Akela Pharma reports third quarter 2009 financial and operating results


    
    www.akelapharma.com
    Toronto Stock Exchange Symbol: AKL
    
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<p><location>AUSTIN, TX</location>, <chron>Nov. 16</chron> /CNW Telbec/ - Akela Pharma Inc. (TSX: AKL), and its wholly owned subsidiary, PharmaForm, today announced financial results for the three and nine months ended <chron>September 30, 2009</chron>. The company also highlighted several recent operational achievements:</p>
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    2009 Third Quarter Operational Highlights

    - Akela announced a change in leadership with the appointment of Greg
      McKee to the position of president and chief executive officer and
      Robert Rieder to the position of chairman of the board of directors.
      Both Mr. McKee and Mr. Rieder join the company as a result of Akela's
      acquisition of Nventa Biopharmaceuticals Corporation in May 2009.
    - Akela announced a comprehensive corporate restructuring designed to
      achieve several operational objectives. In an effort to preserve
      resources essential to Akela's Fentanyl TAIFUN(R) program, and to
      optimize the infrastructure required to support its PharmaForm clients,
      the company reduced its head count by 32 employees to a workforce of
      65. Akela's operational headquarters have been centralized in Austin,
      Texas, and several of the company's international operations are in the
      process of being closed.
    - Subsequent to the end of the third quarter, Akela and PharmaForm
      announced the addition of aqueous and solvent spray drying to its
      portfolio of bioavailability enhancement solutions. A widely used
      processing technology, spray drying offers a number of benefits to
      optimize drug formulation, including enhanced bioavailability of poorly
      soluble compounds, higher drug loading and predictable scale-up. In
      addition to the new spray drying capability, PharmaForm's comprehensive
      bioavailability enhancement technologies include hot-melt extrusion,
      solvent-based fluid bed processing and liquid filled hard capsules.
    
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<p>2009 Third Quarter Financial Highlights</p>
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<p>Total consolidated revenues for the third quarter of 2009 were <money>$3.1 million</money>, including <money>$2.2 million</money> of contract services, as compared to <money>$4.2 million</money>, including <money>$3.4 million</money> of contract services, for the same period during the previous year. Revenues during the third quarter of 2009 were adversely impacted by the limited ability of our clients in the pharmaceutical and biotech industry to secure funding. Over the last several months business development has been restructured and expanded. Direct sales and marketing efforts have diversified our client portfolio, fostered collaborative ventures with other pharmaceutical companies and have focused on securing longer term supply arrangements with some of our larger existing and potential customers.</p>
<p>Consolidated net loss for the third quarter of 2009 was <money>$3.2 million</money>, or (<money>$0.10</money>) per share, versus <money>$3.9 million</money>, or (<money>$0.18</money>) per share, for the third quarter of 2008. Results for the current quarter reflect a <money>$0.5 million</money> charge associated with Akela's recently announced corporate restructuring. Excluding this one time charge, Akela's consolidated net loss was <money>$2.7 million</money> or (<money>$0.09</money>) per share.</p>
<p>The company had a cash balance of <money>$0.8 million</money> as of <chron>September 30, 2009</chron> compared with <money>$2.3 million</money> as of <chron>December 31, 2008</chron>.</p>
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<p>About Akela Pharma Inc.:</p>
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<p>Akela Pharma is a drug development company with its lead product, Fentanyl TAIFUN(R), being developed for the treatment of breakthrough cancer pain. Fentanyl TAIFUN is a fast-acting fentanyl formulation delivered using the company's TAIFUN multi-dose dry powder inhaler platform. Akela's pipeline also includes a growth hormone releasing hormone (GHRH), which is being developed for frailty and wasting in chronic renal disease.</p>
<p>Akela's common shares trade on The <location>Toronto</location> Stock Exchange ("TSX") under the symbol "AKL" with 30.9 million shares outstanding.</p>
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<p>About PharmaForm:</p>
<p/>
<p>PharmaForm, a wholly owned subsidiary of Akela Pharma Inc., is a leading specialty contract service provider in the area of pharmaceutical dosage form development and manufacturing, specializing in controlled release and bioavailability enhancement technologies, such as hot melt extrusion, liquid filled capsules, solvent-based fluid bed processing and spray drying. Through its diverse offerings, PharmaForm solutions help pharmaceutical and biotechnology clients reach their development targets, reduce development costs and accelerate time-to-market.</p>
<p>The audit committee of the company has reviewed and approved the contents of this press release. Summary financial statements are attached below. The full financial statements and MD&A for the nine months ended <chron>September 30, 2009</chron> can be found on SEDAR at <a href="http://www.sedar.com">http://www.sedar.com</a>.</p>
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<p>This press release contains statements which may constitute forward-looking information under applicable Canadian securities legislation or forward-looking statements within the meaning of the <location>United States</location> Private Securities Litigation Reform Act of 1955. Such forward-looking statements or information may include financial and other projections as well as statements regarding the company's future plans, objectives, performance, revenues, growth, profits, operating expenses or the company's underlying assumptions. The words "may", "would", "could", "will", "likely", "expect", anticipate", "intend", "plan", "forecast", "project", "estimate" and "believe" or other similar words and phrases may identify forward-looking statements or information. Persons reading this press release are cautioned that such statements or information are only expectations, and that the company's actual future results or performance may be materially different.</p>
<p>Forward-looking statements or information in this press release include, but are not limited to, statements or information concerning our ongoing drug development programs and collaborations as well as the possible receipt of future payments upon achievement of milestones.</p>
<p>Such forward-looking statements or information involve known and unknown risks, uncertainties and other factors that may cause our actual results, events or developments to be materially different from results, events or developments expressed or implied by such forward-looking statements or information. Such factors include, among others, the possibility that risks associated with requirements for approvals by government agencies such as the FDA before products can be tested in clinical trials; the possibility that such government agency approvals will not be obtained in a timely manner or at all or will be conditioned in a manner that would impair our ability to advance development; risks associated with the requirement that a drug candidate be found safe and effective after extensive clinical trials; our dependence on suppliers, collaborative partners and other third parties and the prospects and timing for negotiating supply agreements, corporate collaborations or licensing arrangements; our ability to attract and retain key personnel; and other factors as described in detail in our filings with the Canadian securities regulatory authorities at <a href="http://http:www.sedar.com">http:www.sedar.com</a>.</p>
<p>Assumptions underlying our expectations regarding forward-looking statements or information contained in this press release include, among others, that future clinical trail results will be favorable; that our drug candidate will treat target diseases as intended; that we will raise enough capital, on reasonable terms and in a timely manner; that we will retain our key personnel; that we will obtain the necessary regulatory approvals.</p>
<p>In the event that any of these assumptions prove to be incorrect, or in the event that we are impacted by any of the risks identified above, we may not be able to continue in our business as planned.</p>
<p>For a complete discussion of the assumptions, risks and uncertainties related to our business, you are encouraged to review our filings with Canadian securities regulatory authorities, filed on SEDAR at <a href="http://www.sedar.com">http://www.sedar.com</a>.</p>
<p>All forward-looking statements and information made herein are based on our current expectations as of the date hereof and we disclaim any intention or obligation to revise or update such forward-looking statements and information to reflect subsequent events or circumstances, except as required by law.</p>
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    AKELA PHARMA INC.
    Consolidated Balance Sheets
    (Unaudited)

