Transition Therapeutics Announces First Quarter Fiscal 2008 Financial Results



    TORONTO, Nov. 14 /CNW/ - Transition Therapeutics Inc. ("Transition" or
the "Company") (TSX: TTH; NASDAQ:   TTHI), a product-focused biopharmaceutical
company developing therapeutics for disease indications with large markets,
today announced its financial results for the quarter ended September 30,
2007.

    Selected Highlights
    -------------------

    During the first quarter of fiscal 2008 and up to the date of this press
release, the Company achieved the following significant milestones:

    
    ELND-005/AZD-103 - Alzheimer's Disease:

    -  On October 26, 2007, the Company Received the Remaining US$7,500,000
       Upfront Payment from Elan. The receipt of US$7,500,000 represents the
       second half of the US$15 million upfront payment under the Company's
       global collaboration agreement with a subsidiary of Elan Corporation,
       plc ("Elan");
    -  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;

    TT-223 (formerly known as "G1") - Diabetes:

    -  TT-223 Program Update: On November 5, 2007, the Company Announced an
       Update on the Clinical Development and Partnership activities for the
       Company's diabetes program. Following good faith negotiations, Novo
       Nordisk and Transition were not able to come to agreement for an
       exclusive license to the Company's diabetes programs. Accordingly,
       Transition has sent notice to Novo Nordisk terminating the agreement
       between the companies, which will return to Transition all rights held
       by Novo Nordisk, relating to E1-I.N.T. Transition will continue on-
       going discussions with other interested parties to partner the
       diabetes programs. In the interim, the Company is fully committed to
       support and advance the clinical development of the diabetes programs,
       leveraging its expertise in disease-modifying therapies for diabetes,
       world-class scientific advisory board and solid financial position.

    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 incurred total share issuance costs of $1,031,433, resulting
       in net cash proceeds of $23,968,567;
    -  On October 31, 2007 the Company received the third anniversary payment
       of $650,000 from the sale of its subsidiary, Stem Cell Therapeutics
       ("SCT"). Total payments received to date amount to $1,850,000 with the
       final payment of $1,650,000 due in the first quarter of fiscal 2009.
    

    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.
    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. Transition and
Elan anticipate starting a Phase II clinical trial by the end of calendar 2007
or early 2008.

    TT-223 for Diabetes

    Preclinical data in diabetes animal models demonstrate the efficacy of
gastrin analogues alone, or in combination with GLP-1 analogues or epidermal
growth factor analogues. In humans, Transition's recent Phase IIa clinical
trial data showed that 4-weeks of E1-I.N.T. therapy (combination of gastrin
analogue and epidermal growth factor analogue) in type 2 diabetes patients
resulted in sustained reductions in blood glucose control parameters,
including haemoglobinA1C, for 6 months post-treatment. Pre-clinical and
clinical data suggests gastrin plays an important role in beta cell
differentiation and function, capable of providing sustained glucose control
in type 2 diabetes. Based on these data, Transition has commenced the studies
to advance its lead gastrin analogue, TT-223, formerly known as "G1", into
Phase II clinical trials in type 2 diabetes patients.
    To support the Phase II clinical development program for TT-223,
Transition is currently performing two Phase I studies to expand the dose
ranges for TT-223. The first study, a single ascending dose study of TT-223 in
healthy volunteers has completed dosing. The second study, a multiple
ascending dose study of TT-223, is expected to begin later this year.
Transition expects to initiate the following Phase II clinical studies
evaluating TT-223 in type 2 diabetes:

    
    -  A dose range finding Phase II trial evaluating TT-223 in type 2
       diabetes patients receiving metformin with or without
       thiazolidinediones (TZDs) to commence in the first half of next year;
    -  An additional Phase II study with TT-223 in type 2 patients receiving
       either GLP-1 analogue therapy or insulin therapy is anticipated to
       follow;
    -  The next steps in the development of TT-223 in combination with
       Transition's epidermal growth factor analogue, will be evaluated
       following the review of data from the above proposed Phase II trials.
    

    Financial Review
    ----------------

    Results of Operations

    For the three months ended September 30, 2007, the Company recorded a net
loss of $4,098,978 ($0.18 per common share) compared to a net loss of
$2,324,722 ($0.13 per common share) for the three months ended September 30,
2006.
    This increase in net loss of $1,774,256 or 76% is largely due to the fact
that the Company did not recognize a future income tax recovery in the current
quarter, compared to the future income tax recovery of $2,729,422 that was
recognized in the same period in the previous year. After adjusting for the
impact of the future income tax recovery, the net loss for the period
decreased $955,166 compared to the same period in fiscal 2007.
    The decrease in net loss can be attributed to a decrease in amortization
expense resulting from the Waratah technology being fully amortized during
fiscal 2007 and increased interest income resulting from higher cash balances.
The decrease in net loss is partially offset by increases in research and
development and general and administrative expenses.

