Thallion Pharmaceuticals Inc. Announces 2009 Second Quarter Results

MONTREAL, QUEBEC--(Marketwire - July 09, 2009) - Thallion Pharmaceuticals Inc. (TSX: TLN) today announced its operational and financial results for the 2009 second quarter which ended on May 31, 2009.

“With our $8.85 million non-dilutive capital transaction on its way to closing, we are well positioned to extend our development runway into 2011,” said Lloyd M. Segal, Chief Executive Officer of Thallion Pharmaceuticals Inc. “As part of the corporate reorganization, we have also succeeded in reducing our ongoing expenditure level while we continue to enroll patients in our Phase II TLN-4601 trial and aggressively pursue potential partnering opportunities for our pipeline products.”

Outlook

Thallion is focused on advancing the development of its clinical assets to the next significant milestone events, specifically as it relates to its oncology candidates. These milestones include:

- Approval by shareholders of the corporate reorganization and non-dilutive capital transaction for gross proceeds of $8.85 million under a court supervised Plan of Arrangement which was announced on June 3, 2009.

- Continuing enrollment at multiple centers in Canada and the U.S. in the Phase II clinical trial for TLN-4601, a monotherapy for glioblastoma multiforme.

- Reporting tumor imaging data and interim analyses from the Phase II TLN-4601 trial in the third quarter of calendar 2009 once an initial cohort of patients have been assessed.

- Resolving the ongoing dispute with the licensor of TLN-232 through a binding arbitration process and re-evaluating the status of the program based on the outcome of the adjudication.

- Continuing its licensing discussions for Shigamabs® with potential partners, with the intent of completing a strategic transaction prior to initiating the next stage of clinical development.

Financial Highlights

Interest revenues amounted to $21,028 in the second quarter of 2009, compared with $176,754 in the second quarter of 2008. Interest revenues for the six-month period ended May 31, 2009 were $58,075 compared with $436,188 in the corresponding period in 2008. In each case, the change resulted from lower yields earned on cash investments in addition to the maturity of cash equivalents and short-term investments used to fund the Company’s operations throughout the periods.

Research and development expenses before tax credits amounted to $2,213,334 in the second quarter of 2009, compared with $2,687,452 in the second quarter of 2008, reflecting a decrease in costs of $474,118 or 18%. Research and development expenses for the six-month period ended May 31, 2009 were $4,325,275 compared with $5,657,331 in corresponding period in 2008, reflecting a decrease of $1,332,056 or 24%. The decrease in research and development expenses for each of the periods is primarily due to the development of two clinical programs throughout the first half of 2009 compared with three clinical programs under development throughout the first half of 2008.

General and administrative expenses amounted to $980,080 in the second quarter of 2009, compared with $1,176,942 in the second quarter of 2008, reflecting a decrease of $196,862 or 17%. General and administrative expenses for the six-month period ended May 31, 2009 were $2,317,504 compared with $2,527,409 in the corresponding period in 2008, reflecting a decrease of $209,905 or 8%. The change in general and administrative expenses for each of the periods is primarily the result of reduced operating costs with the final integration of the Company’s two operating facilities being completed on May 31, 2008 in addition to management’s continued efforts to reduce general and administrative expenses.

The Company recorded a net loss of $2,998,425 or $0.09 per share in the second quarter of 2009, compared with $5,948,117 or $0.19 per share in the second quarter of 2008. The Company recorded a net loss of $6,237,096 or $0.19 per share in the six-month period ended May 31, 2009, compared with $9,917,204 or $0.31 per share in the corresponding period in 2008. The decreases in net loss is primarily attributable to reductions in research and development and general and administrative expenses as well as the lease exit costs and related write-off of capital assets recorded in the second quarter of 2008.

As at May 31, 2009 the Company’s cash position amounted to $6,764,860, which consists of cash, cash equivalents and short-term investments. Tax credits receivable amounted to $1,401,748. Consequently, the Company’s liquidity availability amounted to $8,166,608 as compared with $13,849,800 on November 30, 2008. The decrease in liquidity is primarily due to cash expenses relating to operations for the first six months of 2009.

As of July 9, 2009, Thallion had 32,144,316 common shares outstanding. The number of stock options and common share purchase warrants outstanding at July 9, 2009 were 2,501,207 and 9,530,000, respectively.

Notice of Conference Call

Thallion will hold a conference call on Thursday, July 9, 2009, at 4:30 p.m. (ET) hosted by Mr. Lloyd M. Segal, Chief Executive Officer and Mr. Michael Singer, Chief Financial Officer to discuss the Company’s financial results and corporate developments. To access the conference call by telephone, dial 416-644-3419 or 1-800-731-5319. A live audio webcast of the call will be available at www.thallion.com. The webcast will be archived for 90 days.

