Transition Therapeutics Announces Fiscal 2007 Year End Financial Results



    TORONTO, Sept. 12 /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 year ended June 30, 2007.

    Selected Highlights
    -------------------
    During fiscal 2007 and up to the date of this press release, the Company
achieved the following significant milestones:

    
    ELND005/AZD-103 - Alzheimer's Disease:
    --------------------------------------
    -   Clinical Data Results: On August 30, 2007, the Company Announced
        Completion of Multiple Phase I Clinical Studies with Alzheimer's
        Disease Drug Candidate ELND-005/AZD-103. ELND-005/AZD-103 was safe
        and well-tolerated at all doses and dosing regimens examined. There
        were no severe or serious adverse events observed. ELND-005/AZD-103
        was also shown to be orally bio-available, cross the blood-brain
        barrier and achieve levels in the human brain and CSF that were shown
        to be effective in animal models for Alzheimer's disease.
    -   FDA Granted Fast Track Designation for Alzheimer's Disease Drug
        Candidate ELND-005/AZD-103 which is being developed in collaboration
        with Elan Pharma International Limited ("Elan") for the treatment of
        Alzheimer's disease.
    -   Transition and Elan signed a US$200 million global collaboration
        agreement to develop and commercialize the Alzheimer's disease
        product, ELND-005/AZD-103. Under the terms of the agreement,
        Transition has received an upfront payment of US$7.5 million and will
        receive an additional upfront payment of US$7.5 million in calendar
        2007. Dependent upon the successful development, regulatory and
        commercial launch of ELND-005/AZD-103, Transition will be eligible to
        receive milestone payments of up to US$185 million and will share the
        costs of development and profits from commercialization;

    I.N.T.(TM) - Diabetes:
    ----------------------
    -   Clinical Data Results:

        On June 28, 2007, the Company Announced Final Results from the
        Exploratory Phase IIa E1-I.N.T.(TM) Clinical Trial. A 4-Week Therapy
        with E1-I.N.T.(TM) Lead to Sustained Reductions in Blood Glucose
        Levels for 6 Months Post-treatment in Type 2 Diabetes Patients. In
        the E1-I.N.T.(TM) treated group of patients, the mean HbA1c level was
        reduced by 0.94% to 1.21% vs. baseline levels in months 2 to 6 post-
        treatment. In addition to the HbA1c reductions, the data demonstrated
        decreases in fasting blood glucose levels as well as improvements in
        glucose tolerance over a six month period following treatment with
        E1-I.N.T.(TM). These clinical improvements, including HbA1c
        reductions greater than 1% in patients six month post-treatment,
        highlight the potential that E1-I.N.T.(TM) therapy could provide
        patients significant clinical benefit in excess of six months.

        On March 5, 2007, Transition Released Positive Interim Data from E1-
        I.N.T.(TM) Clinical Trials in Type 1 and Type 2 Diabetes. Data from
        the trial in type 2 diabetes patients demonstrated that E1-I.N.T.(TM)
        significantly lowered blood glucose levels for patients using
        metformin with/without thiazolidinediones (TZD). In the type 1
        diabetes study, 6 of 11 (54%) patients responded to E1-I.N.T.(TM)
        therapy, either by decreasing their average daily insulin usage by
        more than 20% or reducing their HbA1c levels by 1.2 to 2%. There were
        no responders among the placebo group.

    -   Transition received the remaining US$750,000 of the US$1 million
        relating to the amended I.N.T.(TM) license agreement between the
        Company and Novo Nordisk A/S ("Novo Nordisk") which restated the
        rights and responsibilities of the parties. Novo Nordisk retains
        exclusive, worldwide rights to the E1-I.N.T.(TM) program and the
        Company regains exclusive ownership and rights to all other I.N.T.
        (TM) programs, including GLP1-I.N.T.(TM);
    -   The Company and the Juvenile Diabetes Research Foundation
        International ("JDRF"), located in the United States, entered into an
        agreement in which the JDRF will provide milestone driven funding of
        up to US$4 million to assist in the expedited development of GLP1-
        I.N.T.(TM) over a two year period.

