Allon Therapeutics, Inc. Releases First Quarter Operating Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 13, 2010) - Allon Therapeutics Inc. (TSX: NPC) announced its unaudited operating results for the three months ended March 31, 2010. The Company also provided a recap of its progress in the development of davunetide, the Company’s lead neurodegenerative product candidate. Davunetide is being investigated as a potential treatment for progressive supranuclear palsy (PSP) and other brain diseases involving impairment of the brain protein tau, including Alzheimer’s disease.

Progress in Allon’s PSP program included:

 -- Orphan Drug designation for davunetide, as a treatment for PSP in the United States and the European Union, the world’s two largest pharmaceutical markets; -- Granting of Fast Track status in the U.S. for davunetide in the treatment of PSP; -- Completion of a Phase 1 clinical trial that began enrolling patients January 28, 2010. The resulting Phase 1 data expanded the demonstrated safety range and pharmacokinetic profile of davunetide at dosage levels higher than previously investigated in the Company’s clinical trials; and -- Initiation of a pilot study at University of California, San Francisco (UCSF) to validate the trial design for future clinical studies 

Gordon McCauley, President and CEO of Allon, said, “We believe we have a clear path to develop davunetide as the first treatment for people suffering with PSP and other brain diseases involving impairment of the brain protein tau.”

“PSP patients have the tau pathology on which davunetide has been shown to work and there is a validated rating scale that measures clinically relevant outcomes,” said McCauley. “These factors, along with excellent regulatory progress, keeps us on track to commence an efficacy study in PSP mid-year,” McCauley added.

Other Allon achievements during the first quarter included the following:

 -- Top-line results from an imaging study of schizophrenia patients showed that 12 weeks of treatment with davunetide resulted in a statistically significant increase in levels of a biomarker that is an important indicator of brain cell health. -- Data presented at an international schizophrenia meeting showed statistically significant (p=0.0170) increased levels of N-acetyl aspartate (NAA) were measured in the brains of the schizophrenia patients treated with davunetide using magnetic resonance spectroscopy (MRS). The scientific literature shows that NAA is an important biomarker, because decreased levels of NAA occur in schizophrenia, and in numerous other neurodegenerative conditions, such as brain injury, stroke, and Alzheimer’s disease. -- Allon entered into a standby equity distribution agreement with a fund managed by Yorkville Advisors, LLC. Under the terms of the agreement, Yorkville has committed to provide up to $10 million of equity capital over the next three years, if and when drawn by Allon, at the Company’s discretion. -- Allon believes it has sufficient cash to execute its business plan into 2011. The standby facility was put in place as an effective corporate finance tool providing a flexible, low-cost source of capital, in an amount and at the time of Allon’s choosing, with a built-in minimum price. -- The Company announced preclinical data demonstrating the potential of AL-309, an early-stage drug candidate. AL-309 is being investigated as a treatment for peripheral neuropathy, a debilitating and painful disorder of the peripheral nervous system afflicting millions of people for which there is no effective treatment. -- The preclinical data has shown AL-309 to be effective at reducing nerve damage and pain in animal models for peripheral neuropathy caused by diabetes and cancer chemotherapy, two of the most common causes of the disease. The data was presented at the AsiaTIDES Oligonucleotide and Peptide Technology and Product Development Conference in Tokyo, Japan. 

Results of Operations

Allon reported a net loss of $3,186,593, or $0.04 per share, for the three months ended March 31, 2010, compared to a net loss of $2,009,589, or $0.03 per share, for the three months ended March 31, 2009, representing an increase in net loss of $1,177,004.

Matthew Carlyle, Chief Financial Officer of Allon, said, “We anticipate that our cash and cash equivalents will be sufficient to fund our projected operations into 2011. With the achievement of significant regulatory and operational milestones to support the initiation of our PSP study, our first quarter expenses increased over prior quarters. We anticipate the PSP study to begin later this year, and with the payment of significant upfront costs, including drug supply in 2009 and the first quarter of 2010, we anticipate that our quarterly cash burn will decline over the remainder of the year.”

