TORONTO, Sept. 12 /PRNewswire-FirstCall/ - Transition Therapeutics Inc. (“Transition” or the “Company”) a product-focused biopharmaceutical company developing therapeutics for disease indications with large markets, today announced its financial results for the year ended June 30, 2007.
Selected Highlights
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During fiscal 2007 and up to the date of this press release, the Company achieved the following significant milestones:
ELND005/AZD-103 - Alzheimer’s Disease: -------------------------------------- - Clinical Data Results: On August 30, 2007, the Company Announced Completion of Multiple Phase I Clinical Studies with Alzheimer’s Disease Drug Candidate ELND-005/AZD-103. ELND-005/AZD-103 was safe and well-tolerated at all doses and dosing regimens examined. There were no severe or serious adverse events observed. ELND-005/AZD-103 was also shown to be orally bio-available, cross the blood-brain barrier and achieve levels in the human brain and CSF that were shown to be effective in animal models for Alzheimer’s disease. - FDA Granted Fast Track Designation for Alzheimer’s Disease Drug Candidate ELND-005/AZD-103 which is being developed in collaboration with Elan Pharma International Limited (“Elan”) for the treatment of Alzheimer’s disease. - Transition and Elan signed a US$200 million global collaboration agreement to develop and commercialize the Alzheimer’s disease product, ELND-005/AZD-103. Under the terms of the agreement, Transition has received an upfront payment of US$7.5 million and will receive an additional upfront payment of US$7.5 million in calendar 2007. Dependent upon the successful development, regulatory and commercial launch of ELND-005/AZD-103, Transition will be eligible to receive milestone payments of up to US$185 million and will share the costs of development and profits from commercialization; I.N.T.(TM) - Diabetes: ---------------------- - Clinical Data Results: On June 28, 2007, the Company Announced Final Results from the Exploratory Phase IIa E1-I.N.T.(TM) Clinical Trial. A 4-Week Therapy with E1-I.N.T.(TM) Lead to Sustained Reductions in Blood Glucose Levels for 6 Months Post-treatment in Type 2 Diabetes Patients. In the E1-I.N.T.(TM) treated group of patients, the mean HbA1c level was reduced by 0.94% to 1.21% vs. baseline levels in months 2 to 6 post- treatment. In addition to the HbA1c reductions, the data demonstrated decreases in fasting blood glucose levels as well as improvements in glucose tolerance over a six month period following treatment with E1-I.N.T.(TM). These clinical improvements, including HbA1c reductions greater than 1% in patients six month post-treatment, highlight the potential that E1-I.N.T.(TM) therapy could provide patients significant clinical benefit in excess of six months. On March 5, 2007, Transition Released Positive Interim Data from E1- I.N.T.(TM) Clinical Trials in Type 1 and Type 2 Diabetes. Data from the trial in type 2 diabetes patients demonstrated that E1-I.N.T.(TM) significantly lowered blood glucose levels for patients using metformin with/without thiazolidinediones (TZD). In the type 1 diabetes study, 6 of 11 (54%) patients responded to E1-I.N.T.(TM) therapy, either by decreasing their average daily insulin usage by more than 20% or reducing their HbA1c levels by 1.2 to 2%. There were no responders among the placebo group. - Transition received the remaining US$750,000 of the US$1 million relating to the amended I.N.T.(TM) license agreement between the Company and Novo Nordisk A/S (“Novo Nordisk”) which restated the rights and responsibilities of the parties. Novo Nordisk retains exclusive, worldwide rights to the E1-I.N.T.(TM) program and the Company regains exclusive ownership and rights to all other I.N.T. (TM) programs, including GLP1-I.N.T.(TM); - The Company and the Juvenile Diabetes Research Foundation International (“JDRF”), located in the United States, entered into an agreement in which the JDRF will provide milestone driven funding of up to US$4 million to assist in the expedited development of GLP1- I.N.T.(TM) over a two year period. Corporate Development --------------------- - On August 20, 2007 the Company’s common shares began trading on the NASDAQ Capital Market under the symbol “TTHI”. The Company’s common shares will continue to trade on the Toronto Stock Exchange in addition to the NASDAQ; - On July 9, 2007 the Company completed a consolidation of its issued and outstanding common shares on the basis of one (1) post- consolidation common share for every nine (9) pre-consolidation common shares. The share consolidation was effected to satisfy the NASDAQ’s listing criteria regarding minimum bid price. - On July 11, 2007 the Company completed a private placement financing issuing 1,736,107 common shares at a price of $14.40 per common share, raising gross proceeds of approximately $25,000,000 from a number of funds managed by Oracle Investment Management Inc., The Invus Group LLC, and a large Boston based investment management company. The Company has incurred total share issuance costs to date of $1,023,596, resulting in net cash proceeds of $23,976,404; - On November 8, 2006 the Company completed a private placement financing issuing 2,986,867 common shares at a price of $8.37 per common share, raising gross proceeds of $25,000,000 from two funds managed by Great Point Partners, LLC. The Company incurred total share issuance costs of $1,035,249, resulting in net cash proceeds of $23,964,751; - Received the second anniversary payment of $400,000 from the sale of its subsidiary, Stem Cell Therapeutics Inc (“SCT”); - Extinguished the indebtedness assumed related to the November 2005 Protana asset purchase. Strategic Acquisition --------------------- - On June 1, 2007, the Company completed the acquisition of 100% of the outstanding common shares of NeuroMedix Inc. (“NeuroMedix”), a central nervous system (“CNS”) focused biotechnology company. NeuroMedix’s lead compound, Minozac, has been shown to prevent neuronal dysfunction in animal models of Alzheimer’s disease and traumatic brain injury.