    Corporate Development
    ---------------------
    -   On August 20, 2007 the Company's common shares began trading on the
        NASDAQ Capital Market under the symbol "TTHI". The Company's common
        shares will continue to trade on the Toronto Stock Exchange in
        addition to the NASDAQ;
    -   On July 9, 2007 the Company completed a consolidation of its issued
        and outstanding common shares on the basis of one (1) post-
        consolidation common share for every nine (9) pre-consolidation
        common shares. The share consolidation was effected to satisfy the
        NASDAQ's listing criteria regarding minimum bid price.
    -   On July 11, 2007 the Company completed a private placement financing
        issuing 1,736,107 common shares at a price of $14.40 per common
        share, raising gross proceeds of approximately $25,000,000 from a
        number of funds managed by Oracle Investment Management Inc., The
        Invus Group LLC, and a large Boston based investment management
        company. The Company has incurred total share issuance costs to date
        of $1,023,596, resulting in net cash proceeds of $23,976,404;
    -   On November 8, 2006 the Company completed a private placement
        financing issuing 2,986,867 common shares at a price of $8.37 per
        common share, raising gross proceeds of $25,000,000 from two funds
        managed by Great Point Partners, LLC. The Company incurred total
        share issuance costs of $1,035,249, resulting in net cash proceeds of
        $23,964,751;
    -   Received the second anniversary payment of $400,000 from the sale of
        its subsidiary, Stem Cell Therapeutics Inc ("SCT");
    -   Extinguished the indebtedness assumed related to the November 2005
        Protana asset purchase.

    Strategic Acquisition
    ---------------------
    -   On June 1, 2007, the Company completed the acquisition of 100% of the
        outstanding common shares of NeuroMedix Inc. ("NeuroMedix"), a
        central nervous system ("CNS") focused biotechnology company.
        NeuroMedix's lead compound, Minozac, has been shown to prevent
        neuronal dysfunction in animal models of Alzheimer's disease and
        traumatic brain injury.
    

    "This year has been marked by the achievement of many significant
milestones in the growth of the company including the clinical advancement of
ELND-005/AZD-103 with our partner Elan, positive clinical data from the Phase
IIa trials with our diabetes product, E1-I.N.T., Transition's move to the
NASDAQ and raising $50 million to strengthen our financial position," said Dr.
Tony Cruz, Chairman and CEO of Transition. "Looking forward, the company is
focused on continued growth through the advancement of its current lead
programs and the introduction of new programs into preclinical and clinical
development."

    Pipeline Review
    ---------------
    ELND-005/AZD-103 for Alzheimer's Disease

    Transition's lead Alzheimer's disease compound ELND-005/AZD-103 is a
disease modifying agent with the potential to both prevent and reduce disease
progression, and improve symptoms such as cognitive function.
    In September 2006, Transition announced a global collaboration with Elan
to develop and commercialize ELND-005/AZD-103.
    In April 2007, Transition announced that the FDA granted Fast Track
designation to the investigational drug candidate ELND-005/AZD-103 which is
being developed in collaboration with Elan. Under the FDA Modernization Act of
1997, Fast Track designation is intended to facilitate the development and
expedite the review of a drug or biologic if it is intended for the treatment
of a serious or life-threatening condition, and it demonstrates the potential
to address unmet medical needs for such a condition.
    On August 30, 2007, the Company announced the completion of Phase I
Clinical Studies with ELND-005/AZD-103. Transition and its development partner
Elan have performed multiple Phase I studies evaluating the safety,
tolerability and pharmacokinetic profile of ELND-005/AZD-103 in healthy
volunteers. Approximately 110 subjects have been exposed to ELND-005/AZD-103
in multiple Phase I studies, including single and multiple ascending dosing;
pharmacokinetic evaluation of levels in the brain; and CSF and plasma studies.
ELND-005/AZD-103 was safe and well-tolerated at all doses and dosing regimens
examined. There were no severe or serious adverse events observed.
ELND-005/AZD-103 was also shown to be orally bio-available, cross the
blood-brain barrier and achieve levels in the human brain and CSF that were
shown to be effective in animal models for Alzheimer's disease. The next steps
in the development of ELND-005/AZD-103 will be submission of data supporting
Phase II studies to the FDA. Transition and Elan anticipate starting Phase II
by the end of calendar 2007 or early 2008.

