INEX Releases 2006 Operating Results and Announces 2007 Corporate Milestones



    VANCOUVER, March 21 /CNW/ - Inex Pharmaceuticals Corporation ("INEX";
TSE: IEX) released its 2006 audited operating results today and announced
plans to build on the year's scientific, business and financing successes. In
2007, the Company will focus on advancing its anti-cancer product candidate
INX-0167 toward clinical trials while continuing to support its partners as
they advance products based on INEX's technology.
    Timothy M. Ruane, President and Chief Executive Officer of INEX, said the
past 12 months included a number of achievements including partnership
agreements with Alnylam Pharmaceuticals, Inc. ("Alnylam"; Nasdaq:   "ALNY") and
Hana Biosciences, Inc. ("Hana"; Nasdaq:   "HNAB") as well as the settlement of
convertible debt and the completion of a $16.0 million equity financing.
    "As a result of our business and financing successes we believe we have
the financial stability for the next two to three years to advance our
internal pipeline and to support our partners to advance their products using
our technology. In the next 18 months, we expect there will be a minimum of
six products using our technology in clinical trials," said Ruane.

    INX-0167
    INX-0167 is the Company's lead internal product candidate using DNA
oligonucleotides to stimulate the immune system to treat cancer. Preclinical
studies have demonstrated the capability of INX-0167 to enhance natural killer
cell activity and to dramatically improve the anti-tumour effectiveness of
monoclonal antibodies when tested in lymphoma and breast cancer models. In
2007, the Company will focus on safety and toxicology studies in animals to
identify a safe initial dose for beginning Phase 1 human clinical trials.
INX-0167 targets Toll-like receptor 9 (TLR9) which stimulates an immune
response including the activation of natural killer cells.

    Partnerships
    The partnership with Alnylam announced in 2006 and expanded in early 2007
is developing drugs that consist of Alnylam's proprietary small interfering
RNA (siRNA) oligonucleotides encapsulated in INEX's oligonucleotide delivery
technology. Alnylam siRNA drugs have demonstrated the capability to switch off
genes that produce disease-causing proteins through a mechanism known as RNA
interference (RNAi). The partnership with Alnylam also gives INEX rights to
develop three siRNA drugs that use Alnylam's RNAi technology and to develop
immune stimulatory drugs using Alnylam's RNA technology.
    A partnership with Hana was signed in 2006 for the development and
commercialization of INEX's targeted chemotherapy products - Marqibo(R)
(sphingosomal vincristine), INX-0125 (sphingosomal vinorelbine) and INX-0076
(sphingosomal topotecan). The Company also has partnerships with two other
companies, Esperion Therapeutics, Inc. (now owned by Pfizer Inc.) and Aradigm
Corporation to whom was licensed, in 1999 and 2004 respectively, technology
and patents for development into drug products. All costs are borne by the
partners and INEX has the opportunity to receive milestones and royalties on
success.

    Upcoming Events
    Over the next 12 months, INEX expects to provide progress updates on the
following objectives of either INEX or its partners:

    
    First Half 2007
    -   Complete the spin-out of Tekmira Pharmaceuticals Corporation
        ("Tekmira").

    -   Commencement by Hana of a pivotal Phase 2 clinical trial to evaluate
        Marqibo as a treatment for relapsed acute lymphoblastic leukemia.

    Second Half 2007

    -   Completion by Hana of a Phase 1 clinical trial evaluating INX-0125.

    -   Commencement by Hana of a Phase 1 clinical trial evaluating INX-0076.

    -   Commencement by Hana of a Phase 3 clinical trial to evaluate Marqibo
        as a treatment for front-line acute lymphoblastic leukemia.

    -   Continuation of toxicology and other studies in preparation for
        filing of an investigational new drug (IND) application for approval
        to evaluate INX-0167 in human clinical trials.

    -   Filing of an IND by Alnylam for approval to begin clinical trials for
        PCS-01, a siRNA gene-silencing product targeting
        hypercholesterolemia.

    -   Announcement of a gene target for the first of INEX's three siRNA
        gene silencing products included in the Alnylam partnership.

