Thallion Pharmaceuticals Inc.
TSX : TLN

Thallion Pharmaceuticals Inc.
Ecopia BioSciences Inc.
TSX : EIA

Ecopia BioSciences Inc.

April 04, 2007 15:30 ET

Thallion Pharmaceuticals Inc. Announces its Operating Highlights and Presents Ecopia's Financial Results for the First Quarter of Fiscal Year 2007

MONTREAL, QUEBEC--(CCNMatthews - April 4, 2007) - Thallion Pharmaceuticals Inc. (formed by the merger of Ecopia BioSciences Inc. and Caprion Pharmaceuticals Inc. on March 14, 2007) (TSX:TLN) today reviewed recent operating highlights and announced the financial results for Ecopia's first quarter ended February 28, 2007. Today's announcement represents the last report of Ecopia's financial results consistent with current regulatory requirements after which we will review and announce future operating highlights and financial results as Thallion Pharmaceuticals Inc. beginning with the second quarter ending May 31, 2007.

Thallion's Recent 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.

- On March 14, 2007, Thallion closed a private placement for total gross proceeds of $45 million.

- Thallion successfully completed the dose-escalation portion of its ECO-4601 Phase I clinical trial.

- Thallion initiated the second portion of its Phase I clinical trial of ECO-4601, the extension Phase.

- Thallion initiated its trial and infused its first patient in its Phase II trial in Renal Cell Carcinoma ("RCC") for CAP-232.

- Thallion is scheduled to present its ShigaMabs program to a Federal Drug Agency ("FDA") advisory panel in April 2007.

Summary and Outlook

Commenting on Thallion's recent developments, Mr. Lloyd M. Segal, Chief Executive Officer of Thallion said: "With the amalgamation and financing behind us, we can now apply our focus and resources on developing our significant base of clinical assets."

Web Cast

April 4, 2007 at 4:00 p.m. - Mr. Lloyd M. Segal, Chief Executive Officer and Mr. Michael Singer, Chief Financial Officer will discuss first quarter operating highlights and financial results. To listen to the live web cast please call local access: (416) 644-3414 or call toll-free 1-800-733-7571. An archived version will be available shortly after the conference on Thallion's website at www.thallion.com.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FOR THE FIRST QUARTER ENDED FEBRUARY 28, 2007

Management's discussion and analysis provides a review of our Company and should be read in conjunction with Ecopia BioSciences Inc.'s ("Ecopia") unaudited financial statements for the first quarter ended February 28, 2007, the audited financial statements for the year ended November 30, 2006, as well as the related notes, which are prepared in accordance with Canadian generally accepted accounting principles. This discussion and analysis compares Ecopia's financial performance for the first quarter ended February 28, 2007 with the same period in 2006. This review was prepared by Management with information available as at April 3, 2007. Additional information relating to the Company, including its Annual Information form, can be found on SEDAR at www.sedar.com.

The financial statements contained in this interim report have not been audited nor reviewed by the Company's auditors.

All amounts are presented in Canadian dollars unless otherwise indicated.

Forward-looking Statements

This Management's Discussion and Analysis contains "forward looking information" that are based on expectations, estimates and projections as of the date of this Management's Discussion and Analysis. Often, but not always, such forward looking information can be identified by the use of forward looking words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward looking information in this Management's Discussion and Analysis.

Examples of such forward looking information in this Management's Discussion and Analysis include, but are not limited to, information with respect to (i) the amalgamation and the results expected to be achieved from the completion of the amalgamation of Ecopia BioSciences Inc. and Caprion Pharmaceuticals Inc.; (ii) the ability to raise future capital to fund the research and development activities of the Company; (iii) success and timely completion of clinical studies; (iv) the pursuit of clinical trials in the United States; (v) the potential of ECO-4601 as a chemotherapy against primary brain cancer; (vi) the potential of ECO-4601 in the treatment of breast, prostate, colon, lung, ovarian and pancreatic cancers; (vii) the identification of a second generation ECO-4601 compound; (viii) the identification of a non-ECO-4601 related compound as a candidate for another regulatory filing; (ix) the potential of Shigamabs in the treatment of Shigatoxin-producing bacterial infections; (x) the potential of CAP-232 in the treatment of solid tumor cancers; and (xi) the earning of revenues from the exercise of exclusivity options on out-licensed patent properties. Such forward looking information is based on a number of assumptions concerning future events and is therefore subject to a number of risks and uncertainties, many of which are outside the control of the Company. Actual results may therefore vary materially from the expectations expressed by the Company and depend on a number of factors. These factors include, but are not limited to: (i) risks related to the integration of acquisitions; (ii) the possibility of delays due to patient recruitment or continued participation in the Phase I trial; (iii) scientific uncertainties relating to the correlation between preclinical animal data and human clinical data; (iv) the safety and efficacy of ECO-4601 as a cancer treatment; (v) the safety and efficacy of Shigamabs as a treatment of Shigatoxin-producing bacterial infections; (vi) the safety and efficacy of CAP-232 in the treatment of solid tumor cancers; (vii) timely progress and completion of Phase I study; (viii) uncertainties related to the regulatory process for drug development; (ix) the ability for the Company to fund its future operations in light of the lack of operating revenues for the years to come; and (x) the impact of general economic conditions.

