Thallion Pharmaceuticals Inc. Announces 2009 Third Quarter Results

MONTREAL, QUEBEC--(Marketwire - October 14, 2009) - Thallion Pharmaceuticals Inc. (TSX: TLN) today announced its operational and financial results for the 2009 third quarter which ended August 31, 2009.

“With the completion of the $8.85 million non-dilutive financing this quarter we have significantly strengthened our cash position,” said Lloyd M. Segal, Chief Executive Officer of Thallion Pharmaceuticals Inc. “We exit this recent challenging economic period in a strong financial position, with a cash runway well into 2011 to execute our development and partnership plans.”

Outlook

Thallion is focused on advancing the development of its clinical assets to the next significant milestone events. These milestones include:

- Reporting the interim analysis in the fourth quarter of calendar 2009 from the Phase II trial for TLN-4601, a monotherapy for glioblastoma multiforme, now that the initial cohort of 20 patients has been successfully enrolled.

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

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

Financial Highlights

Interest revenues amounted to $11,951 in the three-month period ended August 31, 2009, compared with $127,447 in the three-month period ended August 31, 2008. Interest revenues for the nine-month period ended August 31, 2009 were $70,026 compared with $563,635 for the nine-month period ended August 31, 2008. These decreases 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 $1,180,377 in the three-month period ended August 31, 2009 (which include $284,370 in severance costs relating to personnel), compared with $1,968,212 in the three-month period ended August 31, 2008, reflecting a decrease in costs of $787,835 or 40%. Research and development expenses for the nine-month period ended August 31, 2009 were $5,505,652 (which include $353,668 in severance costs relating to personnel) compared with $7,625,543 for the nine-month period ended August 31, 2008, reflecting a decrease of $2,119,891 or 28%. The change in research and development expenses for each of the periods is primarily due to the development of two clinical programs until July 2009, at which time the Company suspended patient enrollment in the Phase II trial evaluating TLN-232 due to an ongoing dispute with the licensor, compared with three clinical programs under development throughout a majority of the nine-month period of 2008. The remaining variance is primarily the result of reduced research and development operating costs in 2009, including the reduction of nine research and development personnel during fiscal 2009, now that the final operational integration of the Company’s two operating facilities was completed at the end of the second quarter of 2008.

General and administrative expenses amounted to $897,760 in the three-month period ended August 31, 2009, compared with $868,314 in the three-month period ended August 31, 2008, reflecting an increase of $29,446 or 3%. The change in general and administrative expenses during the three-month period of 2009 is the direct result of a $136,000 reversal of a capital tax accrual recorded in the 2008 comparative period. General and administrative expenses for the nine-month period ended August 31, 2009 were $3,215,264 compared with $3,395,723 for the nine-month period ended August 31, 2008, reflecting a decrease of $180,459 or 5%. The decrease in general and administrative expenses for the nine-month period of 2009 is primarily the result of reduced operating costs due to the final integration of the Company’s two operating facilities being completed on May 31, 2008.

The Company recorded a net loss of $3,025,762 or $0.09 per share in the three-month period ended August 31, 2009, compared with $2,568,664 or $0.08 per share in the three-month period ended August 31, 2008. The change in net loss for the three-month period is directly attributed to a non-recurring stock based compensation expense related to the vesting and cancellation of the Company’s stock options pursuant to the July 2009 Plan of Arrangement (the “Arrangement”). The Company recorded a net loss of $9,262,858 or $0.29 per share in the nine-month period ended August 31, 2009, compared with $12,485,868 or $0.39 per share in the nine-month period ended August 31, 2008. The decrease in net loss for the nine-month period is primarily to due to the lease exit costs and related write-off of capital assets recorded in the second quarter of 2008 in addition to reductions in research and development and general and administrative expenses.

As at August 31, 2009 the Company’s unrestricted cash position amounted to $9,652,953, which consists of cash, cash equivalents and short-term investments. A receivable from Premium Brands Holdings Corporation pursuant to the Arrangement relating to fiscal 2009 Revenue Quebec tax credits remaining in the previous Thallion corporation amounted to $732,751 and tax credits receivable from Revenue Quebec amounted to $889,411. Consequently, the Company’s liquidity availability amounted to $11,275,115 as compared with $13,557,838 on November 30, 2008. The decrease in liquidity is primarily due to cash expenses relating to operations for the first nine months of 2009 offset by $5,535,101 in net unrestricted cash received from Premium Brands pursuant to the Arrangement.

