Stellar Pharmaceuticals Inc. Reports First Quarter 2010 Financial Results

LONDON, ONTARIO--(Marketwire - May 14, 2010) - Stellar Pharmaceuticals Inc. (OTCBB: SLXCF) (“Stellar” or “the Company”), a Canadian pharmaceutical developer and marketer of high quality, cost-effective products for select health care markets, today announced financial results for the quarter ended March 31, 2010. In this press release, all dollar amounts are expressed in Canadian currency and results are reported in accordance with United States generally accepted accounting principles (U.S. GAAP).

For the three-month period ended March 31, 2010, Stellar’s total revenues were $577,879 as compared to $772,515 for the same period in 2009. The Company noted that the decrease in total revenues was driven primarily by the absence of licensing revenues in the first quarter of 2010, compared to $219,000 of license revenues being recorded in the same three-month period a year ago. Stellar’s licensing revenue fluctuates based on the timing and terms of its global out-licensing agreements. Inclusive of $33,947 in non-cash stock options and $26,790 for amortization recorded in the first quarter of 2010, Stellar’s net loss was $247,538, or $0.01 per share, compared to a net profit of $25,177, or $nil per share in the first quarter of 2009.

Stellar ended the quarter in a strong financial position, with no debt and working capital of $2,725,200.

Peter Riehl, Stellar’s President and Chief Executive Officer, commented, “This quarter was characterized by some very unfortunate timing. While we had anticipated licensing fees in the first quarter of 2010, they did not materialize until May. Had these licensing revenues been recorded in the first quarter of 2010, total revenues would have shown growth over the first quarter of 2009. In addition, first quarter international sales were down by 6.1% due to one international NeoVisc® order which was rescheduled for delivery from March to May.”

“The good news was that domestic NeoVisc®, domestic Uracyst® and international Uracyst® sales grew 10.8%, 13.8% and 30.0% respectively in the first quarter of 2010 compared to the same period in 2009. Although it can not be assured, these strong sales growth trends, combined with the inclusion of the aforementioned licensing fees and a return to international NeoVisc® sales growth, provides us with confidence that the second quarter will be much stronger,” Mr. Riehl concluded.

About Stellar Pharmaceuticals Inc.

Stellar has developed and is marketing direct in Canada, and in countries around the world through out-license agreements, three products based on its core polysaccharide technology: NeoVisc® and NeoVisc® Single Dose, for the symptomatic treatment of osteoarthritis; and Uracyst®, its patented technology for the treatment of interstitial cystitis (IC), an inflammatory disease of the urinary bladder wall. Both NeoVisc and Uracyst have their CE Mark certification for the European Community. Stellar also has an in-licensing agreement for NMP22® BladderChek®, a proteomics-based diagnostic test for the diagnosis and monitoring of bladder cancer. For more information, please visit the company’s website at www.stellarpharma.com.

Forward-Looking Statements

This press release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on these forward-looking statements. Actual results may differ materially from those indicated by these forward-looking statements as a result of risks and uncertainties impacting the Company’s business including increased competition; the ability of the Company to expand its operations, to attract and retain qualified professionals, technological obsolescence; general economic conditions; and other risks detailed from time to time in the Company’s filings.

