Transition Therapeutics Announces Second Quarter Fiscal 2008 Financial Results



    TORONTO, Feb. 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
including Alzheimer's Disease and Diabetes, today announced its financial
results for the quarter ended December 31, 2007.

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

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

    
    ELND005 (AZD-103) - Alzheimer's Disease:

    -   On January 22, 2008, the Company received a US$5,000,000 milestone
        payment from Elan. The milestone payment was triggered by the
        initiation of a Phase II clinical study of Alzheimer's disease drug
        candidate, ELND005 (AZD-103) on December 21, 2007;

    -   On December 21, 2007, Elan and Transition Dose First Patient in
        Phase II Clinical Study of ELND005 (AZD-103) in Alzheimer's Disease.
        The study is a randomized, double-blind, placebo-controlled, dose-
        ranging, safety and efficacy study in approximately 340 patients with
        mild to moderate Alzheimer's disease. Approximately 65 sites in North
        America are expected to participate in the program. The study will
        evaluate both cognitive and functional endpoints and each patient's
        participation is planned to last approximately 18 months;

    -   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 Elan.

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

    -   On November 5, 2007, the Company Announced an Update on the Clinical
        Development and Partnership activities for its diabetes program.
        Following negotiations, Novo Nordisk and Transition were not able to
        come to agreement for an exclusive license to all of the Company's
        diabetes programs. Accordingly, Transition terminated the agreement
        between the companies, returning to Transition all rights held by
        Novo Nordisk, relating to E1-I.N.T. Transition is continuing 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 Developments:

    -   On January 7, 2008 the Company's common shares were approved for
        listing and commenced trading on the NASDAQ Global Market. Prior to
        this change, the Company's common shares were listed on the NASDAQ
        Capital Market since August 20, 2007 under the symbol "TTHI". The
        Company's common shares continue to trade on the Toronto Stock
        Exchange in addition to the NASDAQ;

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

    ELND005 (AZD-103) for Alzheimer's Disease

    Transition's lead Alzheimer's disease compound ELND005 (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 ELND005 (AZD-103). In April 2007, Transition
announced that the FDA granted Fast Track designation to the investigational
drug candidate ELND005 (AZD-103).
    On August 30, 2007, the Company announced the completion of Phase I
clinical studies with ELND005 (AZD-103). Transition and its development
partner Elan have performed multiple Phase I studies evaluating the safety,
tolerability and pharmacokinetic profile of ELND005 (AZD-103) in healthy
volunteers. Approximately 110 subjects have been exposed to ELND005 (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.
ELND005 (AZD-103) was safe and well-tolerated at all doses and dosing regimens
examined. There were no severe or serious adverse events observed. ELND005
(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.
    On December 21, 2007, Elan and Transition announced that the first
patient had been dosed in a Phase II clinical study of ELND005 (AZD-103) in
patients with Alzheimer's disease. The study is a randomized, double-blind,
placebo-controlled, dose-ranging, safety and efficacy study in approximately
340 patients with mild to moderate Alzheimer's disease. Approximately 65 sites
in North America are expected to participate in the program. The study will
evaluate both cognitive and functional endpoints, and each patient's
participation is planned to last approximately 18 months.
    In connection with the initiation of the Phase II clinical study, the
Company issued the former shareholders of ENI the first contingent
consideration milestone in the form of 174,123 Transition common shares at a
price of $10.86 per share. The shares issued had a fair value of $1,890,976
which represents additional consideration paid to acquire the technology,
products and patents from ENI and accordingly, has been capitalized as
intangible assets and will be amortized over the remaining useful life of the
technology, products and patents.