“This year has been marked by the achievement of many significant milestones in the growth of the company including the clinical advancement of ELND-005/AZD-103 with our partner Elan, positive clinical data from the Phase IIa trials with our diabetes product, E1-I.N.T., Transition’s move to the NASDAQ and raising $50 million to strengthen our financial position,” said Dr. Tony Cruz, Chairman and CEO of Transition. “Looking forward, the company is focused on continued growth through the advancement of its current lead programs and the introduction of new programs into preclinical and clinical development.”
Pipeline Review --------------- ELND-005/AZD-103 for Alzheimer’s Disease
Transition’s lead Alzheimer’s disease compound ELND-005/AZD-103 is a disease modifying agent with the potential to both prevent and reduce disease progression, and improve symptoms such as cognitive function.
In September 2006, Transition announced a global collaboration with Elan to develop and commercialize ELND-005/AZD-103.
In April 2007, Transition announced that the FDA granted Fast Track designation to the investigational drug candidate ELND-005/AZD-103 which is being developed in collaboration with Elan. Under the FDA Modernization Act of 1997, Fast Track designation is intended to facilitate the development and expedite the review of a drug or biologic if it is intended for the treatment of a serious or life-threatening condition, and it demonstrates the potential to address unmet medical needs for such a condition.
On August 30, 2007, the Company announced the completion of Phase I Clinical Studies with ELND-005/AZD-103. Transition and its development partner Elan have performed multiple Phase I studies evaluating the safety, tolerability and pharmacokinetic profile of ELND-005/AZD-103 in healthy volunteers. Approximately 110 subjects have been exposed to ELND-005/AZD-103 in multiple Phase I studies, including single and multiple ascending dosing; pharmacokinetic evaluation of levels in the brain; and CSF and plasma studies. ELND-005/AZD-103 was safe and well-tolerated at all doses and dosing regimens examined. There were no severe or serious adverse events observed. ELND-005/AZD-103 was also shown to be orally bio-available, cross the blood-brain barrier and achieve levels in the human brain and CSF that were shown to be effective in animal models for Alzheimer’s disease. The next steps in the development of ELND-005/AZD-103 will be submission of data supporting Phase II studies to the FDA. Transition and Elan anticipate starting Phase II by the end of calendar 2007 or early 2008.
I.N.T.(TM) Technology for Diabetes E1-I.N.T.(TM)
Transition’s first Islet Neogenesis Therapy product, E1-I.N.T.(TM), a combination of Transition’s epidermal growth factor analogue (“E1") and gastrin analogue (“G1"), has completed two Phase I clinical trials, in which it was shown that E1-I.N.T.(TM) is safe to administer. Transition received FDA clearance to initiate exploratory Phase IIa clinical trials for E1-I.N.T.(TM) in both type 1 and type 2 diabetics. These two clinical trials evaluated the efficacy, safety and tolerability of a 28-day course of daily E1-I.N.T.(TM) treatments with a six-month follow-up.
In March, 2007, the Company announced positive unblinded interim safety, tolerability and efficacy data from these exploratory Phase IIa trials for type 1 and type 2 diabetes patients. In the type 1 diabetes study, 6 of 11 (54%) patients responded to E1-I.N.T.(TM) therapy, either by decreasing their average daily insulin usage by more than 20% or reducing their HbA1c levels by 1.2 to 2%. There were no responders among the placebo group.