    Financial Results
    The following is selected financial information for fiscal years 2006,
2005 and 2004:

    (in millions of Cdn$ except per share date)     2006      2005      2004
    -------------------------------------------------------------------------
    Total revenues                               $  15.9   $  15.4   $  14.6
    Research and development expenses                5.3      10.2      26.8
    General and administrative expenses              4.5       4.4       9.3
    Restructuring costs                                -       5.7       5.1
    Amortization                                     0.8       2.1       6.6
    Total income (loss)                             21.1      (9.4)    (33.7)
    Income (Loss) per share                         0.55     (0.24)    (0.88)
    Diluted income (loss) per share                 0.55     (0.24)    (0.88)
    Total assets                                     7.0      21.5      49.4
    Total long-term liabilities                      0.1      40.4      38.7
    Deficit                                       (195.3)   (222.3)   (212.9)
    Total shareholders' equity (deficit)             0.2     (21.5)    (12.6)
    


    The factors that have caused period to period variations in revenues,
expenses and loss per year between 2006 and 2005 are explained in further
detail below. The most significant factor causing the period to period
variations between 2005 and 2004 were the December 2004 and June 2005
workforce reductions and program cut backs as reflected in reduced research
and development and general and administrative expenses and a charge for
restructuring costs. The December 2004 scaling back of activities and
workforce reduction was in response to the December 1, 2004 FDA's Oncologic
Drugs Advisory Committee ("ODAC") vote to not support accelerated approval for
Marqibo. INEX's workforce was further reduced in June 2005 in order to
conserve cash and to facilitate a new strategic path for its targeted
chemotherapy products and early stage pipeline based on oligonucleotide drugs.
    Amortization expense decreased by $4.5 million in 2005 as compared to
2004 largely due to medical technology acquired in 1998 from Lynx Therapeutics
being written off to nil through a $3.4 million impairment loss in the fourth
quarter of 2004 and therefore no ongoing amortization expense for this
technology in 2005.
    The decrease in total assets from 2004 to 2005 was primarily due to
decreasing cash and cash equivalents and a reduced property and equipment
value resulting from both disposals and impairment charges tied to the
restructurings following the December 2004 decision of ODAC.

    RESULTS OF OPERATIONS
    For the fiscal year ended December 31, 2006, net income was $21.1 million
($0.55 per common share) as compared to a net loss of $9.4 million ($0.24 loss
per common share) for 2005.
    There are a number of factors contributing to changes in results
including the gain on the purchase and settlement of the exchangeable and
development notes and revenue from INEX's current collaborative partnerships
with Hana and Alnylam.
    Revenue / Revenue from research and development collaborations, licensing
fees and milestone payments was $15.9 million for 2006 as compared to
$15.4 million for 2005. Revenue in 2005 was primarily a consequence of the
recognition of deferred revenue and a one-time payment as a result of the
termination of a previous partnership with Enzon Pharmaceuticals, Inc.
("Enzon"). Revenue in 2006 arises from licensing and collaboration payments
from partnerships with Hana and Alnylam.

    
    Revenue is detailed in the following table:

    (in millions Cdn$)                                        2006      2005
    -------------------------------------------------------------------------
    Research and development collaborations
    Enzon                                                  $     -   $   1.3
    Alnylam                                                    1.4         -
    Hana                                                       1.2         -
    -------------------------------------------------------------------------
    Total research and development collaborations          $   2.6   $   1.3

    Licensing fees and milestone payments
    Enzon revenue
      Amortization of up-front payment                     $     -   $  11.2
      Milestones and termination payment                         -       2.7
    Aradigm initial licensing fee                                -       0.2
    Alnylam initial licensing fee                              1.0         -
    Hana revenue
      Amortization of Up-front Payments                       11.2         -
      Milestone                                                1.1         -
    -------------------------------------------------------------------------
    Total licensing fees and milestone payments            $  13.3   $  14.1
    