    Research and Development

    Research and development increased $676,811 or 32% from $2,088,988 for
the three months ended September 30, 2006 to $2,765,799 for the three months
ended September 30, 2007. This increase was primarily the result of an
increase in clinical development costs related to ELND-005/AZD-103 and TT-223.
The increase was also amplified in the current quarter as the comparative
prior year period included the reimbursement by Novo Nordisk of E1-I.N.T.(TM)
development costs in the amount of $502,293, resulting from the amended Novo
Nordisk agreement. These increases were partially offset by decreases in
clinical program expenses relating to the Company's I.E.T. clinical trials and
a reduction of costs relating to the drug discovery platform.

    General and Administrative

    General and administrative expenses increased to $1,332,181 for the three
months ended September 30, 2007 from $1,029,393 for the three months ended
September 30, 2006. This increase of $302,788 or 29% primarily resulted from
increased professional fees, insurance and regulatory fees resulting from the
NASDAQ listing, increased option expenses and increased corporate governance
costs.

    Amortization

    Amortization decreased by $2,308,988 or 78% to $659,318 for the three
months ended September 30, 2007 as compared to $2,968,306 for the same period
in fiscal 2007. The decrease in amortization expense is primarily due to the
Waratah technology being fully amortized during fiscal 2007. This decrease was
partially offset by the full quarter impact of the amortization relating to
the NeuroMedix technology acquired during the fourth quarter of fiscal 2007.

    Recovery of Future Income taxes

    Recovery of future income taxes decreased from $2,729,422 for the
three-month period ended September 30, 2006 to Nil for the three-month period
ended September 30, 2007. The decrease in recovery of future income taxes 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. which occurred during the
three-month period ended September 30, 2006. There was no equivalent
transaction during the three-month period ended September 30, 2007.

    Interest Income, net

    Interest income for the three months ended September 30, 2007, was
$596,479 as compared to $73,241 for the three months ended September 30, 2006.
This increase of $523,238 or 714% in interest income primarily resulted from
increased cash balances resulting from the December 2006 and July 2007 private
placement financings and strengthened cash management.

    SCT Anniversary Payment

    Subsequent to the end of the three-month period ending September 30,
2007, the Company received the third anniversary payment of $650,000 in cash
which will be recorded as a gain in the second quarter of fiscal 2008. Total
payments received to date amount to $1,850,000 with the final payment of
$1,650,000 due in the first quarter of fiscal 2009.

    About Transition
    ----------------

    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 TT-223 for the
treatment of diabetes. Transition has an emerging pipeline of preclinical drug
candidates acquired externally or developed internally 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
    (Unaudited)

                                                   September 30,     June 30,
                                                           2007         2007
                                                              $            $
    -------------------------------------------------------------------------

    ASSETS
    Current
    Cash and cash equivalents                        21,266,834    1,377,387
    Held-to-maturity investments                     32,912,917   33,414,383
    Receivables                                         180,771      317,979
    Investment tax credits receivable                   554,429      559,405
    Prepaid expenses and deposits                       493,129      519,937
    -------------------------------------------------------------------------
    Total current assets                             55,408,080   36,189,091
    Capital assets, net                               1,118,071    1,174,028
    Intangible assets                                25,987,998   26,632,609
    -------------------------------------------------------------------------
                                                     82,514,149   63,995,728
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Accounts payable and accrued liabilities          1,175,661    2,866,655
    Due to Elan Pharma International Limited            678,569      697,743
    Current portion of deferred revenue               1,563,916      131,244
    -------------------------------------------------------------------------
    Total current liabilities                         3,418,146    3,695,642
    Deferred revenue                                  8,420,250    9,885,733
    Leasehold inducement                                 88,598       91,456
    -------------------------------------------------------------------------
    Total liabilities                                11,926,994   13,672,831
    -------------------------------------------------------------------------

    Commitments
    Guarantees
    Subsequent event

    Shareholders' equity
    Share capital
      Common shares                                 158,066,934  133,988,318
      Contributed surplus                             4,487,752    4,487,752
      Stock options                                   1,823,016    1,538,396
    Deficit                                         (93,790,547) (89,691,569)
    -------------------------------------------------------------------------
    Total shareholders' equity                       70,587,155   50,322,897
    -------------------------------------------------------------------------
                                                     82,514,149   63,995,728
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED STATEMENTS OF LOSS AND
    COMPREHENSIVE LOSS
    (Unaudited)

