AGI Therapeutics plc: Interim Financial Results For The Six Months Ended 30 June 2009

Published: Sep 22, 2009

Dublin, Ireland, 22 September 2009 - AGI Therapeutics plc ("AGI" or “the Company") (AIM, IEX: AGI), a speciality pharmaceutical development company, today announces interim financial results for the six months ended 30 June 2009.

The Company also today announces that, following a comprehensive review of the business by management, it has implemented a revised business strategy which has been endorsed by the Board.

Financial summary

• Cash and short-term deposits at 30 June 2009 of $15.1 million (31 December 2008: $23.6.million). Net of short-term liabilities: $12.4 million (31 December 2008: $21.0 million)

• R&D spend $7.8 million (2008: $8.3 million)

• Loss per ordinary share $0.14 cents (2008: $0.13 cents)

Operational summary

• In May, the top line results of ARDIS1, the Phase III efficacy study of Rezular™ in diarrhea-predominant irritable bowel syndrome (IBS-D), the Company’s lead development programme, were announced

o The study did not show a statistically significant difference between drug and placebo in the primary endpoint of patient-reported adequate relief of IBS symptoms

o Statistically significant evidence favouring Rezular treatment was achieved in a number of secondary endpoints and in particular those relating to GI motility and diarrhea symptoms as well as quality of life

• In March, positive results in a Phase II proof-of-concept study of AGI-004 in the control of chemotherapy-induced diarrhea (CID) were announced. AGI-004 is a once-daily controlled release transdermal patch containing the nicotinic antagonist mecamylamine

o The results showed a statistically significant difference between drug and placebo in the primary endpoint of reducing the incidence of patient-recorded diarrhea

o The primary endpoint was supported by a statistically significant difference in the secondary endpoint of patient-recorded severity of diarrhea

Business strategy review

Following the announcement on May 15th that AGI was discontinuing the development of Rezular in the broad indication of IBS-D, the Company commenced a full review of its business strategy, including a fundamental review of its pipeline products, and an extensive post-hoc analysis of the data from the ARDIS 1 study and the ARDIS 3 safety study of Rezular. That business review has now been completed and a new business strategy, prepared by management, has been approved by AGI’s Board of Directors.

The key elements of the new business strategy are as follows:

Business focus

• While AGI has focused to date on products for gastro-intestinal (GI) indications, the Company’s approach to development of differentiated products based on Known Molecular Entities (KMEs) is equally applicable to other therapeutic areas

• Under the new business plan, the Company will focus on the development of specialty products where there is an unmet medical need. In some cases these products will be developed for Orphan indications

• The Company will focus its primary efforts on the US market where it has the most experience and which offers the greatest commercial potential

• By focusing on products targeting unmet medical needs in specialty indications the Company will execute development programmes in a timely and cost effective manner and will aim to bring products to the market either directly or through out-licensing to or partnering with established pharmaceutical companies

• The Company’s immediate focus will be to maximize the value of its existing pipeline of products, as well as adding new product opportunities where appropriate

Product pipeline

• Applying criteria based on the new business strategy, AGI has completed a comprehensive review of its product pipeline and associated indications

• A comprehensive review of the data from ARDIS 1, AGI’s Phase III clinical efficacy study of Rezular in IBS-D, has been conducted. The analysis has confirmed that Rezular offers a potential treatment for chronic diarrhea symptoms, particularly those associated with altered gut motility. Furthermore the analysis, based on extensive and extended drug exposure in ARDIS 1 and ARDIS 3 supports the excellent safety profile of the drug. (A separate press release setting out in more detail the results of this analysis is issued today.)

• Following the review, AGI has identified a number of potential diarrhea-associated indications for Rezular that could be appropriate for further development. Some of these indications may qualify for Orphan drug status and approval. For competitive and intellectual property protection reasons, AGI does not intend to reveal these indications until priority has been established. AGI estimates that if Rezular was ultimately successfully developed, approved and launched in all these indications, peak sales could be in excess of $1.0 billion

• In addition, based on the unique pharmacology of Rezular, AGI has identified a new indication that is not diarrhea-related and is not in the GI therapeutic area, but which is an established Orphan indication where Rezular may have particular and unique benefit. If successfully developed in this indication AGI estimates potential peak global sales of $0.5 billion

• The management team has also determined that AGI-004, transdermal mecamylamine for the treatment of Chemotherapy Induced Diarrhoea (CID), meets the criteria of AGI’s new business strategy and will be considered for further development

• A detailed operational plan is now being developed around these core products, Rezular and AGI-004, that prioritises the programmes for further direct investment by AGI. Co-funding or funding through strategic industry alliances may be considered for certain programmes

• AGI has three other products in development, AGI-010, AGI-022 and AGI-006. The Company recently announced that it has reached mutual agreement with Axcan Pharma Inc. to terminate the joint-development of AGI-010, controlled-release omeprazole, without any further financial obligations on either party. AGI has now regained full rights to this product and intends to seek pharmaceutical partners to fund the further development of AGI-010. A similar approach will be taken with AGI-022, a targeted and controlled-release aminosalicylate and AGI-006, an upper-GI prokinetic agent

New products

• In addition to building value based on its core products, Rezular and AGI-004, the business review has made provision for adding new products to add to the pipeline, including through partnerships and/or alliances with other companies. These new opportunities will be evaluated against the same criteria as those being pursued in-house, i.e. targetting unmet medical needs, in specialist indications and potential Orphan indications

Cost structure and cash

In the June 11 AGM statement, AGI announced that it expected to have cash resources of approximately $12.0 million at the end of Q2 2009. Cash on hand at 30 June 2009 was $15.1 million, before current liabilities of $2.7 million, most of which related to close out costs on the ARDIS programme and restructuring costs. These liabilities are due to be discharged in the third quarter of 2009, leaving pro-forma cash reserves of $12.4 million available as of the end of June for the execution of the new business strategy. The Company has moved to reduce its cost base which will allow for future clinical programmes to be funded to ensure it can rebuild value in its pipeline. The Company envisages that it will have sufficient cash resources for at least two years.

Commenting on the announcement today, John Devane, CEO of AGI stated; “We are pleased to have completed a rigorous business strategy and portfolio review, which provides a realistic route for rebuilding value in our pipeline, using the assets and resources available to us. In recent months we have spent considerable time identifying assets that will benefit best from further internal development and those better monetised by out-licensing. Over the next year we will concentrate our efforts on building value based on clinical and other scientific evidence in those indications where we see the greatest value for AGI.”

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