    Alnylam revenue / On March 25, 2006, INEX signed an exclusive research
collaboration agreement with Alnylam to evaluate Alnylam's RNAi therapeutics
with INEX's systemic lipid-based technology. This agreement was amended on
July 14, 2006. Under the amended agreement, Alnylam paid INEX $1.4 million
(US 1.2 million) in collaboration payments and $1.7 million (US$1.5 million)
in licensing payments. Collaboration revenue from this agreement was
recognized in 2006 as Research and development collaborations revenue as
services were performed and related expenditures were incurred.
    During 2006, Alnylam made licensing payments of $0.6 million
(US$0.5 million) for a 12 month option to execute a global license for
specific RNAi therapeutic targets. Income from this option is being recognized
as Licensing fees and milestone payments on a straight-line basis over the
period that the option covers from March 25, 2006 to March 24, 2007. Alnylam
has also paid $1.1 million (US$1.0 million) relating to an option to take a
broad exclusive license to certain of INEX's technology. Income from this
option is being recognized as Licensing fees and milestone payments on a
straight-line basis over the period of the option from September 26, 2006 to
March 24, 2007 leaving $0.7 million as Deferred revenue at the end of 2006.

    Hana revenue / On May 6, 2006, INEX signed a number of agreements with
Hana including an agreement to issue worldwide licenses (the "License
Agreement") for INEX's targeted chemotherapy products, Marqibo, INX-0125 and
INX-0076. Under the License Agreement, Hana paid a non-refundable up-front
cash payment of $1.7 million (US$1.5 million) and issued INEX with 1,118,568
Hana shares (together the "Up-front Payments"). The value of the Hana shares
on May 6, 2006, based on a share price of $12.34 (US$11.15) was $13.8 million
(US$12.5 million) giving a total of $15.5 million (US$14.0 million) in
Up-front Payments. Also on May 6, 2006, INEX signed an asset transfer
agreement with Hana to transfer certain of surplus laboratory equipment as
part consideration for the Up-front Payments from Hana. The net book value of
the assets transferred under this agreement was $0.2 million. Effective April
3, 2006, INEX also signed a Service Agreement under which Hana is reimbursing
the Company for expenses and time spent in maintaining and transferring the
technology and product expertise related to the three products.
    In accordance with INEX's revenue recognition policy, $15.3 million of
the Up-front Payments was deferred and was initially being amortized on a
straight line basis from April 3, 2006 to December 31, 2006 by which time INEX
had expected to deliver substantially all services under the Service
Agreement. After reviewing the delivery of services to Hana in the fourth
quarter of 2006, INEX now expects to deliver substantially all services by the
end of 2007 so has extended the amortization of the Up-front Payments,
effective October 1, 2006, to December 31, 2007. As a result, at the end of
2006, $4.1 million is included in Deferred revenue in respect of Up-front
Payments from Hana. The $0.2 million balance of the Up-front Payment has been
allocated to the surplus laboratory equipment transferred to Hana giving a
gain on disposal of nil.
    On August 29, 2006, INEX received a notice from Hana that they had
enrolled the first patient in a Phase 1 clinical trial of INX-0125 thereby
triggering a milestone payment of $1.1 million (US$1.0 million).
    Under the License Agreement INEX could receive up to an additional
US$29.5 million in cash or Hana shares for development and regulatory
milestones and will also receive royalties on product sales.
    Under INEX's agreement with the former holders of the exchangeable and
development notes ("Former Noteholders"), the Up-front Hana shares,
$2.8 million (US$2.5 million) in cash and the $1.1 million (US$1.0 million)
milestone payment less royalties of $0.2 million (US$0.2 million) paid to the
University of British Columbia, have been transferred to them. INEX has agreed
to pay certain of the future contingent Hana milestones and royalties to the
Former Noteholders.

    Aradigm revenue / The Aradigm revenue is a licensing fee received from
Aradigm according to an agreement dated December 8, 2004 under which Aradigm
licensed certain INEX sphingosomal technology for the delivery of
ciprofloxacin.

    Expenses / Research and development / Research and development expenses
decreased to $5.3 million for 2006 as compared to $10.2 million for 2005. This
decrease relates primarily to reduced research and development personnel,
reduced external costs for products in INEX's pipeline and reduced facility
overheads. Research and development salary expenses declined $1.4 million as
compared with 2005 due to workforce reductions in June 2005. Internal research
and development staff was 21 at December 31, 2006 (total staff 30) as compared
to 37 (total staff 57) just prior to the June 2005 restructuring. Effective
October 1, 2005, INEX reduced its lease and operating expenses through a
sub-lease agreement for certain of its laboratory and office space. Also
contributing to the decrease in research and development costs is decreased
external costs related to the targeted chemotherapy platform for which
spending was reduced after Enzon terminated a strategic partnership in the
first quarter of 2005 and for which spending was passed through to Hana from
April 2006.
    With planned staffing and research and development activity increases,
INEX (and subsequently Tekmira) expects research and development costs to be
approximately $10.0 million in 2007.

