Akela Pharma reports results the three months and year ended 2009 and files
its fourth default status report

AUSTIN, TX, May 31 /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 and year ended December 31, 2009.

    
    During the past year, the Company has achieved the following:

    - On February 9, 2009 we announced the implementation of measures to cut
      costs and preserve cash. The reduction in costs targeted the
      Pharmaceutical Development programs as well as, PharmaForm. The
      measures were taken to allow sufficient time for the completion of
      ongoing financing and M&A efforts.

    - On March 10, 2009, the Company agreed to accept a payment of $2,000 Cdn
      ($1,563 US) and 500,000 common share purchase warrants with an exercise
      price of $0.50 Cdn ($0.39 US) from LAB Research Inc. (LRI) as full and
      final settlement of its lawsuit relating to a failed Fentanyl TAIFUN(R)
      toxicology study.

    - On May 21, 2009, we acquired all of the issued and outstanding
      securities of Nventa Biopharmaceuticals Corporation ("Nventa") by way
      of plan of arrangement (the "Arrangement") under the Business
      Corporations Act (British Columbia). Bob Rieder and Greg McKee were
      appointed to our Board of Directors.

    - On June 26, a new Board was elected consisting of Gordon Busenbark,
      Michael Lagueux, Raj Maheshwari, Greg McKee, Bob Rieder, Robert
      Williams

    - On September 2, 2009, Akela announced a change in leadership with the
      appointment of Greg McKee to the position of President and Chief
      Executive Officer and Robert Rieder to the position of Chairman of the
      Board of Directors.

    - On September 3, 2009, we announced a comprehensive corporate
      restructuring designed to achieve several operational objectives. As
      part of its efforts to preserve its ability to execute on its
      development strategy for Fentanyl TAIFUN(R) and to optimize the
      infrastructure required to support its PharmaForm clients, the Company
      reduced its head count by 32 employees to a workforce of 65. Further,
      Akela announced the closure of its international operations and the
      centralization of the Company's operational headquarters in Austin,
      Texas.

    - During the first quarter of 2010, we 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.
    

Total consolidated revenues for the three months ended December 31, 2009 were $3.0 million, including $2.4 million of contract services, as compared to $3.5 million, including $2.9 million of contract services, for the same period during the previous year. For the year ended December 31, 2009, total consolidated revenues were $13.9 million, including $10.5 million of contract services, as compared to $14.8 million, including $12.3 million of contract services, for 2008. During 2009 revenues were adversely impacted by the continued weakness of the global economy and limited funding of core research and development projects for corporations and clients within the pharmaceutical and biotech industries.

Consolidated net loss for the three and twelve months ended December 31, 2009 was $14.1 million, ($0.46) per share, and $21 million, ($0.77) per share, versus $13.6 million, ($0.63) per share, and $26.0 million, ($1.35) per share, for the same respective periods in 2008.

Operating results for the three and twelve months ended December 31, 2009 include $10.5 million in one time charges resulting from an impairment of goodwill and intangibles and the termination of our lease with HEP Davis Spring L.P.. The Company's 2009 cost reduction plan resulted in additional charges of charges of $0.3 million and $1.1 million for the three and twelve months ended December 31, 2009, respectively. The twelve months ended December 31, 2009 was also affected by a $1.5 million provision for repayment of government grants associated with the Company's Finnish subsidiary. 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. The three and twelve months ended December 31, 2008 includes $9.6 million in charges associated with the impairment of intangibles and other assets associated with Akela's product programs. Excluding these one time gains and losses, Akela's consolidated net loss for the three and twelve months ended December 31, 2009 was $2.1 million, ($0.07) per share, and $8.4 million, ($0.31) per share, versus $4.9 million, ($0.23) per share, and $17.5 million, ($0.91) per share, for the same respective periods in 2008.

The Company had a cash balance of $0.1 million as of December 31, 2009 compared with $2.3 million as of December 31, 2008.