As at August 31, 2009 the Company’s restricted cash position amounted to $2,590,024 of which $1,590,024 has been classified as short term and $1,000,000 classified as long term.

As of October 14, 2009, Thallion had 32,144,316 common shares outstanding. A total of 9,530,000 common share purchase warrants and a total of 2,257,375 stock options at an average exercise price of $0.12 remain outstanding.

Notice of Conference Call

Thallion will hold a conference call on Wednesday, October 14, 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 416-644-3423 or 1-800-589-8577. A live audio webcast of the call will be available at www.thallion.com. The webcast will be archived for 90 days.

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 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 August 31, 2009 and November 30, 2008 (Unaudited) 2009 2008 ------------------------------------------------------------------------- Assets (audited) Current assets: Cash and cash equivalents $6,244,585 $8,863,383 Short-term investments 3,408,368 3,876,579 Restricted cash 1,590,024 291,962 Sales tax receivable and other 307,189 253,923 Accounts receivable 13,765 88,369 Tax credits receivable 889,411 817,876 Receivable from Premium Brands Holdings Corporation 732,751 - Deposits and prepaid expenses 409,212 468,011 ------------------------------------------------------------------------- 13,595,305 14,660,103 Long-term deposit 100,000 200,000 Restricted cash 1,000,000 - Capital assets 2,870,915 3,258,947 ------------------------------------------------------------------------- $17,566,220 $18,119,050 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Liabilities and Shareholders’ Equity Current liabilities: Accounts payable and accrued liabilities $1,761,651 $1,935,668 Current portion of lease exit obligations 766,441 608,505 ------------------------------------------------------------------------- 2,528,092 2,544,173 Long-term portion of lease exit obligations 645,841 1,042,769 Shareholders’ Equity: Capital stock 115,502,723 115,502,723 Warrants 9,986,860 9,986,860 Contributed surplus 11,471,364 2,348,592 Deficit (122,568,660) (113,305,802) Accumulated other comprehensive loss - (265) ------------------------------------------------------------------------- (122,568,660) (113,306,067) ------------------------------------------------------------------------- Total shareholders’ equity 14,392,287 14,532,108 ------------------------------------------------------------------------- $17,566,220 $18,119,050 ------------------------------------------------------------------------- ------------------------------------------------------------------------- THALLION PHARMACEUTICALS INC. Consolidated Statements of Operations Three and nine-month periods ended August 31, 2009 and 2008 (Unaudited) Three-month period Nine-month period ended August 31 ended August 31 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 2009 2008 2009 2008 ------------------------------------------------------------------------- Revenues Interest revenues $11,951 $127,447 $70,026 $563,635 ------------------------------------------------------------------------- 11,951 127,447 70,026 563,635 Costs and expenses Research and development 1,180,377 1,968,212 5,505,652 7,625,543 Tax credits (220,413) (245,981) (804,286) (800,981) ------------------------------------------------------------------------- 959,964 1,722,231 4,701,366 6,824,562 General and administrative 897,760 868,314 3,215,264 3,395,723 Amortization of capital assets 127,697 128,142 379,433 463,737 Foreign exchange (gain)/loss (14,770) (22,576) (30,241) 11,625 ------------------------------------------------------------------------- 1,970,651 2,696,111 8,265,822 10,695,647 ------------------------------------------------------------------------- Loss before non- recurring items (1,958,700) (2,568,664) (8,195,796) (10,132,012) Non-recurring items Stock-based compensation 1,067,062 - 1,067,062 - Lease exit costs - - - 1,728,550 Write-off of capital assets - - - 625,306 ------------------------------------------------------------------------- 1,067,062 - 1,067,062 2,353,856 ------------------------------------------------------------------------- Net loss $(3,025,762) $(2,568,664) $(9,262,858)$(12,485,868) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net basic and diluted loss per share $(0.09) $(0.08) $(0.29) $(0.39) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted average number