    General and administrative / General and administrative expenses were
$4.5 million for 2006 as compared to $4.4 million for 2005. Legal and
consulting fees increased significantly in 2006 and relate to the Hana and
Alnylam partnerships, litigation with the former majority noteholder (prior to
settlement), litigation with Protiva and ongoing spin-out activities. Salaries
and related costs decreased substantially after the June 2005 workforce
reductions.
    INEX (and subsequently Tekmira) currently estimates that general and
administrative expenses in 2007 will be approximately $4.0 million.

    Restructuring costs / Net restructuring costs for the year ended
December 31, 2006 were nil as compared to $5.7 million for the year ended
December 31, 2005. In June 2005, INEX scaled back certain activities and
implemented a workforce reduction of 61% or 35 employees.

    Impairment of medical technology / In the second quarter of 2006, the
licensing of INEX's targeted chemotherapy technology to Hana and the purchase
and settlement of the exchangeable and development notes, which includes the
assignment or transfer of all of the Hana up-front payment and most of the
milestone payments to the Former Noteholders, prompted a review of the fair
value of medical technology. Potential net cash in-flows generated by the
medical technology are several years away, are contingent upon the success of
Hana's development of Marqibo and the other licensed products and are not
readily determinable. INEX therefore decided to take a full impairment loss on
its medical technology and recorded impairment of medical technology of
$7.2 million in the quarter ended June 30, 2006. There is no comparative
figure for this expense item.

    Amortization / Amortization expense was $0.8 million in 2006 as compared
to $2.1 million in 2005. The decrease in amortization is primarily due to:

    
    -   minimal amortization expense on leasehold improvements in 2006 due to
        the $1.5 million impairment loss recorded in the second quarter of
        2005
    -   the sale of laboratory equipment in the fourth quarter of 2005
    -   a provincial sales tax refund of $0.2 million recorded in the second
        quarter of 2006 and related to property and equipment that had
        already been fully amortized
    -   the complete impairment charge of all medical technology at June 30,
        2006
    

    In 2007 INEX (and subsequently Tekmira) expects amortization expense as
related to its property and equipment to be approximately $0.4 million. At
this time INEX has not yet assessed the accounting implications of its
expanded Alnylam collaboration agreement, signed on January 8, 2007, for its
amortization expense in 2007.

    Other Income/Losses / Interest income / Interest income was $0.4 million
for the year ended December 31, 2006 as compared to $0.5 million for the year
ended December 31, 2005. The decrease is a result of a decrease in the average
cash and cash equivalents held throughout 2006 as compared to the prior year,
somewhat offset by higher average interest rates during 2006. In the future
interest income will continue to fluctuate in relation to cash balances and
interest yields. See Risks and Uncertainties.

    Interest on exchangeable and development notes / Interest expense on the
US dollar denominated exchangeable and development notes (the "Notes") was
$1.9 million for the year ended December 31, 2006 as compared to $4.0 million
for 2005. On June 20, 2006, INEX signed a purchase and settlement agreement
with the holders of the Notes. There will be no interest charged on the Notes
after their purchase and settlement on June 20, 2006.

    Gain on purchase and settlement of the exchangeable and development notes
/ The gain on purchase of the exchangeable and development notes in the year
ended December 31, 2006 was $26.0 million. On June 20, 2006 INEX signed a
Purchase and Settlement Agreement with the Former Noteholders and recorded a
gain on settlement of $26.8 million. On August 29, 2006, Hana paid a milestone
of $1.1 million (US$1.0 million) (see Hana revenue). After paying a royalty of
$0.2 million (US$0.2 million) the balance of the milestone payment of
$0.9 million (US$0.8 million) was paid to the Former Noteholders and recorded
as an adjustment to the Gain on purchase and settlement of exchangeable and
development notes. There are no comparative amounts for this item.