FOURTH DEFAULT STATUS REPORT AND MANAGEMENT CEASE TRADE ORDER

Further to the filing of its annual financial statements for the year ended December 31, 2009, Akela wishes to provide its fourth bi-weekly Default Status Report under National Policy 12-203 - Cease Trade Orders for Continuous Disclosure Defaults ("NP 12-203") as Akela remains in default of filing its interim financial statements for the 3-month period ended March 31, 2010.

As a result, the management cease trade order prohibiting certain directors, officers and insiders of Akela from trading in securities of Akela will remain outstanding as long as the interim financial statements, CEO and CFO certifications and related MD&A and AIF are not filed (the "Management Cease Trade Order").

Akela is diligently working on finalizing its interim financial statements and anticipates that the filing of same will occur on or around June 15, 2010.

Akela reports that, since announcing the Management Cease Order of April 6, 2010 and except for the filing of its annual financial statement described above, there have not been any material changes to the information contained therein; nor any failure by Akela to fulfill its intentions as stated therein with respect to satisfying the provisions of the alternative information guidelines, and there are no additional defaults or anticipated defaults subsequent to such announcement. Further, there have been no additional material changes respecting Akela and its affairs. Akela intends to file, if required, its next Default Status Report by June 15, 2010.

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

    As at December 31st
    (in thousands of US dollars)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                            2009        2008
    -------------------------------------------------------------------------
    Assets
    Current assets:
      Cash                                            $      107  $    2,345
      Restricted cash                                        938         600
      Accounts receivable                                  1,679       6,070
      Prepaid expenses and other current assets              417         346
      -----------------------------------------------------------------------
                                                           3,141       9,361

    Restricted cash and deposits                               -       1,258
    Property and equipment                                 4,217       5,229
    Intangible assets                                          -       4,755
    Goodwill                                                   -       6,457
    Other assets                                             598       1,397
    -------------------------------------------------------------------------
                                                      $    7,956  $   28,457
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Liabilities and Shareholders' Deficiency

    Current liabilities:
      Accounts payable and accrued liabilities        $    7,801  $    7,307
      Deferred revenue                                     2,795       4,515
      Current portion of long-term debt                    1,015       1,311
      -----------------------------------------------------------------------
                                                          11,611      13,133

    Deferred revenue                                      14,630      16,266
    Long-term debt                                         6,615       4,894
    Income taxes                                             799         610

    Shareholders' deficiency:
      Common shares (unlimited authorized, 30,890,338
       and 21,655,577 common shares issued and
       outstanding with no par value at December 31,
       2009 and December 31, 2008, respectively)          67,544      66,346
      Warrants                                             2,954       2,814
      Additional paid-in capital                           8,511       8,105
      Accumulated other comprehensive income               3,110       3,110
      Deficit                                           (107,818)    (86,821)
      -----------------------------------------------------------------------
      Total shareholders' deficiency                     (25,699)     (6,446)

    Commitments, contingencies and guarantees
    -------------------------------------------------------------------------
                                                      $    7,956  $   28,457
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to audited consolidated financial statements.


    AKELA PHARMA INC.
    Consolidated Statements of Operations and Comprehensive Loss

    Periods ended December 31st
    (in thousands of US
     dollars, except share
     and per share data)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    	                              Three months ended           Year ended
                                      December 31,            December 31,
                              -----------------------------------------------
                                    2009        2008        2009        2008
    -------------------------------------------------------------------------
    Revenues                  $    3,048  $    3,527  $   13,893  $   14,774

    Expenses:
      Direct costs                 1,773       2,132       8,158       7,730
      Selling, general and
       administrative              1,667       1,618       6,183       7,103
      Research and development     1,019       2,934       3,711      11,563
      Stock-based compensation        37          93         238         477
      Depreciation of property
       and equipment                 342         461       1,464       1,866
      Amortization of
       intangible assets             424         715       1,693       2,875
      Interest on long-term
       debt                           81          46         268         158
      Unrealized loss on
       securities held for
       trading                        92           -          23           -
      Foreign exchange loss         (188)        473         600         471
      -----------------------------------------------------------------------
                                   5,247       8,472      22,338      32,243