of outstanding shares 32,144,316 32,144,316 32,144,316 32,118,134 ------------------------------------------------------------------------- ------------------------------------------------------------------------- THALLION PHARMACEUTICALS INC. Consolidated Statements of Comprehensive Loss Three and nine-month periods ended August 31, 2009 and 2008 (Unaudited) Three-month period Nine-month period ended August 31 ended August 31 2009 2008 2009 2008 -------------------------------------------------------------------------- Net loss for the period $(3,025,762) $(2,568,664) $(9,262,858) $(12,485,868) Other comprehensive income Unrealized gain on available for sale investments arising during the period - 10,316 265 54,218 -------------------------------------------------------------------------- Comprehensive loss $(3,025,762) $(2,558,348) $(9,262,593) $(12,431,650) -------------------------------------------------------------------------- -------------------------------------------------------------------------- THALLION PHARMACEUTICALS INC. Consolidated Statements of Cash Flows Three and nine-month periods ended August 31, 2009 and 2008 (Unaudited) Three-month period Nine-month period ended August 31 ended August 31 -------------------------------------------------------------------------- -------------------------------------------------------------------------- 2009 2008 2009 2008 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Cash flows from operating activities: Net loss $(3,025,762) $(2,568,664) $(9,262,858) $(12,485,868) Adjustments for: Lease exit costs - - - 1,728,550 Accretion in carrying value of lease liability 77,295 62,922 231,883 62,922 Write-off of capital assets - - - 625,306 Loss on disposal of capital assets - - 6,637 - Amortization of capital assets 127,697 128,142 379,433 463,737 Loss (gain) on disposal of short- term investments - 14,243 (14,013) 66,869 Stock-based compensation 1,070,402 106,129 1,289,609 456,420 -------------------------------------------------------------------------- (1,750,368) (2,257,228) (7,369,309) (9,082,064) Changes in operating assets and liabilities: Interest receivable 2,720 68,907 668 250,341 Accounts receivable 20,872 120,346 74,604 8,374 Sales tax receivable and other (54,087) 80,701 (53,934) 56,212 Tax credits receivable 512,337 694,478 (71,535) 1,854,981 Receivable from Premium Brands Holdings Corporation (732,751) - (732,751) - Deposits and prepaid expenses 32,702 123,778 58,799 113,932 Accounts payable and accrued liabilities (432,152) (903,172) (174,017) (1,335,565) Payment of lease exit obligations (53,730) (175,355) (470,875) (175,355) Deferred revenues - 5,750 - 88,500 -------------------------------------------------------------------------- -------------------------------------------------------------------------- (704,089) 15,433 (1,369,041) 861,420 -------------------------------------------------------------------------- (2,454,457) (2,241,795) (8,738,350) (8,220,644) -------------------------------------------------------------------------- Cash flows from financing activities: Proceeds from reorganization 8,850,000 - 8,850,000 - Costs of reorganization (1,016,837) - (1,016,837) - Decrease in long- term deposit 100,000 100,000 100,000 100,000 Redemption of special preferred shares - - - (1) -------------------------------------------------------------------------- 7,933,163 100,000 7,933,163 99,999 -------------------------------------------------------------------------- Cash flows from investing activities: Acquisition of short- term investments (297,338) (2,615,717) (3,934,146) (6,161,757) Proceeds from disposal of short-term investments 2,402,357 4,111,000 4,416,635 10,865,294 Restricted cash (2,298,062) - (2,298,062) - Proceeds from disposal of capital assets - - 23,000 - Additions to capital assets (589) (39,076) (21,038) (53,372) -------------------------------------------------------------------------- (193,632) 1,456,207 (1,813,611) 4,650,165 -------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 5,285,074 (685,588) (2,618,798) (3,470,480) Cash and cash equivalents, beginning of period 959,511 7,822,022 8,863,383 10,606,914 -------------------------------------------------------------------------- Cash and cash equivalents, end of period $6,244,585 $7,136,434 $6,244,585 $7,136,434 -------------------------------------------------------------------------- --------------------------------------------------------------------------