    Foreign exchange and other gains (losses) / Foreign exchange and other
gains (losses) showed gains of $1.6 million in 2006 as compared to gains of
$1.3 million in 2005. Historically, foreign exchange and other gains (losses)
have largely resulted from foreign exchange gains and losses on the US dollar
denominated exchangeable and development notes. After the purchase and
settlement of the exchangeable and development notes on June 20, 2006 foreign
exchange gains and losses are expected to be less significant. INEX does,
however, expect continued fluctuation in Canada/US dollar exchange rates in
future periods and these fluctuations will result in foreign exchange gains or
losses on its US denominated cash investments, accounts receivable and
accounts payable. See Risks and Uncertainties.

    Investment in Protiva Biotherapeutics Inc. / In 2005, INEX's Long-term
Investment balance was reduced to nil as a result of the continued losses
incurred by Protiva Biotherapeutics Inc. ("Protiva"), a company spun out of
INEX in 2001, as INEX's percentage of losses, based on ownership percentage,
exceeded the initial investment. Consequently, and according to INEX's
existing investment policy, it recognized the remaining deferred dilution gain
of $2.1 million.
    Also in 2005, Protiva issued new share capital thereby reducing INEX's
ownership percentage from 34% to 7% that in turn gave rise to a dilution gain
of $1.2 million. INEX also recorded $0.9 million as amortization of earlier
dilution gains giving a total 2005 dilution gain from its Protiva investment
of $2.1 million. INEX's equity in Protiva's loss for 2005 was $1.7 million and
an impairment loss of $0.2 million was recorded on the balance of the
Company's investment in Protiva. As a result of this dilution, INEX no longer
has influence over Protiva so now applies the cost method of accounting to
this investment.
    INEX is currently engaged in a contractual dispute with Protiva.

    Loss on disposal of Hana Biosciences, Inc. shares / On June 20, 2006, as
a part of the consideration for the purchase of the Notes, INEX transferred
1,118,568 Hana shares with a value at that time of $10.7 million
(US$9.6 million) to the Former Noteholders. INEX initially recorded the
1,118,568 Hana shares on May 6, 2006, the date they were issued, at their then
trading price of $12.34 (US$11.15) giving an aggregate value of $13.8 million
(US$12.5 million). The loss in value of the Hana shares of $3.1 million has
been recorded in the second quarter of 2006 as Loss on disposal of Hana
shares. There is no comparative amount for this item.

    Income taxes / In the first quarter of 2005 INEX accrued $0.5 million
(US$0.4 million) of income taxes payable relating to a portion of the
termination payment received from Enzon. The $0.003 million income tax in 2006
represents an adjustment to the US income tax provision now that INEX has
finalized and filed its 2004 and 2005 US income tax returns.

    Capital Expenditures / Capital expenditures were $0.11 million in 2006
and $0.05 million in 2005. Of the capital additions in 2006, $0.13 million
were funded by capital leases.
    INEX (and subsequently Tekmira) anticipates capital expenditures in 2007
of between $1.0 million and $1.5 million.

    RISKS AND UNCERTAINTIES
    INEX's funding needs may vary depending on a number of factors including:

    
    -   revenues earned from its partnership with Alnylam and, to a lesser
        extent, its Service Agreement with Hana
    -   its decisions to in-license or acquire additional products for
        development, in particular for its RNAi therapeutics program
    -   the pace at which it is able to or decides to expand its staffing,
        research and development and operations in general
    -   the extent to which it continues development or can extract
        significant value from its technologies
    -   its ability to attract and retain corporate partners, and their
        effectiveness in carrying out the development and ultimate
        commercialization of its product candidates
    -   the decisions, and the timing of decisions, made by health regulatory
        agencies regarding its technology and products
    -   competing technological and market developments
    -   prosecuting and enforcing its patent claims and other intellectual
        property rights
    

    INEX's risks and uncertainties are discussed in further detail in the
"Management's Discussion and Analysis of Financial Condition and Operations"
portion of its 2006 Annual Report and in its Annual Information Form. Both the
2006 Annual Report and Annual Information Form will be available on
www.sedar.com.