    I.N.T.(TM) Technology for Diabetes

    E1-I.N.T.(TM)

    Transition's first Islet Neogenesis Therapy product, E1-I.N.T.(TM), a
combination of Transition's epidermal growth factor analogue ("E1") and
gastrin analogue ("G1"), has completed two Phase I clinical trials, in which
it was shown that E1-I.N.T.(TM) is safe to administer. Transition received FDA
clearance to initiate exploratory Phase IIa clinical trials for E1-I.N.T.(TM)
in both type 1 and type 2 diabetics. These two clinical trials evaluated the
efficacy, safety and tolerability of a 28-day course of daily E1-I.N.T.(TM)
treatments with a six-month follow-up.
    In March, 2007, the Company announced positive unblinded interim safety,
tolerability and efficacy data from these exploratory Phase IIa trials for
type 1 and type 2 diabetes patients. In the type 1 diabetes study, 6 of 11
(54%) patients responded to E1-I.N.T.(TM) therapy, either by decreasing their
average daily insulin usage by more than 20% or reducing their HbA1c levels by
1.2 to 2%. There were no responders among the placebo group.
    On June 28, 2007, the Company announced final results from the
exploratory Phase IIa E1-I.N.T.(TM) clinical trial. A 4-week therapy with
E1-I.N.T.(TM) lead to sustained reductions in blood glucose levels for 6
months post-treatment in type 2 diabetes patients. In the E1-I.N.T.(TM)
treated group of patients, the mean HbA1c level was reduced by 0.94% to 1.21%
vs. baseline levels in months 2 to 6 post-treatment. More specifically, the
mean HbA1c level among treated patients was reduced 0.43%, 0.94% (p(less
than)0.05), 1.09% (p(less than)0.05), 1.12% (p(less than)0.05), 1.21% (p(less
than)0.05), and 1.14% in months 1, 2, 3, 4, 5, and 6 post-treatment,
respectively. In contrast, the mean HbA1c levels of the placebo group ranged
from a reduction of 0.1% to an increase of 1.0% over the same period. In
addition to the HbA1c reductions, the data demonstrated decreases in fasting
blood glucose levels as well as improvements in glucose tolerance over a six
month period following treatment with E1-I.N.T.(TM). Trends in increased
insulin levels as measured with an oral glucose tolerance test were also
observed, particularly in patients where the HbA1c levels decreased over 1%
with E1-I.N.T.(TM) therapy. These data are consistent with the increased
glucose control observed in diabetes animal models where a short treatment
with E1-I.N.T.(TM) resulted in a sustained increase in beta cell mass and
function. These clinical improvements, including HbA1c reductions greater than
1% in patients six month post-treatment, highlight the potential that
E1-I.N.T.(TM) therapy could provide patients significant clinical benefit in
excess of six months.
    These clinical data support the potential of gastrin as a therapeutic in
combination with other diabetes therapies. Transition holds the exclusive
rights to a series of proprietary gastrin based combination therapies
including GLP1-I.N.T.(TM) (a combination of gastrin analogue, G1, and a GLP-1
analogue) and combination therapies of gastrins and DPP-IV inhibitors.
Transition will continue the development of these combination therapies into
clinical trials with type 1 and type 2 diabetes patients.

