AKELA Pharma reports financial results for the three months ended March 31,
2010

In thousands of US dollars, unless specified otherwise

AUSTIN, TX, June 18 /CNW Telbec/ - Akela Pharma, Inc. ("Akela"), (TSX: AKL), a leader in the development of therapeutics for the treatment of pain, and the company's wholly owned subsidiary, PharmaForm, today announced its financial results for the three months ended March 31, 2010.

Akela's net loss for the three months ending March 31, 2010 was $0.4 million, ($0.01) per share, as compared to $2.6 million, or ($0.12) per share, for the same period in 2009.

"At quarter's end, we have begun to see the positive effect of our corporate restructuring and cost reduction efforts on the company's consolidated results, a long anticipated trend which we plan to continue through the balance of 2010," said Greg McKee, President and Chief Executive Officer.

2010 First Quarter Operational Highlights

    
    - During the first quarter of 2010, Akela began negotiating the sale of
      our contract service operations, PharmaForm. Proceeds from this
      disposition, will be dedicated to the reduction of the Company's
      outstanding liabilities. Remaining funds will be utilized in the
      further advancement of Fentanyl TAIFUN(R).

    - On February 4, 2010 Akela announced the outcomes of two legal cases
      involving former employees. In Michael Crowley v. Formulation
      Technologies, LLC d/b/a PharmaForm, the arbitrator found in favour of
      Mr. Crowley. As a result, Mr. Crowley has been awarded $325 for payment
      under Mr. Crowley's employment agreement, commissions and vacation
      accruals earned over his employment period, partial payment of Mr.
      Crowley's legal fees and Mr. Crowley's out-of-pocket expenses.

    - On February 4, 2010 Akela also announced in the matter of Stephen
      Lermer v. Akela Pharma Inc. and Formulation Technologies, LLC d/b/a
      PharmaForm, a jury sided with Mr. Lermer and awarded him $189 in
      severance pay and approximately $47 in vacation pay earned during the
      period which he was employed by the company. The judgment was solely
      against Akela Pharma. On May 11, 2010, Akela announced the The District
      Court of Travis County, Texas issued an Order Denying Plaintiff's
      Motion for Judgment and issued a final judgment in the legal case
      involving former employee Stephen Lermer. The May 11, 2010 ruling
      reduced the judgment and previous award by $189 disallowing the claim
      of severance to Mr. Lermer.

    - On February 11, 2010, Akela achieved a near term development milestone
      in the pharmaceutical development of the Fentanyl TAIFUN(R) inhaler
      (the "Product"). The milestone achievement was related to Akela's
      Fentanyl TAIFUN(R) license and co-development agreement with Teikoku
      Seiyaku Co. Ltd which was amended in June 2009 in order to advance
      certain milestone payments to support the continued development of the
      Product.

    - On April, 16, 2010 Akela announced that PharmaForm reached agreement
      with HEP Davis Spring, L.P. to terminate its lease for a planned new
      laboratory facility located at 9825 Spectrum Drive, Austin, Texas,
      eliminating $14,481 in future lease payment obligations to the Company.
      As part of the agreement, Akela released $937 of funds from an
      associated cash secured letter-of-credit. Akela also undertook to issue
      1,250,000 common shares and assumed an obligation to pay HEP Davis
      Spring, L.P. in monthly instalments of $10 through March 2020.
    

2010 First Quarter Financial Highlights

Total consolidated revenues for the three months ending March 31, 2010 were $2.6 million, including $2.0 million of contract services, as compared to $3.8 million, including $2.8 million of contract services, for the same period during the previous year. A contraction of the economy and limited funding of core research and development projects for corporations and clients within the pharmaceutical and biotech industries has adversely impacted our contract services operations, PharmaForm. During the first quarter of 2010, we began negotiating the sale of this business. The decline from the previous year also reflects a revision in the amortization of deferred revenue from license fees and milestones associated with Fentanyl TAIFUN(R) which took effect October 1, 2009. The result is a delay in revenue recognition based on management's re-assessment of projected commercialization, from May 2012 to June 30, 2016.

Consolidated net loss for the three months ending March 31, 2010 was $0.4 million, ($0.01) per share, as compared to $2.6 million, or ($0.12) per share, for the same period in 2009.

