Bellus Health reports net loss of $5.8M for second-quarter vs. net income of $14.27M for previous year

BELLUS HEALTH INC.Aug 9 2010

Announcement of new initiatives to reduce burn rate

BELLUS Health Inc. (TSX: BLU) ("BELLUS Health" or the "Company") reported today its financial results for the second quarter ended June 30, 2010. The Company also announced new initiatives to reduce its annual expenditures ("burn rate") by focusing its efforts on existing products and on supporting current and future strategic partnerships. All currency figures reported in this press release, including comparative figures, are in Canadian dollars, unless otherwise specified.

Financial Results

For the three-month period ended June 30, 2010, the net loss amounted to $5,816,000 ($0.03 per share), compared to a net income of $14,270,000 ($0.11 per share) for the corresponding period the previous year. For the six-month period ended June 30, 2010, the net loss amounted to $10,009,000 ($0.05 per share), compared to net income of $1,925,000 ($0.02 per share) for the same period last year.

The significant variation between the 2010 net loss and the 2009 net income is attributable to unusual items recorded in the second quarter of 2009. During that quarter, the Company recorded a gain on extinguishment of debt in the amount of $19,173,000 resulting from amendments to the terms, in April 2009, of the convertible notes issued in 2006 and 2007, as well as a net credit for vacant space in the amount of $2,474,000 in relation to the vacant portion of the Company's premises.

As at June 30, 2010, the Company had available cash and cash equivalents of $11,770,000, compared to $14,017,000 at December 31, 2009. This excludes US$5 million that the Company will receive on October 29th, 2010 in connection with the KIACTA(TM) Asset Purchase and License Agreement. The decrease in the six-month period is primarily due to funds used in operating activities, offset by the first instalment of US$5 million received in April 2010 pursuant to the KIACTA(TM) Asset Purchase and License Agreement.

The Company's consolidated financial statements and accompanying Management's Discussion and Analysis for the three and six-month periods ended June 30, 2010, will be available in the coming days on SEDAR at www.sedar.com and shortly on the Company's web site at www.bellushealth.com.

2010 Second Quarter Highlights:

KIACTA(TM) Asset Purchase and License Agreement

On April 29, 2010, the Company entered into an Asset Purchase and License Agreement with Celtic Therapeutics pursuant to which Celtic Therapeutics acquired and licensed worldwide rights related to the Phase III investigational product candidate KIACTA(TM) (eprodisate) for upfront payments totalling US$10 million, to be paid in two instalments, with US$5 million having been paid on the closing of the transaction and the remaining US$5 million payable on the sixth-month anniversary of the closing date. Celtic Therapeutics will fund 100% of KIACTA(TM)'s development costs through its confirmatory Phase III clinical study and all other requirements for KIACTA(TM)'s regulatory approval. Celtic Therapeutics will then conduct an auction process for the commercialization rights of KIACTA(TM). The overall proceeds of the auction process are expected to be shared equally between Celtic Therapeutics and BELLUS Health. The Company currently expects the confirmatory Phase III study to begin in the fourth quarter of 2010.

Update on VIVIMIND(TM)

BELLUS Health continues to pursue strategic partnership arrangements for the global commercialization activities of its nutraceutical product VIVIMIND(TM). Regulatory approvals for the commercialization of VIVIMIND(TM) in Italy and Spain were obtained in 2009.

NC-503 diabetes program

On May 4, 2010, the Company announced its decision to discontinue the NC-503 (eprodisate) diabetes development program due to lack of efficacy in the Phase II clinical trial.

Strategic Initiatives to Reduce Burn Rate:

BELLUS Health also announced today that it will focus on supporting its current and future strategic partnerships and on undertaking less expensive product development programs for its existing drug candidate in order to further reduce its burn rate and extend its cash resources. The initiatives will allow BELLUS Health to use its existing cash as well as cash from future strategic partnerships to fund operations, thereby reducing the risk that the Company will require new equity financing for at least the next two years.

From an operating perspective, the signature of the strategic partnership for KIACTA(TM) effectively transferred responsibility for developing that product from BELLUS Health to its strategic partner, Celtic Therapeutics.

In the case of NRM8499, BELLUS Health's prodrug candidate for the treatment of Alzheimer's disease, a revised development program will be undertaken with a focus on putting in place an eventual partnership for this program. A Phase I clinical study for NRM8499 was initiated by the Company on March 30, 2010.

As a result of these initiatives, BELLUS Health will gradually reduce its head count by more than two thirds over the next twelve months. The remaining employees will manage BELLUS Health's obligations under current and future strategic partnerships, oversee the development of NRM8499, and ensure that BELLUS Health meets all its obligations as a listed public company. As a result of these initiatives, the monthly burn rate is expected to decrease from more than $1.5 million to less than $500,000 based on the Company's current estimates.

"The structure of our strategic partnership relationship provides us with an opportunity to build long-term value while minimizing our expenditures and our burn rate," said Roberto Bellini, President and Chief Executive Officer of BELLUS Health. "An intensive focus on limiting our operating costs will preserve substantial value for our shareholders in the medium to long term, particularly the value created from our partnership with Celtic Therapeutics for KIACTA(TM). Our goal is to use our existing capital and to leverage our assets through partnerships as we move our products to commercialization. Once we have implemented today's initiatives, new financings should be unnecessary for the foreseeable future," he concluded.