    GLP1- I.N.T.(TM)

    Transition's second Islet Neogenesis Therapy product, GLP1-I.N.T.(TM) is
a combination of one of the leading diabetes drug candidates,
Glucagon-Like-Peptide-1 ("GLP-1"), with G1. The Company will perform
additional safety and tolerability studies in humans in preparation for Phase
II clinical development. The Company has entered into an agreement with the
JDRF to support the clinical development of GLP1-I.N.T.(TM) over the next two
years.

    Sustaining Financial Strength
    -----------------------------
    During the year ended June 30, 2007, the Company strengthened its cash
position by completing an offering for 2,986,867 common shares for net cash
proceeds of $23,964,751. Subsequent to the end of the year, the Company
further strengthened its cash position by completing another private
placement, issuing 1,736,107 common shares resulting in net cash proceeds of
$23,976,404. The Company's cash and cash equivalents and short-term
investments were $34,368,142 at June 30, 2007. The Company currently believes
that it has adequate financial resources for anticipated expenditures until
early fiscal 2011.

    Financial Review
    ----------------
    For the year ended June 30, 2007, Transition recorded a net loss of
$16,961,790 ($0.87 per common share) compared to a net loss of $23,018,090
($1.53 per common share) for the fiscal year ended June 30, 2006.
    Research and development expenses excluding amortization of intangibles
decreased to $9,839,170 for the fiscal year ended June 30, 2007 from
$11,060,455 for the same period in 2006. The decrease of $1,221,285 or 11% was
primarily the result of a reduction in research and development expense
resulting from expense reimbursements from Elan, Novo Nordisk and the JDRF, as
well as a decrease in clinical program expenses relating to the Company's
E1-I.N.T.(TM) and I.E.T. clinical trials which were both completed during
fiscal 2007. The decrease is partially offset by costs incurred to advance
ELND-005/AZD-103 through Phase I clinical trials and for pre-clinical research
studies supporting the GLP1-I.N.T.(TM) program.
    General and administrative expenses increased to $5,317,524 for the
fiscal year ended June 30, 2007 from $3,140,800 for the fiscal year ended
June 30, 2006. This increase of $2,176,724 or 69% primarily resulted from
increased professional fees associated with the Nasdaq listing, the Elan
co-development agreement, expenses relating to the amalgamation of various
subsidiaries, increased corporate development costs, option expense, and an
increase in salaries incurred to strengthen the finance and management teams.
    Amortization for the year ended June 30, 2007 decreased by $2,740,015 or
29% to $6,823,259 as compared to $9,563,274 for the year ended June 30, 2006.
The decrease in amortization expense is primarily due to the Waratah
technology being fully amortized early in the third quarter of fiscal 2007.
This decrease was partially offset by the full year impact of the amortization
relating to the products, patents and technologies acquired from ENI as well
as the amortization of the NeuroMedix technology acquired May 9, 2007.
    Interest income, net for the fiscal year ended June 30, 2007, was
$1,226,099 as compared to $350,380 for the fiscal year ended June 30, 2006.
The increase in interest income, net of $875,719 primarily resulted from
increased cash balances due to the November 2006 private placement and the
upfront payment received from Elan.
    Recovery of future income taxes for the year ended June 30, 2007
increased by $1,631,901 or 149% to a recovery of $2,729,422 as compared to a
recovery of $1,097,521 for the year ended June 30, 2006. The majority of the
increase in recovery of future income taxes for fiscal 2007 is due to the
recognition of future income tax assets resulting from the amalgamation of
Ellipsis Neurotherapeutics Inc., 1255205 Ontario Inc., 1255206 Ontario Inc.
and Waratah Pharmaceuticals Inc. As a result of the amalgamation, the Company
has adjusted the valuation allowance on future income tax assets and has
recognized a future income tax asset to the extent of offsetting future income
tax liabilities of the amalgamated entity. Additional future income tax
recovery also arose from changes in temporary differences.