    Loss before under noted
     items                        (2,199)     (4,945)     (8,445)    (17,469)

    Other (expenses) income:
      Settlement with LRI              -           -       1,664           -
      Impairment of goodwill,
       intangible and other
       assets                     (9,601)     (9,635)     (9,601)     (9,635)
      Lease termination           (1,936)          -      (1,936)          -
      Provision for repayment
       of government grants            -           -      (1,544)          -
      Restructuring                 (263)          -      (1,071)          -
      -----------------------------------------------------------------------
    Loss before income taxes     (13,999)    (14,580)    (20,933)    (27,104)

    (Provision for) recovery
     of income taxes:
      Current                        (64)          -         (64)          -
      Future                           -         976           -       1,115
      -----------------------------------------------------------------------
                                     (64)        976         (64)      1,115

    -------------------------------------------------------------------------
    Net loss and
     comprehensive loss       $  (14,063)  $ (13,604)  $ (20,997)  $ (25,989)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted net
     loss per share           $    (0.46)  $   (0.63)  $   (0.77)  $   (1.35)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted
     weighted average number
     of shares outstanding    30,890,338  21,615,577  27,283,487  19,276,943
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to audited consolidated financial statements.


    AKELA PHARMA INC.
    Consolidated Statements of Cash Flows

    Periods ended December 31st
    (in thousands of US dollars)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                    Three months ended           Year ended
                                      December 31,            December 31,
                              -----------------------------------------------
                                    2009        2008        2009        2008
    -------------------------------------------------------------------------
    Cash flows from operating
     activities:
      Net loss                $  (14,063) $  (13,604) $  (20,997) $  (25,989)
      Adjustments for:
        Depreciation of
         property and
         equipment                   342         461       1,464       1,866
        Amortization of
         intangible assets           424         715       1,693       2,875
        Impairment of
         intangible and other
         assets                    9,601       9,635       9,601       9,635
        Lease termination          1,936           -       1,936           -
        Provision for
         repayment of
         government grants             -           -       1,544           -
        Restructuring                153           -         471           -
        Settlement with LRI            -           -        (101)          -
        Stock-based
         compensation                 37          93         238         477
        Unrealized foreign
         exchange loss               (29)        (48)        649          54
        Unrealized loss on
         securities held for
         trading                      92           -          23           -
        Income taxes                  64        (976)         64      (1,115)
      Net changes in working
       capital                       607       2,825       1,653       5,375
    -------------------------------------------------------------------------
                                    (836)       (899)     (1,762)     (6,822)

    Cash flows from financing
     activities:
      Repayments of long-term
       debt                         (897)       (163)     (1,517)       (626)
      Proceeds from issuance
       of units                        -           -           -      10,200
      Unit issue costs                 -          31           -      (1,182)
    -------------------------------------------------------------------------
                                    (897)       (132)     (1,517)      8,392

    Cash flows from investing
     activities:
      Acquisition of property
       and equipment                  88      (1,289)     (1,036)     (4,315)
      Acquisition of Nventa           25           -       1,157           -
      Restricted cash                920           -         920      (1,258)
      Addition to intangible
       assets                          -           -           -        (340)
    -------------------------------------------------------------------------
                                   1,033      (1,289)      1,041      (5,913)

    Net decrease in cash            (700)     (2,320)     (2,238)     (4,343)

    Cash, beginning of year          807       4,665       2,345       6,688

    -------------------------------------------------------------------------
    Cash, end of year         $      107  $    2,345  $      107  $    2,345
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to audited consolidated financial statements.
    

%SEDAR: 00003466E

SOURCE Akela Pharma Inc

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

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