For the three months ended March 31, 2010, research and development expenses were $2,167,911 compared to $1,198,936 for the same period of 2009. The increase in research and development expenses resulted from an increase in clinical trial activity related to the Company’s neuroprotective drug candidate, davunetide.

For the three months ended March 31, 2010, general and administrative expenses were $852,407 compared to $750,685 for the same period of 2009. The increase of $101,722 compared to 2009 resulted primarily from expenses related to the standby equity distribution agreement.

Amortization expense for the three months ended March 31, 2010 was $136,780 compared to $136,612 for the three months ended March 31, 2009. Allon amortizes tangible assets and intellectual property on a straight-line basis.

The Company’s other income and expenses are primarily comprised of interest income and foreign exchange gains and losses. The Company earned interest revenue of $8,754 during the three months ended March 31, 2010, compared to $43,536 for the same period in 2009. Reduced interest earnings resulted from lower interest rates and lower cash balances in 2010, compared to the same period in 2009.

Foreign exchange translation loss was $38,249 for the three months ended March 31, 2010. This compared to gain of $33,108 for the same period in 2009. During the first quarter of 2010, the U.S. dollar declined against the Canadian dollar resulting in foreign exchange losses on the Company’s U.S. dollar cash and cash equivalents. This compared to foreign exchange gains in the first quarter of 2009 when the U.S. dollar appreciated against the Canadian dollar.

At March 31, 2010, the Company had cash and cash equivalents of $6,459,236 compared to $11,002,859 of cash and cash equivalents at December 31, 2009. The Company’s cash equivalents are held in high-grade, liquid and low risk investments, which may include commercial paper, government bonds, and money market funds, and are recorded at fair value.

About Allon’s neuroprotective platforms

Allon’s two neuroprotective technology platforms are based on two naturally occurring proteins produced by the brain in response to a range of insults. The platforms are activity-dependent neuroprotective protein (ADNP) and activity-dependent neurotrophic factor (ADNF).

Because the two platforms are based on different proteins, the drugs from each are different molecules with different therapeutic mechanisms and distinct commercial opportunities. Clinical-stage drugs based on davunetide are derived from ADNP, while preclinical stage drug AL-309 is derived from ADNF. Davunetide is focused on Alzheimer’s disease, cognitive impairment in schizophrenia, and progressive supranuclear palsy (PSP) and is administered intranasally or intravenously. ADNF drug candidate AL-309 is being developed for the treatment of peripheral neuropathies and is administered orally or subcutaneously.

About Allon

Allon Therapeutics Inc. is a clinical-stage biotechnology company developing treatments for major neurodegenerative conditions. Allon’s drug davunetide has demonstrated human efficacy in amnestic mild cognitive impairment, a precursor to Alzheimer’s disease, and cognitive impairment associated with schizophrenia. Allon has Phase 2 human efficacy programs pursuing large underserved markets, such as Alzheimer’s disease and cognitive impairment associated with schizophrenia, and in orphan markets, such as frontotemporal dementias. The Company is listed on the Toronto Stock Exchange under the trading symbol “NPC” (Neuro Protection Company™) and based in Vancouver. For additional information please visit the Company’s website: www.allontherapeutics.com.

Forward Looking Statements

Statements contained herein, other than those which are strictly statements of historical fact may include forward-looking information. Such statements will typically contain words such as “believes”, “may”, “plans”, “will”, “estimate”, “continue”, “anticipates”, “intends”, “expects”, and similar expressions. While forward-looking statements represent management’s outlook based on assumptions that management believes are reasonable, forward-looking statements by their nature are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, events or developments to be materially different from any future results, events or developments expressed or implied by them. Such factors include, among others, the inherent uncertainty involved in scientific research and drug development, Allon’s early stage of development, lack of product revenues, its additional capital requirements, the risks associated with successful completion of clinical trials and the long lead-times and high costs associated with obtaining regulatory approval to market any product which Allon may eventually develop. Other risk factors include the limited protections afforded by intellectual property rights, rapid technology and product obsolescence in a highly competitive environment and Allon’s dependence on collaborative partners and contract research organizations. These factors can be reviewed in Allon’s public filings at www.SEDAR.com and should be considered carefully. Readers are cautioned not to place undue reliance on such forward-looking statements.