On June 28, 2007, the Company announced final results from the exploratory Phase IIa E1-I.N.T.(TM) clinical trial. A 4-week therapy with E1-I.N.T.(TM) lead to sustained reductions in blood glucose levels for 6 months post-treatment in type 2 diabetes patients. In the E1-I.N.T.(TM) treated group of patients, the mean HbA1c level was reduced by 0.94% to 1.21% vs. baseline levels in months 2 to 6 post-treatment. More specifically, the mean HbA1c level among treated patients was reduced 0.43%, 0.94% (p<0.05), 1.09% (p<0.05), 1.12% (p<0.05), 1.21% (p<0.05), and 1.14% in months 1, 2, 3, 4, 5, and 6 post-treatment, respectively. In contrast, the mean HbA1c levels of the placebo group ranged from a reduction of 0.1% to an increase of 1.0% over the same period. In addition to the HbA1c reductions, the data demonstrated decreases in fasting blood glucose levels as well as improvements in glucose tolerance over a six month period following treatment with E1-I.N.T.(TM). Trends in increased insulin levels as measured with an oral glucose tolerance test were also observed, particularly in patients where the HbA1c levels decreased over 1% with E1-I.N.T.(TM) therapy. These data are consistent with the increased glucose control observed in diabetes animal models where a short treatment with E1-I.N.T.(TM) resulted in a sustained increase in beta cell mass and function. These clinical improvements, including HbA1c reductions greater than 1% in patients six month post-treatment, highlight the potential that E1-I.N.T.(TM) therapy could provide patients significant clinical benefit in excess of six months.
These clinical data support the potential of gastrin as a therapeutic in combination with other diabetes therapies. Transition holds the exclusive rights to a series of proprietary gastrin based combination therapies including GLP1-I.N.T.(TM) (a combination of gastrin analogue, G1, and a GLP-1 analogue) and combination therapies of gastrins and DPP-IV inhibitors. Transition will continue the development of these combination therapies into clinical trials with type 1 and type 2 diabetes patients.
GLP1- I.N.T.(TM)
Transition’s second Islet Neogenesis Therapy product, GLP1-I.N.T.(TM) is a combination of one of the leading diabetes drug candidates, Glucagon-Like-Peptide-1 (“GLP-1"), with G1. The Company will perform additional safety and tolerability studies in humans in preparation for Phase II clinical development. The Company has entered into an agreement with the JDRF to support the clinical development of GLP1-I.N.T.(TM) over the next two years.
Sustaining Financial Strength
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During the year ended June 30, 2007, the Company strengthened its cash position by completing an offering for 2,986,867 common shares for net cash proceeds of $23,964,751. Subsequent to the end of the year, the Company further strengthened its cash position by completing another private placement, issuing 1,736,107 common shares resulting in net cash proceeds of $23,976,404. The Company’s cash and cash equivalents and short-term investments were $34,368,142 at June 30, 2007. The Company currently believes that it has adequate financial resources for anticipated expenditures until early fiscal 2011.
Financial Review
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For the year ended June 30, 2007, Transition recorded a net loss of $16,961,790 ($0.87 per common share) compared to a net loss of $23,018,090 ($1.53 per common share) for the fiscal year ended June 30, 2006.
Research and development expenses excluding amortization of intangibles decreased to $9,839,170 for the fiscal year ended June 30, 2007 from $11,060,455 for the same period in 2006. The decrease of $1,221,285 or 11% was primarily the result of a reduction in research and development expense resulting from expense reimbursements from Elan, Novo Nordisk and the JDRF, as well as a decrease in clinical program expenses relating to the Company’s E1-I.N.T.(TM) and I.E.T. clinical trials which were both completed during fiscal 2007. The decrease is partially offset by costs incurred to advance ELND-005/AZD-103 through Phase I clinical trials and for pre-clinical research studies supporting the GLP1-I.N.T.(TM) program.
General and administrative expenses increased to $5,317,524 for the fiscal year ended June 30, 2007 from $3,140,800 for the fiscal year ended June 30, 2006. This increase of $2,176,724 or 69% primarily resulted from increased professional fees associated with the Nasdaq listing, the Elan co-development agreement, expenses relating to the amalgamation of various subsidiaries, increased corporate development costs, option expense, and an increase in salaries incurred to strengthen the finance and management teams.
Amortization for the year ended June 30, 2007 decreased by $2,740,015 or 29% to $6,823,259 as compared to $9,563,274 for the year ended June 30, 2006. The decrease in amortization expense is primarily due to the Waratah technology being fully amortized early in the third quarter of fiscal 2007. This decrease was partially offset by the full year impact of the amortization relating to the products, patents and technologies acquired from ENI as well as the amortization of the NeuroMedix technology acquired May 9, 2007.