While the Company anticipates that subsequent events and developments may cause its views to change, it will not update this forward-looking information, except as required by law. This forward-looking information should not be relied upon as representing the views of the Company as of any date subsequent to the date of this Management's Discussion and Analysis. The Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those current expectations described in forward looking information. However, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended and that could cause actual actions, events or results to differ materially from current expectations. There can be no assurance that forward looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. These factors are not intended to represent a complete list of the factors that could affect the Company. A more complete discussion of the risks and uncertainties facing the Company appears in the Joint Management Information Circular dated February 7, 2007, the 2006 Management's Discussion and Analysis of Financial Position and Results of Operations for fiscal 2006 and the 2006 Annual Information Form available at www.sedar.com.

Overview

Ecopia BioSciences Inc. ("Ecopia") ("The Company") was a biotechnology company developing innovative therapeutics in the field of oncology. The Company's strategy was to develop drug candidates, which addressed unmet medical needs with access to a rapid path to commercialization. Ecopia's strategy also sought to leverage pharmaceutical and biotechnology partnerships to most rapidly exploit and prosecute its assets, which was in the best long-term interest of its shareholders.

On March 14, 2007, Ecopia acquired Caprion Pharmaceuticals Inc. ("Caprion") by way of an amalgamation to form a new entity called Thallion Pharmaceuticals Inc. ("Thallion"). On that date, Thallion issued, among other things, 69,871,584 common shares to existing Caprion shareholders, representing 50% of its then total issued and outstanding capital. Thallion also completed a concurrent private placement for total gross proceeds of $45 million through the issuance of 180 million units at $0.25 per unit.

During the first quarter of 2007 and prior to the creation of Thallion, the Company's main corporate focus was the completion of the proposed merger and financing. Meanwhile, Ecopia's research and development operations mainly revolved around ECO-4601, its proprietary novel small molecule which targets the RAS-mitogen-activated pathway while binding to the Peripheral Benzodiazepine Receptor (PBR), a receptor highly expressed in many cancer cells.

On January 11, 2007, the Company announced that ECO-4601 had successfully completed the first portion, dose-escalation, of its Phase I clinical trial. This portion of the trial revealed no dose-limiting toxicity in doses up to 480 mg/m2/day, the maximum dose set as per the protocol. The Company subsequently initiated the second portion of the trial, the extension Phase, which is expected to be completed by late spring of this year. The Company is currently conducting its trial at two clinical sites, namely the Sir Mortimer B. Davis - Jewish General Hospital in Montreal, Quebec and the Charles LeMoyne Hospital, located on Montreal's South Shore. Clinical results for both portions of the trial will be released when compiled data has been audited.

ECO-4601's Phase I trial includes brain, breast, prostate, ovarian, lung, colon or pancreatic cancer patients refractory to the current standard of care. The purpose of this trial is dose-selection and evaluation of safety and tolerability of ECO-4601, as well as determination of clinical pharmacokinetics.

Pursuant to the amalgamation on March 14, 2007, two additional clinical therapeutics programs were added to the current pipeline. The first program, called ShigaMabs, is a dual antibody product being developed for the treatment of shigatoxin-producing bacterial infections. ShigaMabs has completed Phase I clinical trials, which have shown each antibody to be safe and well-tolerated in healthy volunteers. Subject to regulatory review and approval, a pivotal Phase II\III trial is expected to be initiated in 2007. The second program, called CAP-232, is a peptide with broad applicability in several oncology indications for which a European Phase II clinical trial in renal cell carcinoma is ongoing.

Thallion will also own two technologies; the DECIPHER® technology, Ecopia's genomic discovery platform and Caprion's CellCarta™ proteomics technology. Thallion intends to divest the CellCarta™ proteomics business in the first 12 months following the amalgamation.