    About Transition
    ----------------
    Transition is a biopharmaceutical company, developing novel therapeutics
for disease indications with large markets. Transition's lead products include
ELND-005/AZD-103 for the treatment of Alzheimer's disease and regenerative
therapies E1-I.N.T.(TM) and GLP1-I.N.T.(TM) for the treatment of diabetes.
Transition has an emerging pipeline of preclinical drug candidates developed
using its proprietary drug discovery engine. Transition's shares are listed on
the NASDAQ under the symbol "TTHI" and the Toronto Stock Exchange under the
symbol "TTH". For additional information about the company, please visit
www.transitiontherapeutics.com.

    Financial Statements to Follow:

    
                         CONSOLIDATED BALANCE SHEETS

    As at June 30
    (in Canadian dollars)
                                                       2007          2006
                                                         $             $
    -------------------------------------------------------------------------

    ASSETS
    Current
    Cash and cash equivalents                        1,377,387     4,074,582
    Short-term investments                          32,990,755    10,930,855
    Receivables                                        741,607       371,663
    Investment tax credits receivable                  559,405     1,176,066
    Research inventory                                       -       587,501
    Prepaid expenses and deposits                      519,937       469,956
    Assets held for sale                                     -       381,948
    -------------------------------------------------------------------------
    Total current assets                            36,189,091    17,992,571
    Long-term research inventory                             -     2,638,098
    Capital assets, net                              1,174,028     1,596,643
    Intangible assets                               26,632,609    21,900,712
    -------------------------------------------------------------------------
                                                    63,995,728    44,128,024
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Accounts payable and accrued liabilities         2,866,655     3,396,013
    Due to Elan Pharma International Limited           697,743             -
    Current portion of long-term debt                        -       292,124
    Current portion of deferred revenue and
     advances                                          131,244       657,541
    Current portion of obligation under capital
     leases                                                  -        18,390
    -------------------------------------------------------------------------
    Total current liabilities                        3,695,642     4,364,068
    Deferred revenue and advances                    9,885,733     1,596,727
    Obligation under capital leases                          -        30,401
    Leasehold inducement                                91,456       102,888
    Future tax liability                                     -     2,729,422
    -------------------------------------------------------------------------
    Total liabilities                               13,672,831     8,823,506
    -------------------------------------------------------------------------
    Commitments
    Guarantees
    Subsequent events
    Shareholders' equity
    Share capital
      Common shares                                133,988,318    99,563,853
      Contributed surplus                            4,487,752     4,469,987
      Stock options                                  1,538,396       774,858
    Deficit                                        (89,691,569)  (69,504,180)
    -------------------------------------------------------------------------
    Total shareholders' equity                      50,322,897    35,304,518
    -------------------------------------------------------------------------
                                                    63,995,728    44,128,024
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                 CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT

    Years ended June 30
    (in Canadian dollars)
                                                       2007          2006
                                                         $             $
    -------------------------------------------------------------------------

    REVENUES
    Milestone revenue                                  552,650             -
    Upfront and licensing fees                         131,244       131,244
    Management fees from ENI                                 -       239,930
    -------------------------------------------------------------------------
                                                       683,894       371,174
    -------------------------------------------------------------------------
    EXPENSES
    Research and development                         9,839,170    11,060,455
    General and administrative                       5,317,524     3,140,800
    Amortization                                     6,823,259     9,563,274
    Foreign exchange loss (gain)                         6,875       (82,043)
    Loss on disposal of capital assets and assets
     held for sale                                      14,377        58,034
    -------------------------------------------------------------------------
                                                    22,001,205    23,740,520
    -------------------------------------------------------------------------
    Loss before the following                      (21,317,311)  (23,369,346)
    Interest income, net                             1,226,099       350,380
    Equity loss in affiliate                                 -      (477,723)
    Gain (losses) of company transferred under
     contractual arrangement                           400,000      (618,922)
    -------------------------------------------------------------------------
    Loss before income taxes                       (19,691,212)  (24,115,611)
    Future income taxes recovery                     2,729,422     1,097,521
    -------------------------------------------------------------------------
    Net loss for the year                          (16,961,790)  (23,018,090)
    -------------------------------------------------------------------------