    
     Consolidated Balance Sheets

    (Expressed in Canadian Dollars)              December 31     December 31
                                                    2006            2005
    -------------------------------------------------------------------------

    ASSETS
    Current assets
    Cash and cash equivalents                  $   5,670,748   $  12,173,022
    Accounts receivable                              704,663         301,922
    Prepaid expenses and other assets                 76,050         209,160
    -------------------------------------------------------------------------
    Total current assets                           6,451,461      12,684,104

    Property and equipment                           582,503       1,107,170
    Medical technology                                     -       7,688,820
    -------------------------------------------------------------------------
                                               $   7,033,964   $  21,480,094
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
    Current liabilities
    Accounts payable and accrued liabilities   $   1,763,523   $   1,933,402
    Income tax payable                                     -         433,799
    Current portion of obligations under
     capital leases                                   96,855          57,594
    Current portion of deferred lease
     inducements                                     134,777         140,735
    Deferred revenue                               4,781,798               -
    -------------------------------------------------------------------------
    Total current liabilities                      6,776,953       2,565,530
    Obligations under capital leases                  75,728          99,302
    Exchangeable and Development Notes                     -      40,158,926
    Deferred lease inducements                             -         134,777
    -------------------------------------------------------------------------
    Total liabilities                              6,852,681      42,958,535

    Shareholders' equity (deficit):

    Common share capital:
      December 31, 2006 - 38,566,788             180,237,917     180,237,917
      December 31, 2005 - 38,566,788
    Additional paid-in capital                    15,211,567      20,569,880
    Deficit                                     (195,268,201)   (222,286,238)
    -------------------------------------------------------------------------
    Total shareholders' equity (deficit)             181,283     (21,478,441)
    -------------------------------------------------------------------------
                                               $   7,033,964   $  21,480,094
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Operations and Deficit
                                                         Year ended
    (Expressed in Canadian Dollars)              December 31     December 31
                                                    2006            2005
    -------------------------------------------------------------------------

    Revenue
    Research and development collaborations    $   2,533,896   $   1,299,398
    Licensing fees and milestone payments         13,323,313      14,136,818
    -------------------------------------------------------------------------
                                                  15,857,209      15,436,216
    -------------------------------------------------------------------------

    Expenses
    Research and development                       5,275,082      10,177,612
    General and administrative                     4,491,410       4,395,812
    Restructuring costs                                    -       5,656,242
    Impairment of medical technology               7,210,515               -
    Amortization                                     839,831       2,126,052
    -------------------------------------------------------------------------
                                                  17,816,838      22,355,718
    -------------------------------------------------------------------------

    Income (Loss) from operations                 (1,959,629)     (6,919,502)

    Interest income                                  369,272         510,310
    Interest on exchangeable and
     development notes                            (1,872,729)     (4,006,408)
    Gain on purchase and settlement of
     exchangeable and development notes           25,955,993               -
    Foreign exchange and other gains               1,648,117       1,345,199
    Dilution gain from Protiva
     Biotherapeutics Inc.                                  -       2,067,220
    Equity in loss of Protiva
     Biotherapeutics Inc.                                  -      (1,670,214)
    Impairment loss on investment in Protiva
       Biotherapeutics Inc.                                -        (235,744)
    Loss on disposal of Hana
     Biosciences, Inc. shares                     (3,069,049)              -
    -------------------------------------------------------------------------
    Income (Loss) before income taxes             21,071,975      (8,909,139)
    Income taxes                                      (2,688)        451,000
    -------------------------------------------------------------------------
    Net income (loss)                          $  21,074,663   $  (9,360,139)

    Deficit, Beginning of period                (222,286,238)   (212,926,099)

    Discount on exchangeable and development
     notes                                         5,943,374               -

    -------------------------------------------------------------------------
    Deficit, End of period                     $(195,268,201)  $(222,286,238)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average number of common shares
      Basic                                       38,566,788      38,566,788
      Diluted                                     38,579,150      38,566,788

    Income (Loss) per common share
      Basic                                    $        0.55   $       (0.24)
      Diluted                                  $        0.55   $       (0.24)