Notice of Special Meeting of Shareholders

Thallion will hold a Special Meeting of Shareholders on Friday July 10, 2009, at 10:00 a.m. (ET) at the offices of McCarthy Tetrault LLP, Suite 2500, 1000, De La Gauchetiere Street West, Montreal, Quebec. Thallion shareholders will be asked to approve the Arrangement between Thallion and Premium Brands Income Fund and, if the Arrangement is approved, the adoption of the New Thallion Stock Option Plan.

About Thallion Pharmaceuticals Inc.

Thallion Pharmaceuticals Inc. (TSX: TLN) is a biotechnology company developing pharmaceutical products in the areas of oncology and infectious disease. The Company’s clinical programs include TLN-4601 and Shigamabs®. TLN-4601 is a novel anti-cancer therapy targeting the RAS-MAPK pathway which is actively enrolling patients at multiple sites in Canada and the United States in a Phase II trial for brain cancer. Shigamabs, is a dual antibody product for the treatment of Shigatoxin producing E. coli bacterial infections which is ready to begin a Phase II/III clinical program upon the completion of a development partnership. Additional information about Thallion can be obtained at www.thallion.com.

Forward-Looking Statements

This press release contains certain forward-looking statements, including, without limitation, statements containing the words “believe”, “may”, “plan”, “will”, “estimate”, “continue”, “anticipate”, “intend”, “expect” and other similar expressions which constitute “forward-looking information” within the meaning of applicable Canadian securities laws. Forward-looking statements reflect Thallion’s current expectation and assumptions, and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. These forward-looking statements involve risks and uncertainties including, but not limited to, the obtaining of court and other regulatory approvals and consents, the satisfaction of closing conditions, changing market conditions, the successful and timely completion of clinical studies, the establishment of corporate alliances, the impact of competitive products and pricing, new product development, uncertainties related to the regulatory approval process and other risks detailed from time-to-time in Thallion’s ongoing filings with the Canadian securities regulatory authorities which filings can be found at www.sedar.com. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Thallion undertakes no obligation to publicly update or revise any forward-looking statements either as a result of new information, future events or otherwise, except as required by applicable Canadian securities laws.