Summary of Operating Results
Quarters ended February 28 ($ in thousands, except per share amounts)

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(Unaudited) 2007 2006 Variance
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$ $ %
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Interest Income 21 62 (66.1)
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Research and Development Expenditures,
before Tax Credits and Grants 1,665 1,577 5.6
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General and administrative costs 531 769 (30.9)
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Net Loss 1,971 2,066 (4.6)
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Net basic and diluted loss per share 0.03 0.03 -
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Weighted Average Shares Outstanding
(in thousands) 69,872 69,872
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Interest Income

Interest income amounted to $21,082 for the quarter ended February 28, 2007, compared with $62,176 for the same period in 2006, a decrease of 66.1%. This decrease is primarily due to the fact that the Company's average liquidities were lower during the first quarter of 2007 compared to the same period in the previous year.

Research & Development Expenses

Research and development ("R&D") expenses, before tax credits and grants, amounted to $1,664,598 in the first quarter of 2007, compared with $1,576,974 in the first quarter of 2006, representing an increase in costs of 5.6%. This increase is primarily due to costs related to GMP production of ECO-4601, the scale-up of the production process and the treatment of patients in its ongoing Phase I clinical trial. However, this increase in expenses was offset by significant costs relating to the completion of preclinical toxicity studies in the first quarter of 2006, which are no longer part of this year's activities.

General and Administrative Expenses

General and administrative ("G&A") expenses amounted to $531,189 in the first quarter of 2007, compared with $ 768,655 in the first quarter of 2006, representing a decrease of 30.9%. The decrease in costs relating to the first quarter of 2007 is primarily due to a head count reduction in the intellectual property department. This reorganization of the Company's intellectual property strategy aims to outsource the prosecution of its patent portfolio with the necessary expertise instead of managing these activities internally.

Net Loss

The Company recorded a net loss of $1,971,168 or $0.03 per share in the first quarter of 2007, compared with $2,065,963 or $0.03 per share for the same period of 2006. The changes in the loss are primarily due to the change in R&D expenses and G&A expenses as discussed above.



Financial Position
(in thousands of dollars) February November
28, 2007 30, 2006
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(unaudited) (audited)

Cash and short term investments(i) $1,133 $2,860

Tax credits receivable $954 $750
Total assets $6,116 $6,456
Capital stock and contributed surplus $55,503 $55,413
Shareholders' equity $3,478 $5,360

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(i) Cash invested in investment-grade bonds are due in the next
operating period.
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Liquidity and Financial Position

On February 28, 2007, the Company's cash position amounted to $1,133,050, which consists of cash and short-term investments. Tax credits receivable amounted to $953,959. Thus the Company's liquidity availability amounted to $2,087,009, compared with $3,610,584 on November 30, 2006. The change in liquidity takes into account cash expenses relating to the first three months of 2007.

During the first quarter of the current fiscal year, Ecopia incurred capital cash expenses of $93,068 compared with $121,346 for the first quarter of last year. This quarter's capital expenditures relate principally to the prosecution of the Company's patent portfolio.

As of February 28, 2007, the Company had incurred $1,163,729 of deferred costs in connection with the proposed merger transaction and its concurrent $45 million equity financing. Theses costs will be allocated to the purchase price of Caprion as well as to share issue costs. At the end of the first quarter, most of these expenses were still unpaid, which explain the increase in accounts payables and accrued liabilities.

Shareholders' equity amounted to $3,478,326 as at February 28, 2007, compared with $5,359,804 as at November 30, 2006. Total assets amounted to $6,116,412 as at February 28, 2007, compared with $6,456,260 as at November 30, 2006. The decrease in shareholders' equity and total assets take into account the use of cash related to operations for the first three months of 2007.

As of February 28, 2007, the number of common shares outstanding totalled 69,871,584 while 4,720,600 options at an average exercise price of $1.30 had been granted under the share purchase option plan. A total of 7,820,834 share purchase warrants were outstanding on that date, of which 4,154,167 are exercisable at a price of $1.28 each at any time until February 12, 2008 with the remainder exercisable at $1.03 expiring on March 8, 2007.

On March 14, 2007, the Company acquired Caprion by way of an amalgamation to form a new entity called Thallion. Thallion issued 69,871,584 common shares to existing Caprion shareholders and issued 10 million non-voting preferred shares redeemable within 12 months of the amalgamation entitling the holders, subject to certain conditions, to certain payments in connection with the sale of CellCarta™. Thallion also issued 5.3 million warrants to a long-term debt holder as part of an existing agreement and closed a private placement of 180 million units at $0.25 per unit for total gross proceeds of $45 million before estimated share issue costs of $3.2 million and total transaction costs of approximately $2.3 million. Each unit of the private placement entitles the holder to one common share and one half of one common share purchase warrant. Each full share purchase warrant will allow the holder to purchase one common share at an exercise price of $0.375 for a period of 36 months.

