Akela Pharma first-quarter net loss reduces to $0.4 million

In thousands of US dollars, unless specified otherwise

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 ended March 31, 2010.

Akela's net loss for the three months ending March 31, 2010 was $0.4 million, ($0.01) per share, as compared to $2.6 million, or ($0.12) per share, for the same period in 2009.

"At quarter's end, we have begun to see the positive effect of our corporate restructuring and cost reduction efforts on the company's consolidated results, a long anticipated trend which we plan to continue through the balance of 2010," said Greg McKee, President and Chief Executive Officer.

2010 First Quarter Operational Highlights

- During the first quarter of 2010, Akela 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.

2010 First Quarter Financial Highlights

Total consolidated revenues for the three months ending March 31, 2010 were $2.6 million, including $2.0 million of contract services, as compared to $3.8 million, including $2.8 million of contract services, for the same period during the previous year. A contraction of the economy and limited funding of core research and development projects for corporations and clients within the pharmaceutical and biotech industries has adversely impacted our contract services operations, PharmaForm. During the first quarter of 2010, we began negotiating the sale of this business. The decline from the previous year also reflects a revision in the amortization of deferred revenue from license fees and milestones associated with Fentanyl TAIFUN(R) which took effect October 1, 2009. The result is a delay in revenue recognition based on management's re-assessment of projected commercialization, from May 2012 to June 30, 2016.

Consolidated net loss for the three months ending March 31, 2010 was $0.4 million, ($0.01) per share, as compared to $2.6 million, or ($0.12) per share, for the same period in 2009.

Operating results for the three months ending March 31, 2009 include a $1.5 million provision for repayment of government grants associated with the company's Finnish subsidiary. The prior year was also affected by Akela's 2009 cost reduction plan which resulted in additional charges of charges of $0.7 million for the first quarter of 2009. 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. Excluding these one-time gains and losses, Akela's consolidated net loss for the three months ending March 31, 2010 was $0.4 million, ($0.01) per share, versus $2.1 million, ($0.10) per share, for the same period in 2009.

The company had a cash balance of $0.2 million as of March 31, 2010 compared with $0.1 million as of December 31, 2009.