Operating results for the three months ending March 31, 2009 include a $1.5 million provision for repayment of government grants associated with the company's Finnish subsidiary. The prior year was also affected by Akela's 2009 cost reduction plan which resulted in additional charges of charges of $0.7 million for the first quarter of 2009. These charges were partially offset by a $1.7 million gain in March 2009 resulting from the settlement of Akela's lawsuit against LRI relating to a failed Fentanyl TAIFUN(R) toxicology study. Excluding these one-time gains and losses, Akela's consolidated net loss for the three months ending March 31, 2010 was $0.4 million, ($0.01) per share, versus $2.1 million, ($0.10) per share, for the same period in 2009.

The company had a cash balance of $0.2 million as of March 31, 2010 compared with $0.1 million as of December 31, 2009.

About Akela Pharma Inc.

Akela Pharma is a drug development company with its lead product, Fentanyl TAIFUN(R), being developed for the treatment of breakthrough cancer pain. Fentanyl TAIFUN is a fast-acting fentanyl formulation delivered using the company's TAIFUN multi-dose dry powder inhaler platform.

About PharmaForm

PharmaForm, Akela's wholly owned subsidiary, is a leading specialty contract service provider in the area of pharmaceutical dosage form development and manufacturing, specializing in controlled release and bioavailability enhancement technologies, such as hot melt extrusion, liquid filled capsules, and spray drying. Through its diverse offerings, PharmaForm solutions help pharmaceutical and biotechnology clients reach their development targets, reduce development costs and accelerate time-to-market.

Akela's common shares trade on The Toronto Stock Exchange ("TSX") under the symbol "AKL" with 30.9 million shares outstanding.

This press release contains statements which may constitute forward-looking information under applicable Canadian securities legislation or forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1955. Such forward-looking statements or information may include financial and other projections as well as statements regarding the company's future plans, objectives, performance, revenues, growth, profits, operating expenses or the company's underlying assumptions. The words "may", "would", "could", "will", "likely", "expect", anticipate", "intend", "plan", "forecast", "project", "estimate" and "believe" or other similar words and phrases may identify forward-looking statements or information. Persons reading this press release are cautioned that such statements or information are only expectations, and that the company's actual future results or performance may be materially different.

Forward-looking statements or information in this press release include, but are not limited to, statements or information concerning our ongoing drug development programs and collaborations as well as the possible receipt of future payments upon achievement of milestones.

Such forward-looking statements or information involve known and unknown risks, uncertainties and other factors that may cause our actual results, events or developments to be materially different from results, events or developments expressed or implied by such forward-looking statements or information. Such factors include, among others, the possibility that risks associated with requirements for approvals by government agencies such as the FDA before products can be tested in clinical trials; the possibility that such government agency approvals will not be obtained in a timely manner or at all or will be conditioned in a manner that would impair our ability to advance development; risks associated with the requirement that a drug candidate be found safe and effective after extensive clinical trials; our dependence on suppliers, collaborative partners and other third parties and the prospects and timing for negotiating supply agreements, corporate collaborations or licensing arrangements; our ability to attract and retain key personnel; and other factors as described in detail in our filings with the Canadian securities regulatory authorities at http:www.sedar.com.

Assumptions underlying our expectations regarding forward-looking statements or information contained in this press release include, among others, that future clinical trial results will be favorable; that our drug candidate will treat target diseases as intended; that we will raise enough capital, on reasonable terms and in a timely manner; that we will retain our key personnel; that we will obtain the necessary regulatory approvals.

In the event that any of these assumptions prove to be incorrect, or in the event that we are impacted by any of the risks identified above, we may not be able to continue in our business as planned.

For a complete discussion of the assumptions, risks and uncertainties related to our business, you are encouraged to review our filings with Canadian securities regulatory authorities, filed on SEDAR at http://www.sedar.com.

All forward-looking statements and information made herein are based on our current expectations as of the date hereof and we disclaim any intention or obligation to revise or update such forward-looking statements and information to reflect subsequent events or circumstances, except as required by law.