As of April 3, 2007, pursuant to the transaction described above and taking into account a share consolidation on a 10 for 1 basis effected on March 14, 2007, the number of common shares outstanding totals 31,974,317 with 470,560 stock options at an average exercise price of $13 remaining outstanding. A total of 9,945,417 common share purchase warrants remain outstanding of which 415,417 are exercisable at a price of $12.8 each at any time until February 12, 2008 with the remainder exercisable at a price of $3.75 for a prescribed period of time.



Quarterly Financial Data
($ in thousands, except for per share amounts)

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Quarters ended May August November February
(Unaudited) 31, 2006 31, 2006 30, 2006 28, 2007

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$ $ $ $
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Revenues 39 34 257 21
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Research and
Development
Expenses, before
Tax Credits and
Grants 1,297 1,115 1,299 1,665
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Net Loss 2,169 1,192 1,377 1,971
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Net Loss per Share 0.03 0.02 0.02 0.03
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Quarters ended May August November February
(Unaudited) 31, 2005 31, 2005 30, 2005 28, 2006

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$ $ $ $
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Revenues 84 83 75 62
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Research and
Development Expenses,
before Tax Credits
and Grants 1,847 2,068 2,404 1,577
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Net Loss 2,288 2,266 2,796 769
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Net Loss per Share 0.03 0.03 0.04 0.03
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Net loss variations, from quarter to quarter, primarily reflect the research and development efforts and the Company's organization structure to administer and develop its business plan.

Changes in accounting policies

Effective with the commencement of its 2007 fiscal year, the Company adopted the Canadian Institute of Chartered Accountants (CICA) Handbook section 1530, Comprehensive Income, CICA handbook section 3855, Financial Instruments, Recognition and Measurement and CICA Handbook section 3865, Hedges. These new handbook sections, which apply to fiscal years beginning on or after October 1, 2006, provide comprehensive requirements for the recognition and measurement of financial instruments, as well as standards on when and how hedge accounting may be applied. Handbook 1530 also establishes standards for reporting and displaying comprehensive income. Comprehensive income is defined as the change in equity from transactions and other events from non-owners sources. Other comprehensive income refers to items recognized in comprehensive income but that are excluded from net income calculated in accordance to GAAP.

Under the new standards, all financial instruments are classified into one of the following five categories: Held-for-trading, Held-to-maturity investments, Loans and receivables, Available-for-sale financial assets or Other financial liabilities. All financial instruments, including derivatives, are included on the balance sheet and are measured at fair value with the exception of Loans and receivable, Held-to-maturity investments and Other financial liabilities, which will be measured at amortized cost. Subsequent measurement and recognition of changes in fair value of financial instruments depend on their initial classification. Held-for-trading financial investments are measured at fair value and all gains and losses are included in net income in the period in which they arise. Available-for-sale financial instruments are measured at fair value with revaluation gains and losses included in other comprehensive income until the asset is removed from the balance sheet.

As a result of the adoption of these standards, we have classified bonds as "Available-for-sale". We have classified our receivables as "Loan and receivables", and our account payables and accrued liabilities as "Other financial liabilities", all of which are measured at amortized cost.

About Ecopia

Ecopia is finding novel anticancer therapies from microorganisms, one of the most prolific sources of drugs. Our current focus is to move our lead compound, ECO-4601, through the different stages of its Phase I clinical trial. ECO-4601 is a novel small molecule with a dual mechanism of action. Not only does the compound inhibit the RAS-mitogen-activated protein kinase (MAPK) pathway at a strategic point, it also selectively binds to the Peripheral Benzodiazepine Receptor (PBR), a receptor highly expressed in many cancer cells. This dual activity positions the compound as a uniquely targeted anticancer drug candidate. Like well-known chemotherapies such as doxorubicin and mitomycin C, ECO-4601 comes from a non-pathogenic microorganism. However, unlike these drugs that were discovered decades ago, ECO-4601 is the fruit of a unique drug discovery platform called the DECIPHER® technology and represents a new chemical class, from which many analogs are being synthesized.

About Caprion

Caprion Pharmaceuticals Inc. is a clinical-stage biotechnology company developing pharmaceutical products in the areas of infectious disease and oncology. Caprion's clinical-stage programs include Shigamabs®, a product for the treatment of Shigatoxin-producing E. coli bacterial infections, and CAP-232, a targeted therapy with potential efficacy in multiple oncology indications. CellCarta®, Caprion's proprietary proteomics technology, provides Caprion with an effective means to identify novel drug targets, predict which therapeutics may be safer and more efficacious, and identify which patients may benefit most from a particular therapy.

Pursuant to the March 14, 2007 amalgamation between Ecopia and Caprion, Thallion's shares are listed on the Toronto Stock Exchange under the ticker symbol: TLN.

Information contained on Thallion's website is not incorporated by reference in this report.

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