    Deficit, beginning of year,
    As originally stated                           (69,504,180)  (46,486,090)
    Adjustment for change in accounting
    policy related to research inventory            (3,225,599)            -
    -------------------------------------------------------------------------
    Deficit, beginning of year, as restated        (72,729,779)  (46,486,090)
    -------------------------------------------------------------------------
    Deficit, end of year                           (89,691,569)  (69,504,180)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted net loss per common share         $(0.87)       $(1.53)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



               CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

    For the years ended June 30, 2007 and 2006

    (in Canadian dollars)
                            Number of        Share  Contributed        Stock
                               Shares      Capital      Surplus      Options
    -------------------------------------------------------------------------
                                                 $            $            $

    Balance, July 1, 2005  13,344,007   77,254,351    2,811,966      743,628
    Share issued for
     purchased assets of
     Protana, net             222,222    1,184,569            -            -
    Issued pursuant to
     bought deal
     financing, net         1,730,556    9,648,600            -            -
    Issued on exercise of
     Exchange Rights          137,733    1,009,437            -            -
    Exchange Rights
     expired unexercised            -            -      242,500            -
    Expiry of share
     purchase warrants              -            -      486,615            -
    Issued on acquisition
     of ENI, net            2,109,479   10,727,317            -            -
    Issued to acquire
     patent portfolio          46,055      286,000            -            -
    Cancellation of shares
     issued to ENI            (98,328)    (559,475)     559,475            -
    Stock options exercised     2,545       13,054            -       (5,038)
    Stock options expired           -            -      369,431     (369,431)
    Stock-based compensation
     expense                        -            -            -      405,699
    Net loss for the year           -            -            -            -
    -------------------------------------------------------------------------
    Balance, June 30,
     2006                  17,494,269   99,563,853    4,469,987      774,858
    -------------------------------------------------------------------------
    Adjustment to opening
     retained earnings for
     change in accounting
     policy related to
     research inventory             -            -            -            -
    Stock options exercised    63,654      601,571            -     (221,177)
    Stock options expired           -            -       17,765      (17,765)
    Stock-based
     compensation expense           -            -            -    1,002,480
    Issued pursuant to
     private placement,
     net                    2,986,867   23,964,751            -            -
    Issued on acquisition
     of NeuroMedix Inc.,
     net                      685,951    9,858,143            -            -
    Net loss for the year           -            -            -            -
    -------------------------------------------------------------------------
    Balance, June 30,
     2007                  21,230,741  133,988,318    4,487,752    1,538,396
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    For the years ended June 30, 2007 and 2006

    (in Canadian dollars)
                                                                      Share-
                                          Exchange        Total     holders'
                             Warrants       Rights      Deficit       Equity
    -------------------------------------------------------------------------
                                                 $            $            $