    
    AKELA PHARMA INC.
    Consolidated Balance Sheets
    (Unaudited)

    March 31, 2010 and December 31, 2009
    (in thousands of US dollars)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                      March 31,  December 31,
                                                          2010          2009
    -------------------------------------------------------------------------
    Assets

    Current assets:
      Cash                                        $        160  $        107
      Restricted cash                                      705           938
      Accounts receivable                                1,104         1,679
      Prepaid expenses and other current assets            393           417
      -----------------------------------------------------------------------
                                                         2,362         3,141

    Property and equipment                               3,860         4,217
    Other assets                                           618           598
    -------------------------------------------------------------------------

                                                  $      6,840  $      7,956
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Liabilities and Shareholders' Deficiency

    Current liabilities:
      Accounts payable and accrued liabilities    $      7,509  $      7,801
      Deferred revenue                                   2,954         2,795
      Current portion of long-term debt                  1,801         1,015
      -----------------------------------------------------------------------
                                                        12,264        11,611

    Deferred revenue                                    13,994        14,630
    Long-term debt                                       5,886         6,615
    Income taxes                                           827           799

    Shareholders' deficiency:
      Common shares (unlimited authorized,
       30,890,338 common shares issued and
       outstanding with no par value at
       March 31, 2010 and December 31, 2009)            67,544        67,544
      Warrants                                           2,651         2,954
      Additional paid-in capital                         8,821         8,511

      Accumulated other comprehensive income             3,110         3,110
      Deficit                                         (108,257)     (107,818)
      -----------------------------------------------------------------------
                                                       (26,131)      (25,699)

    -------------------------------------------------------------------------
                                                  $      6,840  $      7,956
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    AKELA PHARMA INC.
    Consolidated Statements of Operations and Comprehensive Loss
    (Unaudited)

    Three month periods ended March 31, 2010 and 2009
    (in thousands of US dollars, except share and per share data)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                          Three months ended
                                                               March 31,
                                                 ----------------------------
                                                          2010          2009
    -------------------------------------------------------------------------

    Revenues                                      $      2,601  $      3,770

    Expenses:
      Direct costs                                       1,444         2,068
      Selling, general and administrative                1,403         1,434
      Research and development                             129         1,389
      Restructuring costs                                    -           676
      Stock-based compensation                               7            77
      Depreciation of property and equipment               357           372
      Amortization of intangible assets                      -           423
      Interest on long-term debt                            63            37
      Unrealized loss on securities held for
       trading                                              29            87
      Foreign exchange gain                               (392)          (40)
      -----------------------------------------------------------------------
                                                         3,040         6,523

    Loss before under noted items                         (439)       (2,753)

    Other income (expense):
      Settlement with LRI                                    -         1,664
      Provision for repayment of government
       grants                                                -        (1,544)
      -----------------------------------------------------------------------
                                                             -           120

    -------------------------------------------------------------------------
    Net loss and comprehensive loss               $       (439) $     (2,633)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted net loss per share          $      (0.01) $      (0.12)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted weighted average number
     of shares outstanding                          30,890,338    21,615,577
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to unaudited consolidated financial statements.


    AKELA PHARMA INC.
    Consolidated Statements of Cash Flows
    (Unaudited)

    Three months ended March 31, 2010 and 2009
    (in thousands of US dollars)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                          Three months ended
                                                               March 31,
                                                 ----------------------------
                                                          2010          2009
    -------------------------------------------------------------------------

    Cash flows from operating activities:
      Net loss                                    $       (439) $     (2,633)
      Adjustments for:
        Depreciation of property and equipment             357           372
        Amortization of intangible assets                    -           423
        Provision for repayment of government
         grants                                              -         1,544
        Resctructuring charges                               -           571
        Stock-based compensation                             7            77
        Unrealized foreign exchange gain                  (392)          (43)
        Unrealized loss on securities held for
         trading                                            30            87
      Net changes in operating assets and
       liabilities                                        (129)        1,300
      -----------------------------------------------------------------------
                                                          (566)        1,698

    Cash flows from financing activities:
      Repayments of long-term debt                         (94)         (162)
      Proceeds from issuance of long-term debt             500             -
    -------------------------------------------------------------------------
                                                           406          (162)

    Cash flows from investing activities:
      Acquisition of property and equipment                (20)         (792)
      Restricted cash                                      233             -
    -------------------------------------------------------------------------
                                                           213          (792)

    Net increase in cash                                    53           744

    Cash, beginning of period                              107         2,345

    Cash, end of period                           $        160  $      3,089
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to unaudited consolidated financial statements.
    

SOURCE Akela Pharma Inc

For further information: For further information: Gregory M. McKee, President and Chief Executive Officer, Akela Pharma Inc., Tel: 512-834-0449

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