Allon Therapeutics, Inc. Reports 2009 Audited Operating Results and Updates 2010 Plans

VANCOUVER, BRITISH COLUMBIA--(Marketwire - March 05, 2010) - Allon Therapeutics Inc. (TSX: NPC) today announced its audited operating results for 2009 and updated clinical development plans for 2010.

Gordon McCauley, Allon's President and CEO, said two key achievements in 2009 moved the Company another significant step toward its objective of developing the first drugs to impact the causes of major neurodegenerative diseases, such as Alzheimer's disease, cognitive impairment associated with schizophrenia and other dementias.

McCauley said the two key achievements were:

- Phase 2a clinical trial results that showed the Company's lead neuroprotective drug candidate, davunetide, had a statistically significant positive effect on functional capacity of schizophrenia-cognition patients to manage their day-to-day lives, and

- Commencement of a new clinical program to develop davunetide as the first approved treatment for frontotemporal dementia (FTD), a group of rapidly progressive and fatal degenerative brain diseases, often misdiagnosed as Parkinson's or Alzheimer's disease.

Allon's progress in 2009 built on the foundational achievements made by the Company in 2008, which included Phase 2a clinical trial data showing that davunetide had a statistically significant, dose dependent and durable effect resulting in specific memory improvement in patients with amnestic mild cognitive impairment (aMCI), a precursor to Alzheimer's disease.

"We have built a track record of clinical successes that bring hope to millions of patients and their families that battle these severe and progressive diseases, while also validating the Company's business strategy of seeking positive results in different clinical indications," McCauley continued.

"We remain on track to bring to market truly disease modifying therapies in these major unmet medical needs," said McCauley.

Cognitive impairment associated with schizophrenia (CIAS)

The Company released top-line Phase 2a clinical trial results July 9, 2009 and followed up with full results December 7, 2009 showing that davunetide achieved measurable positive treatment effects in schizophrenia patients with cognitive impairment. These patients showed improvements in their ability to carry out important activities in their daily lives.

The trial achieved a statistically significant positive treatment effect on a secondary endpoint, which was the UCSD (University of California, San Diego) Performance-based Skills Assessment (UPSA) test. The UPSA scale assesses the functional capacity of skills for daily living and has been recognized by drug regulators as an appropriate co-primary endpoint in patients suffering from cognitive impairment associated with schizophrenia (CIAS).

Most people with schizophrenia suffer from this cognitive impairment that is independent of the psychotic symptoms of the illness. While there are sales of $6-billion to treat the psychosis associated with schizophrenia, there are currently no approved drugs treating CIAS.

The trial was managed by TURNS (Treatment Units for Research on Neurocognition and Schizophrenia), with substantial financial support from the National Institute of Mental Health (NIMH), part of the U.S. National Institutes of Health.

Frontotemporal dementia

Allon's clinical program in FTD builds on positive preclinical studies and Phase 2a human clinical trial data in patients with aMCI. These data show that davunetide halts the formation of neurofibrillary tangles in brain cells caused by impairment of the brain protein tau. Approximately half of the dementias that are classified as FTD have similar pathology involving tau impairment causing tangles.

Subsequent to the establishment of the Company's FTD program in 2009, Allon has announced three related developments in 2010:

- The United States Food and Drug Administration (FDA) granted Orphan Drug Designation to davunetide for the treatment of progressive supranuclear palsy (PSP), one of several types of FTD in which the pathology is known to involve impairment of the brain protein tau.

- Initiation of a pilot clinical trial sponsored by the Memory and Aging Center of the University of California, San Francisco, to validate the trial design for a larger Phase 2 PSP clinical trial scheduled to begin in 2010. Trial investigators are among the leading experts in the field, including Drs. Bruce Miller and Adam Boxer of the Memory and Aging Center.

- Commencement of patient enrolment in a Phase 1 clinical trial to broaden the demonstrated safety range and pharmacokinetic profile of davunetide. The results will provide the Company with more dosing flexibility in the Phase 2 PSP clinical trial scheduled to begin this year.

Other 2009 achievements

Allon achieved the following milestones in 2009:

- Received U.S. patent which strengthened the intellectual property underlying the Company's activity-dependent neurotrophic factor (ADNF) technology platform by covering the chemical composition of two component peptides and covering their use in drugs to protect brain cells from degenerative diseases.

- Received European patent covering the composition and method of use of davunetide as a treatment for Alzheimer's disease. Davunetide is based on an eight amino acid peptide, single letter code NAPVSIPQ (NAP), derived from Allon's ADNP technology platform.

- Received a Canadian patent covering the chemical composition of the Company's preclinical-stage peptide AL-209 and its use in protecting against Alzheimer's disease and other degenerative diseases.

- Davunetide was selected as one of the Top 10 partnership candidates at the 2009 Windhover Therapeutic Areas Partnership Conference in Boston, MA.

Financials

Allon reported a net loss of $7,341,985 ($0.09 per share) for the year ended December 31, 2009, compared to a net loss of $11,312,034 ($0.17 per share) for the year ended December 31, 2008, representing a year over year decrease in net loss of $3,970,049.

For the fiscal year ended December 31, 2009, research and development expenses were $3,891,750 compared to $8,634,382 for the fiscal year ended December 31, 2008. The decline in research and development expenses resulted from a decrease in clinical trial activity. During 2008, the Company had as many as three ongoing Phase 2 clinical programs, two of which were completed in 2008. The third trial was completed in 2009.

For the year ended December 31, 2009, general and administrative expenses were $2,840,193 compared to $3,458,931 for the year ended December 31, 2008. The decrease of $618,738 compared to 2008 resulted from reduced expenditures on corporate travel, reduction in consulting fees and lower compensation expense.

Amortization expense for the year ended December 31, 2009 was $546,766 compared to $549,186 for the year ended December 31, 2008. Allon amortizes tangible assets and intellectual property on a straight-line basis. The small decline compared to the previous year was primarily the result of certain assets being fully amortized.

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 $103,058 during 2009 compared to $435,641 in 2008. Reduced interest earnings resulted from significantly lower interest rates and lower cash balances in 2009 compared to 2008.

Foreign exchange translation loss was $175,309 for the 12 months ended December 31, 2009. This compared to gains of $904,421 in 2008. During 2009, the U.S. dollar declined significantly 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 2008 when the U.S. dollar appreciated against the Canadian dollar. The Company had lower amounts of U.S. dollar holdings in 2009 compared to the same period in 2008, which mitigated the effects of fluctuation in the exchange rate.

At December 31, 2009, the Company had cash and cash equivalents of $11,002,859 compared to $19,093,499 of cash and cash equivalents at December 31, 2008. 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 frontotemporal dementia. 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 II 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.