Zalicus second quarter revenue decreases to $1.8 million

Aug 3 2011

Zalicus Inc. (NASDAQ: ZLCS) today reported financial results for the second quarter ended June 30, 2011.

"During the first half of 2011 we diligently executed on our product development plans with the initiation of the Synavive Phase 2b clinical trial for rheumatoid arthritis and the advancement of our Ion channel product candidates, which remain on track to enter the clinic by the end of this year," commented Mark H.N. Corrigan, MD, President and CEO of Zalicus. "The initiation of these clinical trials will mark an evolution of the Zalicus pipeline and the progress of our R&D efforts from discovery research toward clinical development."

Second Quarter 2011 and Recent Accomplishments:

• Initiated a Phase 2b clinical trial evaluating Synavive^TM, a low-dose glucocorticoid with the potential for amplified immuno-inflammatory benefits, in patients with rheumatoid arthritis (RA). Top-line results of the clinical trial are expected to be available in the second half of 2012. The trial, titled SYNERGY (SYNavivE for Reducing signs and sYmptoms of rheumatoid arthritis trial), is a 12-week, five-arm, global, double-blind, placebo-controlled study to evaluate the safety and efficacy of Synavive as a treatment for the signs and symptoms of RA in approximately 250 subjects with moderate to severe disease. The trial will be conducted in up to 60 centers throughout the United States, Europe and Latin America. The primary objective of the trial is to evaluate Synavive efficacy compared to placebo, while key additional secondary objectives include evaluating the efficacy of Synavive compared to its individual components (2.7mg of Prednisolone and 360mg of Dipyridamole) as well as how Synavive performs in comparison to 5mg of Prednisone. Subjects who complete the core SYNERGY trial will be eligible to participate in a one-year extension study designed to investigate the long-term safety and durability of response for Synavive.
• Presented data on Zalicus's two innovative cell-based drug discovery platforms; the selective Ion channel modulation platform, and the cHTS synergistic combination high throughput screening platform, at the 10^th Annual World Pharma Conference in Philadelphia in June. Terrance P. Snutch, Ph.D., Chief Scientific Officer of Zalicus discussed preclinical efforts at Zalicus to rationally design and develop high affinity and state-dependent small molecule N-type and T-type blockers for pain intervention in a session highlighting novel Ion channel therapeutics for the treatment of pain, and Glenn Short, Ph.D., Director of Discovery Sciences at Zalicus discussed the application of the next-generation Zalicus combination high throughput screening (cHTS) technology to correlate cancer cell line genotypic determinants with combination drug sensitivity to define multi-target drug combinations that synergistically induce genotype-specific cytotoxicity in a session discussing cutting edge cell-based screening tools and the advantages of combination high-throughput screening.
• Selected to join the NASDAQ Biotechnology Index (NASDAQ: NBI) in May. The NBI serves as the basis for the iShares NASDAQ Biotechnology Index Fund (IBB) and includes pharmaceutical and biotechnology companies ranked on a semi-annual basis based on minimum market value and share volume requirements.

Second Quarter 2011 Financial Results (Unaudited):

As of June 30, 2011, Zalicus had cash, cash equivalents, restricted cash and short-term investments of $56.0 million compared to $52.8 million on March 31, 2011.

For the quarter ended June 30, 2011, revenue was $1.8 million compared to $2.9 million for the quarter ended June 30, 2010. Revenue is derived from research and development collaborations with Novartis, Amgen and Eisai, a grant from the United States Army Medical Research Institute for Infectious Diseases and $0.5 million in royalty revenue received from Covidien based on Exalgo sales. Covidien continues to increase Exalgo managed care access and to invest in a range of Exalgo growth strategies. To date, Zalicus has recognized $2.5 million in revenue related to Exalgo royalties since its market launch in April 2010.

For the quarter ended June 30, 2011, net loss was $11.3 million, or $0.11 per share, compared to a net loss of $8.6 million, or $0.10 per share, in the quarter ended June 30, 2010.

Research and development expenses were $9.0 million in the quarter ended June 30, 2011 compared to $4.6 million in the quarter ended June 30, 2010. The $4.4 million increase was due primarily to an increase in expenses related to the clinical development of Synavive and preclinical program expenses related to our Ion channel product candidates. We expect research and development expenses to increase for the year ended December 31, 2011 compared to 2010 due to the Phase 2b SYNERGY trial and the advancement of our Ion channel product candidates.

General and administrative expenses were $2.7 million in the quarter ended June 30, 2011 compared to $2.6 million in the quarter ended June 30, 2010. We expect our general and administrative expenses for the year ended December 31, 2011 to be consistent with 2010.