Akela Pharma fourth-quarter consolidated net loss increases to $14.1M

Jun 1 2010

Akela Pharma, Inc. ("Akela"), (TSX: AKL), a leader in the development of therapeutics for the treatment of pain, and the company's wholly owned subsidiary, PharmaForm, today announced its financial results for the three months and year ended December 31, 2009.

During the past year, the Company has achieved the following: - On February 9, 2009 we announced the implementation of measures to cut costs and preserve cash. The reduction in costs targeted the Pharmaceutical Development programs as well as, PharmaForm. The measures were taken to allow sufficient time for the completion of ongoing financing and M&A efforts. - On March 10, 2009, the Company agreed to accept a payment of $2,000 Cdn ($1,563 US) and 500,000 common share purchase warrants with an exercise price of $0.50 Cdn ($0.39 US) from LAB Research Inc. (LRI) as full and final settlement of its lawsuit relating to a failed Fentanyl TAIFUN(R) toxicology study. - On May 21, 2009, we acquired all of the issued and outstanding securities of Nventa Biopharmaceuticals Corporation ("Nventa") by way of plan of arrangement (the "Arrangement") under the Business Corporations Act (British Columbia). Bob Rieder and Greg McKee were appointed to our Board of Directors. - On June 26, a new Board was elected consisting of Gordon Busenbark, Michael Lagueux, Raj Maheshwari, Greg McKee, Bob Rieder, Robert Williams - On September 2, 2009, 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. - On September 3, 2009, we announced a comprehensive corporate restructuring designed to achieve several operational objectives. As part of its efforts to preserve its ability to execute on its development strategy for Fentanyl TAIFUN(R) 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. Further, Akela announced the closure of its international operations and the centralization of the Company's operational headquarters in Austin, Texas. - During the first quarter of 2010, we began negotiating the sale of our contract service operations, PharmaForm. Proceeds from this disposition, will be dedicated to the reduction of the Company's outstanding liabilities. Remaining funds will be utilized in the further advancement of Fentanyl TAIFUN(R). - On February 4, 2010 Akela announced the outcomes of two legal cases involving former employees. In Michael Crowley v. Formulation Technologies, LLC d/b/a PharmaForm, the arbitrator found in favour of Mr. Crowley. As a result, Mr. Crowley has been awarded $325 for payment under Mr. Crowley's employment agreement, commissions and vacation accruals earned over his employment period, partial payment of Mr. Crowley's legal fees and Mr. Crowley's out-of-pocket expenses. - On February 4, 2010 Akela also announced in the matter of Stephen Lermer v. Akela Pharma Inc. and Formulation Technologies, LLC d/b/a PharmaForm, a jury sided with Mr. Lermer and awarded him $189 in severance pay and approximately $47 in vacation pay earned during the period which he was employed by the company. The judgment was solely against Akela Pharma. On May 11, 2010, Akela announced the The District Court of Travis County, Texas issued an Order Denying Plaintiff's Motion for Judgment and issued a final judgment in the legal case involving former employee Stephen Lermer. The May 11, 2010 ruling reduced the judgment and previous award by $189 disallowing the claim of severance to Mr. Lermer. - On February 11, 2010, Akela achieved a near term development milestone in the pharmaceutical development of the Fentanyl TAIFUN(R) inhaler (the "Product"). The milestone achievement was related to Akela's Fentanyl TAIFUN(R) license and co-development agreement with Teikoku Seiyaku Co. Ltd which was amended in June 2009 in order to advance certain milestone payments to support the continued development of the Product. - On April, 16, 2010 Akela announced that PharmaForm reached agreement with HEP Davis Spring, L.P. to terminate its lease for a planned new laboratory facility located at 9825 Spectrum Drive, Austin, Texas, eliminating $14,481 in future lease payment obligations to the Company. As part of the agreement, Akela released $937 of funds from an associated cash secured letter-of-credit. Akela also undertook to issue 1,250,000 common shares and assumed an obligation to pay HEP Davis Spring, L.P. in monthly instalments of $10 through March 2020.

Total consolidated revenues for the three months ended December 31, 2009 were $3.0 million, including $2.4 million of contract services, as compared to $3.5 million, including $2.9 million of contract services, for the same period during the previous year. For the year ended December 31, 2009, total consolidated revenues were $13.9 million, including $10.5 million of contract services, as compared to $14.8 million, including $12.3 million of contract services, for 2008. During 2009 revenues were adversely impacted by the continued weakness of the global economy and limited funding of core research and development projects for corporations and clients within the pharmaceutical and biotech industries.

Consolidated net loss for the three and twelve months ended December 31, 2009 was $14.1 million, ($0.46) per share, and $21 million, ($0.77) per share, versus $13.6 million, ($0.63) per share, and $26.0 million, ($1.35) per share, for the same respective periods in 2008.

Operating results for the three and twelve months ended December 31, 2009 include $10.5 million in one time charges resulting from an impairment of goodwill and intangibles and the termination of our lease with HEP Davis Spring L.P.. The Company's 2009 cost reduction plan resulted in additional charges of charges of $0.3 million and $1.1 million for the three and twelve months ended December 31, 2009, respectively. The twelve months ended December 31, 2009 was also affected by a $1.5 million provision for repayment of government grants associated with the Company's Finnish subsidiary. These charges were partially offset by a $1.7 million gain in March 2009 resulting from the settlement of Akela's lawsuit against LRI relating to a failed Fentanyl TAIFUN(R) toxicology study. The three and twelve months ended December 31, 2008 includes $9.6 million in charges associated with the impairment of intangibles and other assets associated with Akela's product programs. Excluding these one time gains and losses, Akela's consolidated net loss for the three and twelve months ended December 31, 2009 was $2.1 million, ($0.07) per share, and $8.4 million, ($0.31) per share, versus $4.9 million, ($0.23) per share, and $17.5 million, ($0.91) per share, for the same respective periods in 2008.

The Company had a cash balance of $0.1 million as of December 31, 2009 compared with $2.3 million as of December 31, 2008.

FOURTH DEFAULT STATUS REPORT AND MANAGEMENT CEASE TRADE ORDER

Further to the filing of its annual financial statements for the year ended December 31, 2009, Akela wishes to provide its fourth bi-weekly Default Status Report under National Policy 12-203 - Cease Trade Orders for Continuous Disclosure Defaults ("NP 12-203") as Akela remains in default of filing its interim financial statements for the 3-month period ended March 31, 2010.

As a result, the management cease trade order prohibiting certain directors, officers and insiders of Akela from trading in securities of Akela will remain outstanding as long as the interim financial statements, CEO and CFO certifications and related MD&A and AIF are not filed (the "Management Cease Trade Order").

Akela is diligently working on finalizing its interim financial statements and anticipates that the filing of same will occur on or around June 15, 2010.

Akela reports that, since announcing the Management Cease Order of April 6, 2010 and except for the filing of its annual financial statement described above, there have not been any material changes to the information contained therein; nor any failure by Akela to fulfill its intentions as stated therein with respect to satisfying the provisions of the alternative information guidelines, and there are no additional defaults or anticipated defaults subsequent to such announcement. Further, there have been no additional material changes respecting Akela and its affairs. Akela intends to file, if required, its next Default Status Report by June 15, 2010.

Source: AKELA PHARMA INC.