Transition reports second quarter 2011 net income of $24.28M vs. $6.05M net loss for second quarter 2010

Feb 8 2011

Transition Therapeutics Inc. ("Transition" or the "Company") (TSX:TTH) (Nasdaq:TTHI), a product-focused biopharmaceutical company developing therapeutics for disease indications with large markets, today announced its financial results for the quarter ended December 31, 2010.

Selected Highlights

During fiscal 2011 and up to the date of this press release, the Company achieved the following significant milestones:

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

• On December 27, 2010, Elan and Transition announced the mutual agreement to modify their collaboration agreement for the development and commercialization of ELND005 (AZD-103). Under the terms of the modification, in lieu of the contractually required initiation of Phase III milestone payment of US$15 million, Transition will receive from Elan a payment of US$9 million and will be eligible to receive a US$11 million payment upon the commencement of the next ELND005 (AZD-103) clinical trial. As per the terms of the original agreement, Transition is also eligible to receive up to an aggregate of US$93 million in additional regulatory and commercial launch related milestone payments plus tiered royalties ranging from 8% to 15% based on net sales of ELND005 (AZD-103) should the drug receive the necessary regulatory approvals for commercialization. The payment of US$9 million was received in January, 2011.;
    
• On August 9, 2010, Elan and Transition announced topline summary results of a Phase II study and plans for Phase III for ELND005 (AZD-103). The study did not achieve significance on co-primary outcome measures (NTB and ADCS-ADL). The study identified a dose with acceptable safety and tolerability. This dose demonstrated a biological effect on amyloid-beta protein in the cerebrospinal fluid and effects on clinical endpoints in an exploratory analysis. Based on the preponderance of evidence, and input from the experts in this field, the companies intend to advance ELND005 (AZD-103) into Phase III studies. 

TT-223 – Diabetes:

On September 17, 2010, Transition announced the clinical study of TT-223 in combination with a GLP-1 analogue did not meet study efficacy endpoints. Given these findings, there will be no further development of TT-223.

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.

The recently completed Phase II study was a randomized, double-blind, placebo-controlled, safety and efficacy study of ELND005 (AZD-103) in approximately 340 patients with mild to moderate Alzheimer's disease. The study evaluated both cognitive and functional endpoints, and each patient's participation lasted approximately 18 months. Elan and Transition announced topline summary results of the Phase II study and plans for Phase III for ELND005 (AZD-103). The AD201 study did not achieve significance on co-primary outcome measures (NTB and ADCS-ACL). The study identified a dose with acceptable safety and tolerability. The dose demonstrated a biological effect on amyloid-beta protein in the cerebrospinal fluid and effects on clinical endpoints in an exploratory analysis. Based on the preponderance of evidence, and input from the experts in this field, the companies intend to advance ELND005 (AZD-103) into Phase III studies. 

TT-301 / TT-302

Transition is developing a class of small molecule compounds that cross the blood brain barrier and have been shown to have an inhibitory effect on pro-inflammatory cytokines. Animal model studies have been performed demonstrating that members of this class of compounds can have a therapeutic effect on CNS diseases including Alzheimer's disease, traumatic brain injury, intracerebral hemorrhage, and others. Transition is also investigating the use of these molecules in the treatment of peripheral diseases mediated by pro-inflammatory cytokines, such as arthritis. 

Transition's lead drug candidates in development are TT-301 and TT-302. In preclinical studies, both TT-301/302 have shown a favourable safety profile and therapeutic window for efficacy. A Phase I clinical study of intravenously administered TT-301 is ongoing. The primary objectives of the trial are to evaluate the safety, tolerability and pharmacokinetics of TT-301. The data from Phase I studies are a first step in the development of TT-301 for CNS intravenous indications, ICH and TBI. In follow up studies, the Company plans to advance oral formulations of lead drug candidate TT-302 for inflammatory diseases such as rheumatoid arthritis. 

TT-401 / TT-402

On March 3, 2010, Transition announced that it had acquired the rights to a series of preclinical compounds from Eli Lilly and Company in the area of diabetes. Under this second licensing and collaboration agreement with Lilly, Transition received exclusive worldwide rights to develop and potentially commercialize a class of compounds that, in preclinical diabetes models showed potential to provide glycemic control and other beneficial effects including weight loss.

The unique properties of these compounds have the potential to provide important therapeutic benefits to type 2 diabetes patients and could represent the next generation of diabetes therapies to be advanced to clinical development. Transition is currently performing the necessary work to prepare these compounds for the clinic.

Financial Liquidity

The Company's cash and cash equivalents and short term investments were $21,069,415 at December 31, 2010. The $US9 million payment was received from Elan in January, 2011. The Company's current cash projection indicates that the current cash resources should enable the Company to execute its core business plan and meet its projected cash requirements beyond the next 12 months.

Financial Review

For the three-month period ended December 31, 2010, the Company recorded net income of $24,284,800 ($1.05 income per common share) compared to a net loss of $6,055,627 ($0.26 loss per common share) for the three-month period ended December 31, 2009. During the second quarter  the Company recognized revenue of $29,671,150 relating to the collaboration agreement with Elan. During the comparative three-month period ending December 31, 2009, the Company recognized $987,828 relating to the Lilly agreement.

Research and development expenses decreased by $1,324,501 from $3,546,952 for the three-month period ended December 31, 2009 to $2,222,451 for the three-month period ended December 31, 2010. This decrease was primarily due to a decrease in clinical development costs related to ELND005 (AZD-103) and TT-223 clinical trials. These decreases are partially offset by increased preclinical and clinical costs associated with advancing the TT-301/302 and the TT-401/402 compounds, as well as an increase in stock option expenses resulting from management's voluntary forfeiture of certain stock options.

General and administrative expenses increased by $1,067,046 from $1,584,103 for the three-month period ended December 31, 2009 to $2,651,149 for the three-month period ended December 31, 2010. The increase in general and administrative expense is due to increased consulting fees related to the strategic initiatives for ELND005 (AZD-103) as well as an increase in stock option expenses resulting from management's voluntary forfeiture of certain stock options. The increases have been partially offset by decreases in accounting fees as the Company's component evaluation for IFRS policy decisions are substantially completed.