 THALLION PHARMACEUTICALS INC. Consolidated Balance Sheets May 31, 2009 and November 30, 2008 (Unaudited) 2009 2008 ----------------------------------------------------------------------- Assets (audited) Current assets: Cash and cash equivalents $959,511 $8,863,383 Short-term investments 5,805,349 4,168,541 Sales tax receivable and other 255,821 253,923 Accounts receivable 34,637 88,369 Tax credits receivable 1,401,748 817,876 Deposits and prepaid expenses 441,914 468,011 ----------------------------------------------------------------------- 8,898,980 14,660,103 Long-term deposit 200,000 200,000 Capital assets 2,998,024 3,258,947 Deferred costs 500,000 - ----------------------------------------------------------------------- $12,597,004 $18,119,050 ----------------------------------------------------------------------- ----------------------------------------------------------------------- Liabilities and Shareholders’ Equity Current liabilities: Accounts payable and accrued liabilities $2,693,803 $1,935,668 Current portion of lease exit obligations 610,567 608,505 ----------------------------------------------------------------------- 3,304,370 2,544,173 Long-term portion of lease exit obligations 778,150 1,042,769 Shareholders’ Equity: Capital stock 115,502,723 115,502,723 Warrants 9,986,860 9,986,860 Contributed surplus 2,567,799 2,348,592 Deficit (119,542,898) (113,305,802) Accumulated other comprehensive loss - (265) ----------------------------------------------------------------------- (119,542,898) (113,306,067) ----------------------------------------------------------------------- Total shareholders’ equity 8,514,484 14,532,108 Subsequent events ----------------------------------------------------------------------- $12,597,004 $18,119,050 ----------------------------------------------------------------------- ----------------------------------------------------------------------- THALLION PHARMACEUTICALS INC. Consolidated Statements of Operations Three and six-month periods ended May 31, 2009 and 2008 (Unaudited) Three-month period Six-month period ended May 31 ended May 31 -------------------------------------------------------------------------- 2009 2008 2009 2008 -------------------------------------------------------------------------- Revenues Interest revenues $21,028 $176,754 $58,075 $436,188 -------------------------------------------------------------------------- 21,028 176,754 58,075 436,188 Costs and expenses Research and development 2,213,334 2,687,452 4,325,275 5,657,331 Tax credits (296,154) (270,000) (583,873) (555,000) -------------------------------------------------------------------------- 1,917,180 2,417,452 3,741,402 5,102,331 General and administrative 980,080 1,176,942 2,317,504 2,527,409 Amortization of capital assets 127,501 169,371 251,736 335,595 Foreign exchange (gain)/loss (5,308) 7,250 (15,471) 34,201 -------------------------------------------------------------------------- 3,019,453 3,771,015 6,295,171 7,999,536 -------------------------------------------------------------------------- Loss before non-recurring items (2,998,425) (3,594,261) (6,237,096) (7,563,348) Non-recurring items Lease exit costs - 1,728,550 - 1,728,550 Write-off of capital assets - 625,306 - 625,306 -------------------------------------------------------------------------- - 2,353,856 - 2,353,856 -------------------------------------------------------------------------- Net loss $(2,998,425) $(5,948,117) $(6,237,096) $(9,917,204) -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net basic and diluted loss per share $(0.09) $(0.19) $(0.19) $(0.31) -------------------------------------------------------------------------- -------------------------------------------------------------------------- Weighted average number of outstanding shares 32,144,316 32,144,316 32,144,316 32,104,972 -------------------------------------------------------------------------- -------------------------------------------------------------------------- THALLION PHARMACEUTICALS INC. Consolidated Statements of Comprehensive Loss Three and six-month periods ended May 31, 2009 and 2008 (Unaudited) Three-month period Six-month period ended May 31 ended May 31 ------------------------------------------------------------------------ 2009 2008 2009 2008 ------------------------------------------------------------------------ Net loss for the period $(2,998,425) $(5,948,117) $(6,237,096) $(9,917,204) Other comprehensive income Unrealized (loss) gain on available for sale investments arising during the period - (7,959) 265 43,902 ------------------------------------------------------------------------ Comprehensive loss $(2,998,425) $(5,956,076) $(6,236,831) $(9,873,302) ------------------------------------------------------------------------ ------------------------------------------------------------------------ THALLION PHARMACEUTICALS INC. Consolidated Statements of Cash Flows Three and six-month periods ended May 31, 2009 and 2008 (Unaudited) Three-month period Six-month period ended May 31 ended May 31 -------------------------------------------------------------------------- 2009 2008 2009 2008 -------------------------------------------------------------------------- Cash flows from operating activities: Net loss $(2,998,425) $(5,948,117) $(6,237,096) $(9,917,204) Adjustments for: Lease exit costs - 1,728,550 - 1,728,550 Accretion in carrying value of lease liability 77,294 - 154,588 - Write-off of capital assets - 625,306 - 625,306 Loss on disposal of capital assets 6,637 - 6,637 - Amortization of capital assets 127,501 169,371 251,736 335,595 Gain on disposal of short-term investments - - (14,013) - Stock-based compensation 107,477 159,066 219,207 350,291 -------------------------------------------------------------------------- (2,679,516) (3,265,824) (5,618,941) (6,877,462) Changes in operating assets and liabilities: Interest receivable (3,522) 81,287 (2,052) 181,434 Accounts receivable (12,971) (107,314) 53,732 (111,972) Sales tax receivable and other 81,554 (37,584) 153 (24,489) Tax credits receivable (296,153) (270,000) (583,872) 1,160,503 Deposits and prepaid expenses 85,918 110,108 26,097 (9,846) Accounts payable and accrued liabilities (20,902) (212,044) 258,135 (432,393) Payment of lease exit obligations (256,878) - (417,145) - Deferred revenues - 717 - 82,750 -------------------------------------------------------------------------- (422,954) (434,830) (664,952) 845,987 -------------------------------------------------------------------------- (3,102,470) (3,700,654) (6,283,893) (6,031,475) -------------------------------------------------------------------------- Cash flows from financing activities: Redemption of special preferred shares - (1) - (1) -------------------------------------------------------------------------- - (1) - (1) -------------------------------------------------------------------------- Cash flows from investing activities: Acquisition of short-term investments (3,613,310) (2,553,518) (3,636,808) (3,546,040) Proceeds from disposal of short-term investments 999,982 6,771,228 2,014,278 6,806,920 Proceeds from disposal of capital assets 23,000 - 23,000 - Additions to capital assets (4,140) (5,585) (20,449) (14,296) -------------------------------------------------------------------------- (2,594,468) 4,212,125 (1,619,979) 3,246,584 -------------------------------------------------------------------------- Net (decrease) increase in cash and cash equivalents (5,696,938) 511,470 (7,903,872) (2,784,892) Cash and cash equivalents, beginning of period 6,656,449 7,310,552 8,863,383 10,606,914 -------------------------------------------------------------------------- Cash and cash equivalents, end of period $959,511 $7,822,022 $959,511 $7,822,022 -------------------------------------------------------------------------- --------------------------------------------------------------------------