    Balance, July 1, 2005     486,615      388,000  (46,486,090)  35,198,470
    Share issued for
     purchased assets of
     Protana, net                   -            -            -    1,184,569
    Issued pursuant to
     bought deal
     financing, net                 -            -            -    9,648,600
    Issued on exercise of
     Exchange Rights                -     (145,500)           -      863,937
    Exchange Rights
     expired unexercised            -     (242,500)           -            -
    Expiry of share
     purchase warrants       (486,615)           -            -            -
    Issued on acquisition
     of ENI, net                    -            -            -   10,727,317
    Issued to acquire
     patent portfolio               -            -            -      286,000
    Cancellation of shares
     issued to ENI                  -            -            -            -
    Stock options exercised         -            -            -        8,016
    Stock options expired           -            -            -            -
    Stock-based compensation
     expense                        -            -            -      405,699
    Net loss for the year           -            -  (23,018,090) (23,018,090)
    -------------------------------------------------------------------------
    Balance, June 30,
     2006                           -            -  (69,504,180)  35,304,518
    -------------------------------------------------------------------------
    Adjustment to opening
     retained earnings for
     change in accounting
     policy related to
     research inventory             -            -   (3,225,599)  (3,225,599)
    Stock options exercised         -            -            -      380,394
    Stock options expired           -            -            -            -
    Stock-based
     compensation expense           -            -            -    1,002,480
    Issued pursuant to
     private placement,
     net                            -            -            -   23,964,751
    Issued on acquisition
     of NeuroMedix Inc.,
     net                            -            -            -    9,858,143
    Net loss for the year           -            -  (16,961,790) (16,961,790)
    -------------------------------------------------------------------------
    Balance, June 30,
     2007                           -            -  (89,691,569)  50,322,897
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                    CONSOLIDATED STATEMENTS OF CASH FLOWS

    Years ended June 30
    (in Canadian dollars)
                                                       2007          2006
                                                         $             $
    -------------------------------------------------------------------------

    OPERATING ACTIVITIES
    Net loss for the year                          (16,961,790)  (23,018,090)
    Add (deduct) items not involving cash:
      Amortization of:
        capital assets                                 317,780       387,274
        intangible assets                            6,748,787     9,477,808
        leasehold inducement                           (11,432)            -
      Leasehold inducement                                   -       102,888
      Write-off of research inventory                  387,667       296,687
      Recovery of future income taxes               (2,729,422)   (1,097,521)
      Stock-based compensation expense               1,002,480       405,699
      Equity loss in ENI                                     -       477,723
      (Gain) losses of company transferred under
       contractual arrangement                        (400,000)      618,922
      Loss on disposal of capital assets and assets
       held for sale                                    45,073        58,034
      Management fees from ENI                               -      (239,930)
      Foreign exchange loss (gain)                       8,583       (36,012)
    Net change in operating assets and liabilities   6,792,452       232,953
    -------------------------------------------------------------------------
    Cash used in operating activities               (4,799,822)  (12,333,565)
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES
    Maturity of short-term investments             108,271,169    21,034,531
    Purchase of short-term investments            (130,361,807)  (17,781,638)
    Proceeds from disposal of short-term
     investments                                        30,738             -
    Acquisition of Protana assets                            -    (3,109,756)
    Proceeds from assets held for sale                 265,401     2,118,220
    Investment in ENI                                        -      (381,062)
    Purchase of capital assets                         (49,526)     (234,919)
    Purchase of intangible assets                     (345,425)
    Proceeds on disposal of capital assets              60,754         3,573
    Net cash received under contractual arrangement    400,000       475,000
    Cash received on acquisition of ENI                      -     1,040,471
    ENI acquisition costs                                    -      (253,296)
    Cash received on acquisition of NMX                109,730             -
    NMX acquisition costs                             (322,842)            -
    -------------------------------------------------------------------------
    Cash provided by (used in) investing
     activities                                    (21,941,808)    2,911,124
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
    Proceeds from bought deal financing, net                 -     9,648,600
    Repayment of long term debt                       (300,707)   (2,740,795)
    Repayment of obligation under capital leases             -       (17,019)
    Proceeds from issuance of common shares, net    24,345,142         8,016
    -------------------------------------------------------------------------
    Cash provided by (used in) financing
     activities                                     24,044,435     6,898,802
    -------------------------------------------------------------------------
    Net increase (decrease) in cash and cash
     equivalents during the period                  (2,697,195)   (2,523,639)
    Cash and cash equivalents, beginning of
     period                                          4,074,582     6,598,221
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period         1,377,387     4,074,582
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    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

Organization Profile

Transition Therapeutics Inc.

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