenses for the three-month period ended November 30, 2010 were $903,026 compared with $969,897 for the corresponding period last year. General and administrative expenses for the twelve-month period ended November 30, 2010 were $4,204,104 compared with $4,185,161 for the corresponding period last year. In 2010, a total of $305,000 in one-time cash incentive bonuses were paid to certain employees pursuant to the execution of the definitive development and license agreement signed with LFB in February 2010, in addition to recording one-time severance costs amounting to $296,137. When excluding these one-time costs, G&A expenses amounted to $3,602,967 in the year ended November 30, 2010 reflecting a 14% decrease which is consistent with the reduction in G&A employees, as well as significant cost reduction efforts undertaken by the Company in 2010.

The net loss for the three-month period ended November 30, 2010 was $1,128,252 or $0.04 per share compared to $4,685,447 or $0.15 per share for the three-month period ended November 30, 2009. The net loss for the twelve-month period ended November 30, 2010 was $4,880,232 or $0.15 per share compared to $13,948,305 or $0.43 per share for the corresponding period in 2009. The changes in net loss were mainly attributable to collaboration and licensing revenues beginning in 2010, as well as reductions in R&D expenses, lease exit costs, stock-based compensation expenses and the write-off of capital assets, partially offset by the 2009 gain on the settlement of note receivable with Caprion Proteomics Inc.

As at November 30, 2010, the Company's unrestricted cash position amounted to $10,254,781, which consists of cash and short-term investments. The Company's liquidity availability amounted to $10,981,096 compared with $9,073,557 on November 30, 2009. The increase in liquidity is primarily due to the up-front and clinical development funding received from LFB following execution of the development and license agreement signed in February 2010, the collection of the note receivable from Caprion Proteomics Inc. and the collection of investment tax credits receivable, partially offset by the final settlement of the Company's lease obligations related to a redundant facility and its corporate headquarters.

As of February 24, 2011, the Company had 32,194,566 common shares outstanding. The number of options and common share purchase warrants outstanding on February 24, 2011, were 2,875,975 and 530,000 respectively.

About Thallion Pharmaceuticals Inc.

Thallion Pharmaceuticals Inc. (TSX:TLN) is a biotechnology company developing pharmaceutical products in the areas of infectious disease and oncology. The Company's clinical programs include Shigamabs® and TLN-4601, a novel anti-cancer therapy. Shigamabs® is a dual antibody product being evaluated in a Phase II clinical trial for the treatment of Shiga toxin producing E. coli bacterial infections. Additional information about Thallion 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 Thallion'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 Thallion'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. Thallion 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.

Financial results included below:

   
THALLION PHARMACEUTICALS INC.  
Consolidated Balance Sheets  
November 30, 2010 and 2009  
   
    2010     2009  
Assets            
Current assets:            
  Cash $ 6,228,340   $ 1,665,929  
  Short-term investments   4,026,441     5,910,559  
  Restricted cash   -     1,590,024  
  Foreign exchange forward contracts   175,082     -  
  Sales tax and other receivables   57,226     252,935  
  Tax credits receivable   434,066     1,159,268  
  Receivable from Premium Brands Holdings Corporation   292,249     337,801  
  Receivable from Caprion Proteomics Inc.   -     1,835,000  
  Deposits and prepaid expenses   436,043     465,971  
  Asset held for sale   63,575     -  
    11,713,022     13,217,487  
Long-term deposit   -     100,000  
Restricted cash   1,000,000     1,000,000  
Asset held for sale   -     63,575  
Capital assets   55,204     150,627  
  $ 12,768,226   $ 14,531,689  
   
Liabilities and Shareholders' Equity            
Current liabilities:            
  Accounts payable and accrued liabilities $ 3,227,103   $ 1,482,111  
  Current portion of lease exit obligations   -     1,397,494  
    3,227,103     2,879,605  
Long-term portion of lease exit obligations   -     1,925,531  
Deferred revenues   4,610,503     -  
Shareholders' Equity:            
  Capital stock   115,512,823     115,502,723  
  Warrants   1,375,000     9,986,860  
  Contributed surplus   20,177,136     11,491,077  
  Deficit   (132,134,339 )   (127,254,107 )
   