Interest income, net for the fiscal year ended June 30, 2007, was $1,226,099 as compared to $350,380 for the fiscal year ended June 30, 2006. The increase in interest income, net of $875,719 primarily resulted from increased cash balances due to the November 2006 private placement and the upfront payment received from Elan.
Recovery of future income taxes for the year ended June 30, 2007 increased by $1,631,901 or 149% to a recovery of $2,729,422 as compared to a recovery of $1,097,521 for the year ended June 30, 2006. The majority of the increase in recovery of future income taxes for fiscal 2007 is due to the recognition of future income tax assets resulting from the amalgamation of Ellipsis Neurotherapeutics Inc., 1255205 Ontario Inc., 1255206 Ontario Inc. and Waratah Pharmaceuticals Inc. As a result of the amalgamation, the Company has adjusted the valuation allowance on future income tax assets and has recognized a future income tax asset to the extent of offsetting future income tax liabilities of the amalgamated entity. Additional future income tax recovery also arose from changes in temporary differences.
About Transition
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Transition is a biopharmaceutical company, developing novel therapeutics for disease indications with large markets. Transition’s lead products include ELND-005/AZD-103 for the treatment of Alzheimer’s disease and regenerative therapies E1-I.N.T.(TM) and GLP1-I.N.T.(TM) for the treatment of diabetes. Transition has an emerging pipeline of preclinical drug candidates developed using its proprietary drug discovery engine. Transition’s shares are listed on the NASDAQ under the symbol “TTHI” and the Toronto Stock Exchange under the symbol “TTH”. For additional information about the company, please visit www.transitiontherapeutics.com.
Financial Statements to Follow: CONSOLIDATED BALANCE SHEETS As at June 30 (in Canadian dollars) 2007 2006 $ $ ------------------------------------------------------------------------- ASSETS Current Cash and cash equivalents 1,377,387 4,074,582 Short-term investments 32,990,755 10,930,855 Receivables 741,607 371,663 Investment tax credits receivable 559,405 1,176,066 Research inventory - 587,501 Prepaid expenses and deposits 519,937 469,956 Assets held for sale - 381,948 ------------------------------------------------------------------------- Total current assets 36,189,091 17,992,571 Long-term research inventory - 2,638,098 Capital assets, net 1,174,028 1,596,643 Intangible assets 26,632,609 21,900,712 ------------------------------------------------------------------------- 63,995,728 44,128,024 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS’ EQUITY Current Accounts payable and accrued liabilities 2,866,655 3,396,013 Due to Elan Pharma International Limited 697,743 - Current portion of long-term debt - 292,124 Current portion of deferred revenue and advances 131,244 657,541 Current portion of obligation under capital leases - 18,390 ------------------------------------------------------------------------- Total current liabilities 3,695,642 4,364,068 Deferred revenue and advances 9,885,733 1,596,727 Obligation under capital leases - 30,401 Leasehold inducement 91,456 102,888 Future tax liability - 2,729,422 ------------------------------------------------------------------------- Total liabilities 13,672,831 8,823,506 ------------------------------------------------------------------------- Commitments Guarantees Subsequent events Shareholders’ equity Share capital Common shares 133,988,318 99,563,853 Contributed surplus 4,487,752 4,469,987 Stock options 1,538,396 774,858 Deficit (89,691,569) (69,504,180) ------------------------------------------------------------------------- Total shareholders’ equity 50,322,897 35,304,518 ------------------------------------------------------------------------- 63,995,728 44,128,024 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT Years ended June 30 (in Canadian dollars) 2007 2006 $ $ ------------------------------------------------------------------------- REVENUES Milestone revenue 552,650 - Upfront and licensing fees 131,244 131,244 Management fees from ENI - 239,930 ------------------------------------------------------------------------- 683,894 371,174 ------------------------------------------------------------------------- EXPENSES Research and development 9,839,170 11,060,455 General and administrative 5,317,524 3,140,800 Amortization 6,823,259 9,563,274 Foreign exchange loss (gain) 6,875 (82,043) Loss on disposal of capital assets and assets held for sale 14,377 58,034 ------------------------------------------------------------------------- 22,001,205 23,740,520 ------------------------------------------------------------------------- Loss before the following (21,317,311) (23,369,346) Interest income, net 1,226,099 350,380 Equity loss in affiliate - (477,723) Gain (losses) of company transferred under contractual arrangement 400,000 (618,922) ------------------------------------------------------------------------- Loss before income taxes (19,691,212) (24,115,611) Future income taxes recovery 2,729,422 1,097,521 ------------------------------------------------------------------------- Net loss for the year (16,961,790) (23,018,090) ------------------------------------------------------------------------- Deficit, beginning of year, As originally stated (69,504,180) (46,486,090) Adjustment for change in accounting policy related to research inventory (3,225,599) - ------------------------------------------------------------------------- Deficit, beginning of year, as restated (72,729,779) (46,486,090) ------------------------------------------------------------------------- Deficit, end of year (89,691,569) (69,504,180) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted net loss per common share $(0.87) $(1.53) ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY For the years ended June 30, 2007 and 2006 (in Canadian dollars) Number of Share Contributed Stock Shares Capital Surplus Options ------------------------------------------------------------------------- $ $ $ Balance, July 1, 2005 13,344,007 77,254,351 2,811,966 743,628 Share issued for purchased assets of Protana, net 222,222 1,184,569 - - Issued pursuant to bought deal financing, net 1,730,556 9,648,600 - - Issued on exercise of Exchange Rights 137,733 1,009,437 - - Exchange Rights expired unexercised - - 242,500 - Expiry of share purchase warrants - - 486,615 - Issued on acquisition of ENI, net 2,109,479 10,727,317 - - Issued to acquire patent portfolio 46,055 286,000 - - Cancellation of shares issued to ENI (98,328) (559,475) 559,475 - Stock options exercised 2,545 13,054 - (5,038) Stock options expired - - 369,431 (369,431) Stock-based compensation expense - - - 405,699 Net loss for the year - - - - ------------------------------------------------------------------------- Balance, June 30, 2006 17,494,269 99,563,853 4,469,987 774,858 ------------------------------------------------------------------------- Adjustment to opening retained earnings for change in accounting policy related to research inventory - - - - Stock options exercised 63,654 601,571 - (221,177) Stock options expired - - 17,765 (17,765) Stock-based compensation expense - - - 1,002,480 Issued pursuant to private placement, net 2,986,867 23,964,751 - - Issued on acquisition of NeuroMedix Inc., net 685,951 9,858,143 - - Net loss for the year - - - - ------------------------------------------------------------------------- Balance, June 30, 2007 21,230,741 133,988,318 4,487,752 1,538,396 ------------------------------------------------------------------------- ------------------------------------------------------------------------- For the years ended June 30, 2007 and 2006 (in Canadian dollars) Share- Exchange Total holders’ Warrants Rights Deficit Equity ------------------------------------------------------------------------- $ $ $ Balance, July 1, 2005 486,615 388,000 (46,486,090) 35,198,470 Share issued for purchased assets of Protana, net - - - 1,184,569 Issued pursuant to bought deal financing, net - - - 9,648,600 Issued on exercise of Exchange Rights - (145,500) - 863,937 Exchange Rights expired unexercised - (242,500) - - Expiry of share purchase warrants (486,615) - - - Issued on acquisition of ENI, net - - - 10,727,317 Issued to acquire patent portfolio - - - 286,000 Cancellation of shares issued to ENI - - - - Stock options exercised - - - 8,016 Stock options expired - - - - Stock-based compensation expense - - - 405,699 Net loss for the year - - (23,018,090) (23,018,090) ------------------------------------------------------------------------- Balance, June 30, 2006 - - (69,504,180) 35,304,518 ------------------------------------------------------------------------- Adjustment to opening retained earnings for change in accounting policy related to research inventory - - (3,225,599) (3,225,599) Stock options exercised - - - 380,394 Stock options expired - - - - Stock-based compensation expense - - - 1,002,480 Issued pursuant to private placement, net - - - 23,964,751 Issued on acquisition of NeuroMedix Inc., net - - - 9,858,143 Net loss for the year - - (16,961,790) (16,961,790) ------------------------------------------------------------------------- Balance, June 30, 2007 - - (89,691,569) 50,322,897 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended June 30 (in Canadian dollars) 2007 2006 $ $ ------------------------------------------------------------------------- OPERATING ACTIVITIES Net loss for the year (16,961,790) (23,018,090) Add (deduct) items not involving cash: Amortization of: capital assets 317,780 387,274 intangible assets 6,748,787 9,477,808 leasehold inducement (11,432) - Leasehold inducement - 102,888 Write-off of research inventory 387,667 296,687 Recovery of future income taxes (2,729,422) (1,097,521) Stock-based compensation expense 1,002,480 405,699 Equity loss in ENI - 477,723 (Gain) losses of company transferred under contractual a