    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. Transition expects to initiate the following Phase II
clinical studies evaluating TT-223 in type 2 diabetes:

    
    -   A 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 calendar 2008;
    -   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-month period ended December 31, 2007, the Company recorded
a net loss of $1,552,208 ($0.07 per common share) compared to a net loss of
$4,858,107 ($0.25 per common share) for the three-month period ended
December 31, 2006.
    For the six-month period ended December 31, 2007, the Company recorded a
net loss of $5,651,186 ($0.25 per common share) compared to a net loss of
$7,182,830 ($0.39 per common share) for the six-month period ended
December 31, 2006.
    The decrease in net loss of $3,305,899 or 68% for the three-month period
ended December 31, 2007 and $1,531,644 or 21% for the six-month period ended
December 31, 2007 is largely due to decreased amortization expense resulting
from the Waratah technology being fully amortized in the third quarter of
fiscal 2007, recognition of the remaining unamortized upfront fee from Novo,
increased interest income resulting from higher cash and held-to-maturity
investment balances and the receipt of the second milestone payment from SCT.
For the three-month period ended December 31, 2007, the decrease in net loss
was partially offset by increases in research and development expense, and
general and administrative expenses. For the six-month period ended
December 31, 2007, the decrease in net loss was offset by the future income
tax recovery of $2,729,422 that was recognized in the first quarter of fiscal
2007, and was also offset by increases in research and development and general
expense and general and administrative expenses.

    Revenues

    Licensing fees increased to $1,563,911 for the three-month period ended
December 31, 2007 from $32,811 for the three-month period ended December 31,
2006. For the six-month period ended December 31, 2007, licensing fees
increased to $1,596,722 from $65,622 for the same period in fiscal 2007. These
increases are due to the fact that the licensing agreement with Novo Nordisk
was terminated during the three-month period ending December 31, 2007 and all
remaining deferred amounts have been recognized as licensing fee revenue
during the period.

    Research and Development

    Research and development expenses increased to $2,480,123 for the
three-month period ended December 31, 2007 from $1,680,714 for the three-month
period ended December 31, 2006. For the six-month period ended December 31,
2007, research and development expenses increased to $5,245,922 from
$3,769,702 for the same period in fiscal 2007. These increases are primarily
the result of an increase in clinical development costs related to ELND005
(AZD-103) and TT-223. The increase was also amplified in the three and six
month periods ended December 31, 2007 as the comparative prior year period
included the reimbursement by Novo Nordisk of E1-I.N.T.(TM) development costs
in the amount of $201,000 and $703,293 for the three-month and six-month
periods respectively resulting from the amended Novo Nordisk agreement. These
increases were partially offset by decreases in clinical program expenses that
related to the Company's completed 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 $1,506,199 for the
three-month period ended December 31, 2007 from $1,051,963 for the three-month
period ended December 31, 2006. For the six-month period ended December 31,
2007, general and administrative expenses increased to $2,838,380 from
$2,081,356 for the same period in fiscal 2007. These increases 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 for the three-month period ended December 31, 2007, was
$663,906 as compared to $2,465,726 for the three-month period ended
December 31, 2006. For the six-month period ended December 31, 2007,
amortization was $1,323,224 as compared to $5,434,033 for the same period in
fiscal 2007. These decreases primarily resulted from the Waratah technology
being fully amortized during the third quarter of 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 remained unchanged from Nil for the
three-month periods ended December 31, 2007 and 2006. For the six-month period
ended December 31, 2007, recovery of future income taxes was Nil compared to
$2,729,422 for the same period in fiscal 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.

    Interest Income, net

    Interest income for the three-month period ended December 31, 2007, was
$692,552 as compared to $331,423 for the same period in fiscal 2007. For the
six-month period ended December 31, 2007, interest income was $1,289,031 as
compared to $404,664 for the same period in fiscal 2007. These increases
primarily resulted from increased cash balances due to the November 2006 and
July 2007 private placements and the upfront payments received from Elan.

    SCT Anniversary Payment

    During the three month period ending December 31, 2007, the Company
received the third anniversary payment of $650,000 in cash which has been
recorded as a gain in the statement of loss and comprehensive loss. As of
December 31, 2007, total payments received amount to $1,850,000. The final
payment of $1,650,000 is 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
ELND005 (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 in Canadian Dollars)
                                                    December 31,     June 30,
                                                           2007         2007
                                                              $            $
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash and cash equivalents                        13,969,176    1,377,387
    Held-to-maturity investments                     45,607,212   33,414,383
    Receivables                                          85,131      317,979
    Investment tax credits receivable                   638,369      559,405
    Prepaid expenses and deposits                       458,656      519,937
    -------------------------------------------------------------------------
    Total current assets                             60,758,544   36,189,091
    Capital assets, net                               1,065,052    1,174,028
    Intangible assets                                27,230,501   26,632,609
    -------------------------------------------------------------------------
                                                     89,054,097   63,995,728
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Accounts payable and accrued liabilities          1,242,303    2,866,655
    Due to Elan Pharma International Limited            728,446      697,743
    Current portion of deferred revenue                       -      131,244
    -------------------------------------------------------------------------
    Total current liabilities                         1,970,749    3,695,642
    Deferred revenue                                 15,704,255    9,885,733
    Leasehold inducement                                 85,740       91,456
    -------------------------------------------------------------------------
    Total liabilities                                17,760,744   13,672,831
    -------------------------------------------------------------------------