  Total shareholders' equity   4,930,620     9,726,553  
  $ 12,768,226   $ 14,531,689  
   
   
   
THALLION PHARMACEUTICALS INC.  
Consolidated Statements of Operations  
Years ended November 30, 2010 and 2009  
   
    2010     2009  
Revenues            
  Collaboration and licensing revenues $ 3,843,654   $ -  
  Interest revenues   68,118     78,247  
    3,911,772     78,247  
Costs and expenses            
  Research and development   5,516,648     6,452,562  
  Tax credits   (739,453 )   (679,193 )
    4,777,195     5,773,369  
  General and administrative   4,204,104     4,185,161  
  Lease exit costs   15,572     1,833,448  
  Stock options cancellation costs   -     1,067,062  
  Gain on settlement of note receivable   -     (1,835,000 )
  Write-off of capital assets   -     2,526,422  
  Amortization of capital assets   49,869     505,939  
  Foreign exchange gain and changes in fair value of forward exchange contracts   (254,736 )   (29,849 )
    8,792,004     14,026,552  
   
Net loss $ (4,880,232 ) $ (13,948,305 )
Net basic and diluted loss per share $ (0.15 ) $ (0.43 )
Weighted average number of outstanding shares   32,179,400     32,144,316  
 
 
 
Consolidated Statements of Comprehensive Loss
Years ended November 30, 2010 and 2009
    2010   2009  
Net loss $ (4,880,232) $ (13,948,305)  
Other comprehensive loss          
  Unrealized gain on available for sale investments   -   265  
Comprehensive loss $ (4,880,232) $ (13,948,040)  
   
   
   
THALLION PHARMACEUTICALS INC.  
Consolidated Statements of Cash Flows  
Years ended November 30, 2010 and 2009  
   
    2010     2009  
Cash flows from operating activities:            
Net loss $ (4,880,232 ) $ (13,948,305 )
Adjustments for:            
  Accretion in carrying value of lease liability   239,274     309,177  
  Lease exit costs   15,572     1,833,448  
  Gain on settlement of note receivable   -     (1,835,000 )
  Accretion in carrying value of note receivable   (15,000 )   -  
  Write-off of capital assets   -     2,526,422  
  Amortization of capital assets   49,869     505,939  
  (Gain) Loss on disposal of capital assets   (104,613 )   9,599  
  Unrealized gain on foreign exchange forward contracts   (175,082 )   -  
  Gain on disposal of short-term investments   -     (14,013 )
  Stock options cancellation costs   -     1,067,062  
  Stock-based compensation   78,269     242,260  
    (4,791,943 )   (9,303,411 )
Changes in operating assets and liabilities:            
  Sales tax and other receivables   195,709     89,357  
  Tax credits receivable   725,202     (341,392 )
  Receivable from Premium Brands Holdings Corporation   45,552     (337,801 )
  Receivable from Caprion Proteomics Inc.   1,850,000     -  
  Deposits and prepaid expenses   29,928     2,040  
  Decrease in long-term deposit   100,000     100,000  
  Accounts payable and accrued liabilities   1,744,992     (453,557 )
  Deferred revenues   4,610,503     -  
  Sub-lease revenues collected   454,794     -  
  Payment of lease exit obligations   (4,032,665 )   (470,874 )
    5,724,015     (1,412,227 )
    932,072     (10,715,638 )
   
Cash flows from financing activities:            
  Issuance of common shares   6,030     -  
  Proceeds from reorganization   -     8,850,000  
  Costs of reorganization   -     (1,016,837 )
    6,030     7,833,163  
   
Cash flows from investing activities:            
  Acquisition of short-term investments   (2,315,882 )   (8,846,255 )
  Proceeds from disposal of short-term investments   4,200,000     6,826,553  
  Restricted cash   1,590,024     (2,298,062 )
  Additions to capital assets   (16,721 )   (22,215 )
  Proceeds from disposal of capital assets   166,888     25,000  
    3,624,309     (4,314,979 )
   
Net increase (decrease) in cash   4,562,411     (7,197,454 )
Cash, beginning of year   1,665,929     8,863,383  
Cash, end of year $ 6,228,340   $ 1,665,929  

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