Zalicus third quarter revenue increases to $2.4 million

Nov 2 2011

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

"We continue to execute on our product development goals. Patient enrollment in the SYNERGY Phase 2b clinical trial of Synavive™ for rheumatoid arthritis is on track with clinical sites actively recruiting subjects across the United States, Europe and Latin America, and we are finalizing preparations to initiate clinical development of Z160, with the goal of moving quickly into Phase 2 trials with a new formulation in 2012," commented Mark H.N. Corrigan, MD, President and CEO of Zalicus. "We plan to report top-line clinical results for both Synavive and our clinical-stage Ion channel programs in 2012."

Third Quarter 2011 and Recent Accomplishments:

• Published research on the role of sodium channels in acute and chronic pain processing. The paper, entitled "Identification of Sodium Channel Isoforms that Mediate Action Potential Firing in Lamina I/II Spinal Cord Neurons," Hildebrand et al., was pre-published on-line in the journal Molecular Pain (2011) and can be found on the Zalicus website. This research provides important new insights into the mediation of spinal cord neuron firing to determine the functional properties of sodium channel expression creating potential new ion channel targets for future pain therapeutics and further validating the pioneering scientific work of the Zalicus Ion channel research team.
• Received a notice of allowance from the U.S. patent and trademark office with allowed claims covering methods of use for Synavive as a treatment for osteoarthritis. Once this patent issues, the Synavive portfolio will include patents covering the Synavive composition of matter, methods of treating rheumatoid arthritis, osteoarthritis and other diseases, as well as pending patent applications directed to various Synavive formulations, providing comprehensive protection for Synavive, with patent terms that extend until at least 2028.

Third Quarter 2011 Financial Results:

As of September 30, 2011, Zalicus had cash, cash equivalents, restricted cash and short-term investments of $49.0 million compared to $56.0 million on June 30, 2011.

For the quarter ended September 30, 2011, revenue was $2.4 million compared to $1.2 million for the quarter ended September 30, 2010. Revenue is derived from research and development collaborations with Novartis and Amgen and other pilot research parties, a grant from the United States Army Medical Research Institute for Infectious Diseases and $0.8 million in royalty revenue received from Covidien based on Exalgo sales. To date, Zalicus has recognized $3.3 million in revenue related to Exalgo royalties since its market launch in April 2010. The increase in revenue in the three months ended September 30, 2011 was primarily due to Exalgo royalties from Covidien and an increase in the recognition of collaboration revenue from Novartis.

For the quarter ended September 30, 2011, net loss was $9.3 million, or $0.09 per share, compared to a net loss of $11.4 million, or $0.13 per share, in the quarter ended September 30, 2010.

Research and development expenses were $8.9 million in the quarter ended September 30, 2011 compared to $5.1 million in the quarter ended September 30, 2010. The $3.8 million increase was due primarily to an increase in expenses related to the clinical development of Synavive and preclinical development expenses related to our Ion channel product candidates, including Z160 and Z944. 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 such as Z160 and Z944 into Phase 1 clinical development.

General and administrative expenses were $2.6 million in the quarter ended September 30, 2011 compared to $2.8 million in the quarter ended September 30, 2010. We expect our general and administrative expenses for the year ended December 31, 2011 to be consistent with such expenses for 2010.