    Shareholders' equity
    Share capital
      Common shares                                 159,968,380  133,988,318
      Contributed surplus                             4,487,752    4,487,752
      Stock options                                   2,179,976    1,538,396
    Deficit                                         (95,342,755) (89,691,569)
    -------------------------------------------------------------------------
    Total shareholders' equity                       71,293,353   50,322,897
    -------------------------------------------------------------------------
                                                     89,054,097   63,995,728
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
    (Unaudited in Canadian Dollars)

                         Six-month     Six-month   Three-month   Three-month
                      period ended  period ended  period ended  period ended
                       December 31,  December 31,  December 31,  December 31,
                              2007          2006          2007          2006
                                 $             $             $             $
    -------------------------------------------------------------------------
    REVENUES
    Milestone revenue            -       552,650             -             -
    Licensing fees       1,596,722        65,622     1,563,911        32,811
    -------------------------------------------------------------------------
                         1,596,722       618,272     1,563,911        32,811
    -------------------------------------------------------------------------

    EXPENSES
    Research and
     development         5,245,922     3,769,702     2,480,123     1,680,714
    General and
     administrative      2,838,380     2,081,356     1,506,199     1,051,963
    Amortization         1,323,224     5,434,033       663,906     2,465,726
    Foreign exchange
     loss (gain)          (220,587)        8,483      (191,557)       (3,577)
    Loss on disposal of
     capital assets and
     assets held for sale        -        41,614             -        27,515
    -------------------------------------------------------------------------
                         9,186,939    11,335,188     4,458,671     5,222,341
    -------------------------------------------------------------------------
    Loss before the
     following          (7,590,217)  (10,716,916)   (2,894,760)   (5,189,530)
    Interest income,
     net                 1,289,031       404,664       692,552       331,423
    Gain of company
     transferred under
     contractual
     arrangement           650,000       400,000       650,000             -
    -------------------------------------------------------------------------
    Loss before
     income taxes       (5,651,186)   (9,912,252)   (1,552,208)   (4,858,107)
    Recovery of future
     income taxes                -     2,729,422             -             -
    -------------------------------------------------------------------------
    Net loss and
     comprehensive loss
     for the period     (5,651,186)   (7,182,830)   (1,552,208)   (4,858,107)
    -------------------------------------------------------------------------

    Basic and diluted
     net loss per
     common share           $(0.25)       $(0.39)       $(0.07)       $(0.25)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
    For the six-month period ended December 31, 2007 and year ended June 30,
    2007 (Unaudited in Canadian Dollars)


                                     Number of          Share    Contributed
                                        Shares        Capital        Surplus
    -------------------------------------------------------------------------
                                            No.             $              $

    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              -
    Issued pursuant to ENI
     Shareholder's Agreement           174,123      1,890,976              -
    Stock options exercised             14,294        120,519              -
    Stock-based compensation expense         -              -              -
    Net loss for the three-month
     period ended December 31, 2007          -              -              -
    -------------------------------------------------------------------------
    Balance, December 31, 2007      23,155,265    159,968,380      4,487,752
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                                       Total
                                         Stock                  Shareholders'
                                       Options        Defecit         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
    Issued pursuant to ENI
     Shareholder's Agreement                 -              -      1,890,976
    Stock options exercised            (42,590)             -         77,929
    Stock-based compensation expense   684,170              -        684,170
    Net loss for the three-month
     period ended December 31, 2007          -     (5,651,186)    (5,651,186)
    -------------------------------------------------------------------------
    Balance, December 31, 2007       2,179,976    (95,342,755)    71,293,353
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    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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