    September 30, 2009 and 2008
    (in thousands of US dollars)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                 September 30,  December 31,
                                                         2009          2008
    -------------------------------------------------------------------------
    Assets

    Current assets:
      Cash                                        $       807   $     2,345
      Restricted cash                                     600           600
      Accounts receivable                               1,386         6,070
      Prepaid expenses and other current assets           367           346
      -----------------------------------------------------------------------
                                                        3,160         9,361

    Restricted cash and deposits                        1,258         1,258
    Property and equipment                              4,565         5,229
    Intangible assets                                   3,485         4,755
    Goodwill                                            6,567         6,457
    Other assets                                        1,782         1,397
    -------------------------------------------------------------------------
                                                  $    20,817   $    28,457
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Deficiency

    Current liabilities:
      Accounts payable and accrued liabilities    $     6,056   $     7,491
      Deferred revenue                                  3,935         4,515
      Current portion of long-term debt                 1,327         1,311
      -----------------------------------------------------------------------
                                                       11,318        13,317

    Deferred revenue                                   14,074        16,266
    Long-term debt                                      6,561         4,894
    Other long-term liabilities                           697           426

    Shareholders' deficiency:
      Common shares  (unlimited authorized,
       30,890,338 and 21,655,577 common shares
       issued and outstanding with no par value
       at September 30, 2009 and December 31,
       2008, respectively)                             67,544        66,346
      Warrants                                          2,955         2,814
      Additional paid-in capital                        8,313         8,105

      Accumulated other comprehensive income            3,110         3,110
      Deficit                                         (93,755)      (86,821)
      -----------------------------------------------------------------------
                                                      (90,645)      (83,711)

      Total shareholders' deficiency                  (11,833)       (6,446)

    -------------------------------------------------------------------------
                                                  $    20,817   $    28,457
    -------------------------------------------------------------------------


    AKELA PHARMA INC.
    Consolidated Statements of Operations and Comprehensive Loss
    (Unaudited)