 STELLAR PHARMACEUTICALS INC. BALANCE SHEETS (Expressed in Canadian dollars) As at As at March December 31, 2010 31, 2009 ------------- ------------- ASSETS CURRENT 2010 2009 ------------- ------------- Cash and cash equivalents $ 1,795,557 $ 2,325,212 Accounts receivable, net of allowance of $nil (2009 - $nil) 312,323 293,565 Inventories 652,045 721,061 Taxes recoverable 11,528 1,501 Loan receivable 15,818 15,818 Prepaids, deposits and sundry receivables 147,817 163,698 ------------- ------------- Total current assets 2,935,088 3,520,855 PROPERTY, PLANT AND EQUIPMENT, net 1,557,765 1,390,296 OTHER ASSETS 122,227 114,553 ------------- ------------- Total assets $ 4,615,080 $ 5,025,704 ------------- ------------- ------------- ------------- LIABILITIES CURRENT Accounts payable $ 69,024 $ 228,367 Accrued liabilities 132,900 175,637 Deferred revenues 7,937 2,890 ------------- ------------- Total current liabilities 209,861 406,894 ------------- ------------- CONTINGENCIES AND COMMITMENTS SHAREHOLDERS’ EQUITY CAPITAL STOCK AUTHORIZED Unlimited Non-voting, convertible, redeemable and retractable preferred shares with no par value Unlimited Common shares with no par value ISSUED 23,480,040 Common shares (2009 - 23,480,040) 8,183,638 8,183,638 Additional Paid-in capital options - outstanding 123,509 89,562 Additional Paid-in capital options - expired 724,127 724,127 ------------- ------------- 9,031,274 8,997,327 DEFICIT (4,626,055) (4,378,517) ------------- ------------- Total shareholders’ equity 4,405,219 4,618,810 ------------- ------------- Total liabilities and shareholders’ equity $ 4,615,080 $ 5,025,704 ------------- ------------- ------------- ------------- STELLAR PHARMACEUTICALS INC. STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME (Expressed in Canadian dollars) For the Three Month Period Ended March 31, ------------------------------- 2010 2009 --------------- --------------- PRODUCT SALES $ 549,510 $ 544,419 ROYALTIES & LICENSING REVENUE 28,369 228,096 --------------- --------------- TOTAL REVENUE FROM ALL SOURCES 577,879 772,515 COST OF PRODUCTS SOLD 203,757 154,955 --------------- --------------- GROSS PROFIT 374,122 617,560 --------------- --------------- EXPENSES Selling, general and administrative 567,932 578,052 Research and development 26,270 5,608 Amortization of assets (non-manufacturing property, plant and equipment) 13,663 13,698 --------------- --------------- 607,865 597,358 --------------- --------------- (LOSS) INCOME FROM OPERATIONS (233,743) 20,202 INTEREST AND OTHER INCOME 1,513 4,975 LOSS ON DISPOSAL OF EQUIPMENT (15,308) - --------------- --------------- (LOSS) NET INCOME AND COMPREHENSIIVE (LOSS) INCOME FOR THE PERIOD (247,538) 25,177 DEFICIT, beginning of period (4,378,517) (4,615,553) --------------- --------------- DEFICIT, end of period $ (4,626,055) (4,590,376) --------------- --------------- --------------- --------------- (LOSS) EARNINGS PER SHARE - Basic and diluted $ (0.01) $ 0.00 --------------- --------------- --------------- --------------- WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - Basic and diluted 23,480,040 23,527,318 --------------- --------------- --------------- --------------- STELLAR PHARMACEUTICALS INC. STATEMENTS OF CASH FLOWS (Expressed in Canadian dollars) For the Three Month Period Ended March 31, --------------------------- 2010 2009 CASH FLOWS USED IN OPERATING ACTIVITIES Net (loss) income $ (247,538) $ 25,177 Items not affecting cash Amortization 26,785 34,995 Loss on disposal of equipment 15,308 -- Issuance of equity instruments for services rendered 33,947 -- Change in non-cash operating assets and liabilities (140,920) 203,043 ------------- ------------- CASH FLOWS USED IN OPERATING ACTIVITIES (312,419) 263,215 CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES Additions to property, plant and equipment (221,853) (197) Increase in other assets (8,014) (6,957) Proceeds from sale of equipment 12,630 -- ------------- ------------- CASH FLOWS USED IN INVESTING ACTIVITIES (217,237) (7,154) ------------- ------------- CASH FLOWS USED IN FINANCING ACTIVITIES Repurchase of common shares for cash -- (21,292) ------------- ------------- CASH FLOWS USED IN FINANCING ACTIVITIES -- (21,292) ------------- ------------- CHANGE IN CASH AND CASH EQUIVALENTS (529,655) 234,769 CASH AND CASH EQUIVALENTS, beginning of period 2,325,212 2,105,966 ------------- ------------- CASH AND CASH EQUIVALENTS, end of period $1,795,557 $2,340,735 ------------- ------------- ------------- -------------