                                                    Three-month  Three-month
                                                         period       period
                                                          ended        ended
                                                      September    September
                                                       30, 2007     30, 2006
                                                              $            $
    -------------------------------------------------------------------------
    REVENUES
    Milestone revenue                                         -      552,650
    Licensing fees                                       32,811       32,811
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                         32,811      585,461
    -------------------------------------------------------------------------

    EXPENSES
    Research and development, net of investment
     tax credits of $61,000 (2007 - $123,000)         2,765,799    2,088,988
    General and administrative                        1,332,181    1,029,393
    Amortization                                        659,318    2,968,306
    Foreign exchange loss (gain)                        (29,030)      12,060
    Loss on disposal of capital assets and
     assets held for sale                                     -       14,099
    -------------------------------------------------------------------------
                                                      4,728,268    6,112,846
    -------------------------------------------------------------------------
    Loss before the following:                       (4,695,457)  (5,527,385)
    Gain on net assets transferred under
     contractual obligation                                   -      400,000
    Interest income, net                                596,479       73,241
    -------------------------------------------------------------------------
    Loss before income taxes                         (4,098,978)  (5,054,144)

    Recovery of future income taxes                           -    2,729,422
    -------------------------------------------------------------------------

    Net loss and other comprehensive loss for
     the period                                      (4,098,978)  (2,324,722)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted net loss and other
     comprehensive loss per common share                 $(0.18)      $(0.13)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
    For the three-month period ended September 30, 2007
    and year ended June 30, 2007
    (Unaudited)


                                         Number of        Share  Contributed
                                            Shares      Capital      Surplus
    -------------------------------------------------------------------------

    Balance, July 1, 2006               17,494,269   99,563,853    4,469,987
    -------------------------------------------------------------------------
    Adjustment to opening deficit
     for change in accounting policy
     related to research inventory               -            -            -
    Stock options exercised                 63,654      601,571            -
    Stock options expired                        -            -       17,765
    Stock-based compensation expense             -            -            -
    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
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Issued pursuant to private
     placement, net                      1,736,107   23,968,567            -
    Stock options exercised                 11,405      110,049            -
    Stock-based compensation expense             -            -            -
    Net loss for the three-month
     period ended September 30, 2007             -            -            -
    -------------------------------------------------------------------------
    Balance, September 30, 2007         22,978,253  158,066,934    4,487,752
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                                       Total
                                                                       Share-
                                             Stock                   holders'
                                           Options      Deficit       Equity
    -------------------------------------------------------------------------

    Balance, July 1, 2006                  774,858  (69,504,180)  35,304,518
    -------------------------------------------------------------------------
    Adjustment to opening deficit
     for change in accounting policy
     related to research inventory               -   (3,225,599)  (3,225,599)
    Stock options exercised               (221,177)           -      380,394
    Stock options expired                  (17,765)           -            -
    Stock-based compensation expense     1,002,480            -    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               1,538,396  (89,691,569)  50,322,897
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Issued pursuant to private
     placement, net                              -            -   23,968,567
    Stock options exercised                (40,170)           -       69,879
    Stock-based compensation expense       324,790            -      324,790
    Net loss for the three-month
     period ended September 30, 2007             -   (4,098,978)  (4,098,978)
    -------------------------------------------------------------------------
    Balance, September 30, 2007          1,823,016  (93,790,547)  70,587,155
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Notice to Readers: Information contained in our press releases should be
considered accurate only as of the date of the release and may be superseded
by more recent information we have disclosed in later press releases, filings
with the OSC, SEC or otherwise. Except for historical information, this press
release may contain forward-looking statements, relating to expectations,
plans or prospects for Transition, including conducting clinical trials. These
statements are based upon the current expectations and beliefs of Transition's
management and are subject to certain risks and uncertainties that could cause
actual results to differ materially from those described in the
forward-looking statements. These risks and uncertainties include factors
beyond Transition's control and the risk factors and other cautionary
statements discussed in Transition's quarterly and annual filings with the
Canadian commissions.





For further information:

For further information: on Transition, visit
www.transitiontherapeutics.com or contact: Dr. Tony Cruz, Chief Executive
Officer, Transition Therapeutics Inc, Phone: (416) 260-7770, x.223,
tcruz@transitiontherapeutics.com; Elie Farah, Chief Financial Officer,
Transition Therapeutics Inc., Phone: (416) 260-7770, x.203,
efarah@transitiontherapeutics.com

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