    Periods ended September 30, 2009 and 2008
    (in thousands of US dollars, except share and per share data)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                             Three months ended           Nine months ended
                                September 30,                September 30,
                      -------------------------------------------------------
                             2009          2008          2009          2008
    -------------------------------------------------------------------------
    Revenues          $     3,053   $     4,155   $    10,845   $    11,247

    Expenses:
      Direct costs          2,581         2,160         6,803         5,598
      Selling,
       general and
       administrative       1,362         1,679         4,098         5,485
      Research and
       development            343         3,175         2,624         8,629
      Restructuring           527             -           876             -
      Stock-based
       compensation            44           103           201           384
      Depreciation of
       property and
       equipment              394           497         1,122         1,405
      Amortization of
       intangible
       assets                 423           736         1,269         2,160
      Interest on
       long-term debt          31            41           108           112
      Unrealized gain
       on securities
       held for trading       (15)            -           (69)            -
      Foreign exchange
       loss (gain)            461          (352)          629            (2)
      -----------------------------------------------------------------------
                            6,151         8,039        17,661        23,771

    Loss before under
     noted items           (3,098)       (3,884)       (6,816)      (12,524)

    Other income
     (expense):
      Settlement with LRI       -             -         1,664             -
      Provision for
       repayment of
       government grants     (112)            -        (1,782)            -
      -----------------------------------------------------------------------
    Loss before
     income taxes          (3,210)       (3,884)       (6,934)      (12,524)

    Recovery of income
     taxes:
      Current                   -             -             -             -
      Future                    -            46             -           139
      -----------------------------------------------------------------------
                                -            46             -           139

    -------------------------------------------------------------------------
    Net loss and
     comprehensive
     loss             $    (3,210)  $    (3,838)  $    (6,934)  $   (12,385)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted
     net loss per
     share            $     (0.10)  $     (0.18)  $     (0.27)  $     (0.67)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted
     weighted average
     number of shares
     outstanding       30,890,338    21,615,577    26,081,203    18,497,399
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    AKELA PHARMA INC.
    Consolidated Statements of Cash Flows
    (Unaudited)

    Periods ended September 30, 2009 and 2008
    (in thousands of US dollars)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                             Three months ended          Nine months ended
                                September 30,               September 30,
                             -------------------         --------------------
                             2009          2008          2009          2008
    -------------------------------------------------------------------------
    Cash flows from
     operating
     activities:
      Net loss        $    (3,210)  $    (3,838)  $    (6,934)   $  (12,385)
      Adjustments for:
        Depreciation
         of property
         and equipment        394           497         1,122         1,405
        Amortization
         of intangible
         assets               423           736         1,269         2,160
        Settlement
         with LRI               -             -          (101)
        Provision for
         repayment of
         government
         grants                40             -         1,710             -
        Restructuring         275             -           318             -
        Stock-based
         compensation          44           103           201           384
        Unrealized
         foreign
         exchange loss
         (gain)               812          (389)          678           (59)
        Unrealized gain
         on securities
         held for
         trading              (15)            -           (69)            -
        Future income
         taxes                  -           (46)            -          (139)
       Net changes in
        working capital      (495)        2,621           880         2,711
    -------------------------------------------------------------------------
                           (1,732)         (316)         (926)       (5,923)
    Cash flows from
     financing
     activities:
       Repayments of
        long-term debt       (294)         (137)         (620)         (463)
       Proceeds from
        issuance of
        units                   -             -             -        10,200
       Unit issue costs         -             -             -        (1,213)
    -------------------------------------------------------------------------
                             (294)         (137)         (620)        8,524
    Cash flows from
     investing
     activities:
       Acquisition of
        property and
        equipment             122        (1,042)       (1,124)       (3,026)
       Acquisition of
        Nventa                (21)            -         1,132             -
       Restricted
        cash                    -        (1,258)            -        (1,258)
       Addition to
        intangible
        assets                  -          (151)            -          (340)
    -------------------------------------------------------------------------
                              101        (2,451)            8        (4,624)

    Net increase
     (decrease) in
     cash                  (1,925)       (2,904)       (1,538)       (2,023)

    Cash, beginning
     of period              2,732         7,569         2,345         6,688

    -------------------------------------------------------------------------
    Cash, end of
     period            $      807   $     4,665   $       807   $     4,665
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

For further information: For further information: Greg McKee, President and Chief Executive Officer, Akela Pharma, (512)834-0449; Tim Brons (media), Vida Communication, (415) 675-7402, tbrons@vidacommunication.com; Stephanie Diaz (investors), (415) 675-7401, sdiaz@vidacommunication.com

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