    Consolidated Statements of Cash Flow
    (Expressed in Canadian Dollars)                      Year ended
                                                 December 31     December 31
                                                    2006            2005
    -------------------------------------------------------------------------
    OPERATIONS
    Income (Loss) for the period               $  21,074,663   $  (9,360,139)
    Items not involving cash:
      Amortization of property and equipment         361,532       1,155,059
      Impairment loss on property and
       equipment                                           -       1,528,064
      Amortization of medical technology             478,299         959,326
      Impairment loss on medical technology        7,210,515
      Amortization of deferred lease
       inducements                                  (140,735)       (139,187)
      Amortization of other long-term assets               -         809,242
      In kind contribution of capital assets               -          61,043
      Interest on exchangeable and development
       notes                                       1,872,729       4,006,408
      Unrealized foreign exchange loss on
       exchangeable and development notes         (1,659,484)     (1,370,270)
      Gain on purchase and settlement of
       exchangeable and development notes        (25,955,993)              -
      Dilution gain from Protiva
       Biotherapeutics Inc.                                -      (2,067,220)
      Equity in loss of Protiva
       Biotherapeutics Inc.                                -       1,670,214
      Impairment loss on investment in Protiva
       Biotherapeutics Inc.                                -         235,744
      Loss on disposal of Hana
       Biosciences, Inc. shares                    3,069,049               -
      Milestone received of Hana
       Biosciences, Inc. shares                     (552,650)              -
      Milestone payment of Hana
       Biosciences, Inc. shares                      108,557               -
      Stock-based compensation expense               585,061         500,753
      Gain from sale of property and equipment       (10,941)       (167,392)
    Change in deferred revenue                    (8,853,833)    (11,155,715)
    Net change in non-cash working capital          (644,324)     (3,591,580)
    -------------------------------------------------------------------------
                                                  (3,057,556)    (16,925,650)
    -------------------------------------------------------------------------

    INVESTMENTS
    Proceeds from sale of property and
     equipment                                        16,490         493,447
    Acquisition of property and equipment           (110,582)        (52,280)
    -------------------------------------------------------------------------
                                                     (94,092)        441,167
    -------------------------------------------------------------------------

    FINANCING
    Repayment of long-term debt, net of
     security deposit                                      -      (1,281,505)
    Repayment of obligations under capital
     leases                                         (116,035)       (106,766)
    Repayment of exchangeable and development
     notes                                        (3,234,593)              -
    -------------------------------------------------------------------------
                                                  (3,350,628)     (1,388,271)
    -------------------------------------------------------------------------

    Increase (decrease) in cash and cash
     equivalents                                  (6,502,274)    (17,872,754)
    Cash and cash equivalents, beginning
     of period                                    12,173,022      30,045,776
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period   $   5,670,748   $  12,173,022
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    About INEX
    INEX is a Canadian biopharmaceutical company developing and
commercializing proprietary drugs and drug delivery systems to improve the
treatment of cancer and other diseases. Further information about INEX can be
found at www.inexpharm.com.

    Forward Looking Statements
    There are forward-looking statements and information contained herein
that are not based on historical fact, including without limitation statements
containing the words "believes," "may," "plans," "will," "estimate,"
"continue," "anticipates," "intends," "expects," and similar expressions, and
the negative of such expressions. Such forward-looking statements and
information involve known and unknown risks, uncertainties and other factors
that may cause the actual results, events or developments to be materially
different from any future results, events or developments expressed or implied
by such forward-looking statements and information. Such factors include,
among others, INEX's stage of development, lack of product revenues,
additional capital requirements, risks associated with the completion of
clinical trials and obtaining regulatory approval to market INEX's products,
the ability to protect its intellectual property and dependence on
collaborative partners. These factors should be considered carefully and
readers are cautioned not to place undue reliance on such forward-looking
statements or information. The Company disclaims any obligation to update any
such factors or to publicly announce the result of any revisions to any of the
forward-looking statements or information contained herein to reflect future
results, events or developments, except as required by law.





For further information:

For further information: Investors, Ian Mortimer, Vice President,
Finance and Chief Financial Officer, Phone: (604) 419-3200, Email:
imortimer@inexpharm.com, Website: www.inexpharm.com; Media, Karen Cook Boas,
James Hoggan & Associates Inc., Phone: (604) 739-7500, Email:
kcook@hoggan.com

Organization Profile

Tekmira Pharmaceuticals Corporation

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