Akela announces new corporate focus on PharmaForm

Aug 9 2011

Akela Pharma, Inc. (TSX:AKL, 'Akela' or 'the Company') today announced a new strategic focus on its profitable pharmaceutical contract manufacturing business, PharmaForm, LLC ("PharmaForm").  In addition, the Company also announced the termination of its Fentanyl Taifun drug development program by its Japanese partner, Teikoku Seiyaku, Co., Ltd. ("Teikoku"), and the initiation of bankruptcy proceedings for the Company's Finnish subsidiary.

Corporate focus on PharmaForm Division

• Investing in capacity expansion
• Entry into commercial contract manufacturing
• Initiating targeted acquisition strategy

Akela announced today its intent to focus management and capital resources on its profitable pharmaceutical contract manufacturing business, PharmaForm. Established in 1996, PharmaForm is a specialty contract service provider of solid dose drug formulation and clinical supply manufacturing to pharmaceutical and biotechnology companies. PharmaForm enabled Akela to become profitable in 2010 and has continued to grow profitably, quarter over quarter, generating nearly $1.0 million in net income during the first quarter of 2011.  Akela intends to focus the Company's resources on the advancement of PharmaForm's business through business development initiatives, the addition of specialty commercial manufacturing services, expansion of capacity and, as opportunities arise, expansion through targeted acquisitions of niche, formulation and manufacturing businesses.

Currently, PharmaForm is increasing its capacity within formulation and manufacturing, primarily focused on Hot Melt Extrusion ("HME"), with the acquisition of a second Leistritz 18 mm Twin Screw Extruder. This acquisition complements PharmaForm's existing 18mm and 16mm Leistritz twin screw extruders. Additionally, in 2011, PharmaForm is significantly advancing its HME manufacturing capabilities to include large scale Phase 3 clinical and pilot studies, as well as commercial manufacturing through the acquisition of a new Leistritz 27 mm Twin Screw Extruder.

PharmaForm has also initiated its entry into the specialty commercial manufacturing arena. Corcept Therapeutics, a PharmaForm client since 2007, recently filed a New Drug Application for its Corlux® product to treat Cushings Syndrome and PharmaForm has been named as Corcept's primary commercial manufacturer and supplier following the anticipated commercial approval of Corlux®.

"Through the continued execution of our current strategic plans, including potential growth through the acquisition of complementary niche manufacturing businesses, Akela and PharmaForm have an opportunity to become a significant force within the specialty contract manufacturing space," said Greg McKee, President and CEO of Akela. "PharmaForm, having experience and leadership in the creation of solid dose drug formulations and clinical supply manufacturing, remains an industry leader in controlled release drug delivery, bioavailability enhancement, and the formulation of potent compounds."

Discontinuation of Fentanyl development program

• Termination of development and licensing agreements
• Initiation of bankruptcy proceedings for the Company's Finnish subsidiary
• Seeking sale of program

Akela also announced today that it has regained the product rights to Fentanyl Taifun® in Japan from Teikoku.  Teikoku has provided formal notice of termination of the development and licensing agreement between the two companies for Fentanyl Taifun®, based on recent analyses of both the market potential and the regulatory process for Fentanyl Taifun® in Japan.  Further, Akela announced that it expects to reach an agreement shortly with Janssen Pharmaceutica NV regarding return of product rights for all jurisdictions under the licensing and development agreement between the two companies, shortly.  Neither change in partner status will have a significant immediate financial impact to Akela.

As such, and due to the lack of meaningful operations in Europe, the Company announced today that it is initiating bankruptcy proceedings in Helsinki, Finland for its Finnish Subsidiary, Akela Pharma, Oy which is the parent company of Akela Clinical Polska in Poland and Blitz-07-676 GmbH which is based in Germany.

"The discontinuation of the Fentanyl TAIFUN program enables Akela to fully deploy its management and capital resources on the profitable PharmaForm subsidiary which is a logical transformation following our successful turnaround of Akela over the past 24 months," said Mr. McKee.  "Given the market capitalization of the Company, our proven track record of dramatically increasing profitability while growing revenues, coupled with a targeted acquisition strategy, we believe that our contract manufacturing platform has the ability to enhance shareholder value without the capital requirements and risks associated with traditional drug development companies."