Allon Therapeutics, Inc. Releases Second Quarter Operating Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - August 11, 2010) - Allon Therapeutics Inc. (TSX: NPC) today announced its unaudited operating results for the three months ended June 30, 2010. The Company also said it remains on course to develop its lead product davunetide as the first approved treatment for progressive supranuclear palsy (PSP) and other brain diseases involving impairment of the brain protein tau, including Alzheimer’s disease.

Gordon McCauley, President and CEO of Allon, said the Company would commence a clinical trial in the second half of 2010 to determine the efficacy of davunetide in patients with PSP. The trial will be held at several medical centres in the United States in collaboration with the Memory and Aging Center of the University of California, San Francisco (UCSF). Dr. Adam Boxer, of the UCSF’s Memory and Aging Center, will be the principal investigator.

“Given that we have already demonstrated the efficacy of davunetide in patients with amnestic mild cognitive impairment, a precursor to Alzheimer’s disease, and in patients with cognitive impairment associated with schizophrenia, two diseases in which tau is implicated, we believe there is a strong rationale to pursue approval in PSP. Moreover, this route will get us to commercialization, and therefore helping patients, faster than Alzheimer’s or schizophrenia,” said McCauley.

“Our second quarter activities were focused on working with our collaborators on a Phase 1 trial and a pilot study in PSP patients to confirm the efficacy trial protocol and to coordinate with trial sites,” said McCauley. “Given that PSP patients represent a homogeneous population suffering from the tau pathology on which davunetide appears to work, we believe that this drug will effectively modify the course of their disease.”

Allon’s PSP program has received 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, and has also been granted Fast Track status in the U.S.

Allon believes it has sufficient cash to execute its business plan into 2011 and has confirmed its strong financial position with 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.

Results of Operations

Allon reported a net loss of $2,711,569 ($0.03 per share) for the three months ended June 30, 2010, compared to a net loss of $1,204,940 ($0.02 per share) for the three months ended June 30, 2009, representing an increase in net loss of $1,506,629. For the six months ended June 30, 2010, the Company reported a net loss of $5,898,162 ($0.08 per share), compared to a net loss of $3,214,529 ($0.04 per share) for the six months ended June 30, 2009. The following is a description of the significant variances from the comparable period in 2009.

For the three and six months ended June 30, 2010, research and development expenses were $1,778,674 and $3,946,585 compared to $541,645 and $1,740,581 for the three and six months ended June 30, 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 and six months ended June 30, 2010, general and administrative expenses were $883,388 and $1,735,795 compared to $548,180 and $1,298,865 for the three and six months ended June 30, 2009. The increase of $335,208 and $436,930 compared to 2009 resulted primarily from expenses related to the standby equity distribution agreement, commercial research activities, and increase in investor relations activities.

Amortization expense for the three and six months ended June 30, 2010 were $135,904 and $272,684 compared to $136,848 and $273,460 for the three and six months ended June 30, 2009. Allon amortizes tangible assets and intellectual property on a straight-line basis.

The Company’s other income and expenses are comprised of interest income, foreign exchange gains and losses, and gain on disposal of investments. The Company earned interest revenue of $6,256 and $15,009 during the three and six months ended June 30, 2010 compared to $48,394 and $111,417 for the same period in 2009. Reduced interest earnings resulted primarily from lower cash balances and lower interest rates in 2010 compared to the same period in 2009.

Foreign exchange translation gain was $42,509 and $4,260 for the three and six months ended June 30, 2010. This compared to a loss of $10,335 and gain of $22,773 for the three and six months ended June 30, 2009. The Company’s foreign exchange exposure is primarily limited to the translation of U.S. dollar balances in cash and short-term investment accounts to Canadian dollars. In addition, during the second quarter of 2010, the Company disposed of investments previously written-off, resulting in a gain of $37,633.

At June 30, 2010, the Company had cash and cash equivalents of $4,322,488 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 PSP

PSP is one of a group of progressive disorders called frontotemporal dementia (FTD), that affect the frontal and temporal lobes of the brain, and for which there are no approved treatments. Approximately 20,000 and 50,000 persons in the U.S. and EU respectively have PSP.

Approximately half of FTDs, including PSP, are tauopathies, which are pathologies that involve impairment of the tau protein in brain cells. Allon expects that demonstrating efficacy in PSP will define the opportunity to use davunetide in other FTD subtypes that are tauopathies.

PSP is often characterized by progressive difficulty with balance and walking, eye movement abnormalities, and cognitive and personality changes. Patients are typically diagnosed when they are between 45 and 65 years of age. PSP is associated with progressive disability and death often three years following onset. The disease is slightly more common in men than women, but there are no known geographical, occupational, or racial patterns.

Davunetide for PSP

Allon has demonstrated a strong scientific and clinical rationale for the potential efficacy of davunetide in PSP. The pathology of PSP and Alzheimer’s is similar in that both diseases involve impairment of the brain protein tau - and davunetide is the most advanced tau therapy in the world.

Research has shown that davunetide reduced tau impairment and preserved memory in mice bred to replicate Alzheimer’s or PSP tau pathology.

In 2008, Allon reported Phase 2a clinical trial results showing that davunetide had a statistically significant positive impact on memory function in patients with amnestic mild cognitive impairment (aMCI), a precursor to Alzheimer’s. The data was presented July 28 and July 30, 2008 to the International Conference on Alzheimer’s Disease and Related Disorders (ICAD 2008).

On December 7, 2009, Allon reported Phase 2a clinical trial results showing that davunetide improved memory function of schizophrenia patients and had a positive impact on the ability of these patients to carry out important activities in their daily lives.

On March 30, 2010, Allon announced top-line results from an imaging study of schizophrenia patients showing 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. Allon said statistically significant (p=0.0170) increased levels of N-acetyl aspartate (NAA) were measured using magnetic resonance spectroscopy in the brains of the schizophrenia patients treated with davunetide. The scientific literature shows that NAA is an informative biomarker because decreased levels of NAA occur in schizophrenia, and in numerous other neurodegenerative conditions such as brain injury, stroke, and Alzheimer’s.

About davunetide

Davunetide is derived from a naturally occurring neuroprotective brain protein known as activity dependent neuroprotective protein (ADNP). Allon’s laboratory and animal studies have shown that davunetide restores the function of structures in the brain - known as microtubules - which are critical to communication between brain cells and the structure of individual cells.

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 associated with schizophrenia, and progressive supranuclear palsy (PSP). 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 is proceeding in advanced clinical trials in an orphan indication, progressive supranuclear palsy (PSP), and will pursue the major markets: Alzheimer’s disease and cognitive impairment associated schizophrenia, with a pharmaceutical partner. 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.