Zalicus Reports Financial Results for the Fourth Quarter and Year-End 2013

  Zalicus Reports Financial Results for the Fourth Quarter and Year-End 2013

                        Provides Update on Operations

Business Wire

CAMBRIDGE, Mass. -- March 13, 2014

Zalicus Inc. (Nasdaq Capital Market: ZLCS), a biopharmaceutical company that
discovers and develops novel treatments for patients suffering from pain,
today reported financial results for the fourth quarter and year ended
December 31, 2013.

“With the successful translation of Z944 in a human clinical pain model,
Zalicus has initiated a Phase 1 clinical study to evaluate the
pharmacokinetics and safety of multiple modified-release formulations of
Z944,” commented Mark H.N. Corrigan, MD, President and CEO of Zalicus.
“Following the recent sale of the Exalgo royalty stream, prepayment of our
debt obligations and the strong performance of our cHTS services business,
Zalicus has the financial resources to advance a modified release formulation
of Z944 toward Phase 2 clinical development in an appropriate pain indication
by late 2014.”

Fourth Quarter 2013 and Recent Accomplishments:

  *Z944. Initiated and successfully completed a Phase 1b clinical study of
    Z944, a novel, oral, T-type calcium channel modulator. The Phase 1b study
    was an experimental clinical model utilizing Laser-Evoked-Potentials (LEP)
    to provide both subjective and objective assessments of the activity of
    Z944 in induced neuropathic and inflammatory pain states. In the study, an
    immediate release formulation of Z944 demonstrated statistically
    significant and meaningful reductions at each of the three doses tested
    compared to placebo of overall peak-to-peak (PtP) amplitude of LEPs in
    models of both inflammatory (p≤0.0002) and neuropathic (p<0.05) pain, as
    well as consistent trends in reduction of subjective pain scores compared
    to placebo using a visual analog scale in both pain models. Zalicus is
    planning to advance a modified-release formulation of Z944 toward Phase 2
    clinical development in an appropriate pain indication by late 2014. Dr.
    Margaret Lee, Vice President, Research and Translational Medicine, is
    presenting the data from the Phase 1b clinical trial of Z944 at the
    Foundation for Peripheral Neuropathy 2014 International Symposium in
    Chicago on March 13, 2014.

    Exalgo Royalty Monetization and Prepayment of Debt. Monetized the Exalgo
    royalty by selling all rights to future royalties on sales of Exalgo to
    Mallinckrodt Inc. (“Mallinckrodt”) for $7.2 million in cash. Exalgo was
    approved for sale in the U.S. in March 2010 and launched by Mallinckrodt
    in April 2010. To date, Zalicus has received $16.0 million in royalties
    related to sales of Exalgo, including approximately $2.0 million for net
    sales during the fourth quarter of 2013. Zalicus applied the proceeds of
    the Exalgo royalty sale and the Exalgo royalties to prepay the remaining
    $8.6 million outstanding under its term loan with Oxford Finance LLC,
    eliminating all future principal and interest payments to Oxford.

  *cHTS Services. Continued to expand and diversify its cHTS services
    business with multiple new customers, providing $8.1 million in revenue
    for the year ended December 31, 2013.

Fourth Quarter and Year-End Financial Results:

As of December 31, 2013, Zalicus had cash, cash equivalents and restricted
cash of $19.8 million compared to $36.4 million as of December 31, 2012.

For the year ended December 31, 2013, revenue was $14.7 million compared to
$12.6 million for the year ended December 31, 2012. Zalicus recognized $6.7
million in royalty revenue from Mallinckrodt based on Exalgo® net sales for
the year ended December 31, 2013 and Zalicus has recognized a total of $16.0
million in royalty revenue from Exalgo through December 31, 2013 since its
commercial launch in April 2010. Zalicus sold all rights to future royalties
on sales of Exalgo to Mallinckrodt in January 2014.

For the year ended December 31, 2013, research and development expense was
$34.0 million compared to $41.4 million for the year ended December 31, 2012.
Research and Development expense in the year ended December 31, 2013 included
approximately $19.0 million devoted to Z160 and approximately $2.0 million in
development expenses related to Z944. We expect research and development
expense to decrease significantly for the year ending December31, 2014 due to
terminated development activities related to our discontinued product
candidate Z160.

For the year ended December 31, 2013, net loss was $38.6 million, or ($1.68)
per share, compared to a net loss of $44.3 million, or ($2.27) per share, in
the year ended December 31, 2012. The net loss per share amounts have been
adjusted for the 1-for-6 reverse stock split effected on October 3, 2013.
Stock-based compensation expense was $2.0 million and $1.8 million in the
years ended December 31, 2013, and 2012, respectively. Depreciation and Exalgo
amortization expense combined was $10.0 million and $5.4 million in the years
ended December 31, 2013, and 2012, respectively.

General and administrative expenses were $7.5 million in the year ended
December 31, 2013 compared to $9.0 million in the year ended December 31,
2012. We expect our general and administrative expense for the year ending
December31, 2014 to be slightly lower than the year ended December 31, 2013.

About Zalicus
Zalicus Inc. (Nasdaq Capital Market: ZLCS) is a biopharmaceutical company that
discovers and develops novel treatments for patients suffering from pain.
Zalicus has a portfolio of proprietary clinical-stage product candidates
targeting pain and has entered into multiple revenue-generating collaborations
with large pharmaceutical companies relating to other products, product
candidates and drug discovery technologies. Zalicus applies its expertise in
the discovery and development of selective ion channel modulators and its
combination high throughput screening capabilities to discover innovative
therapeutics for itself and its collaborators in the areas of pain and
oncology. To learn more about Zalicus, please visit www.zalicus.com.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 concerning Zalicus, its
product candidates, including Z944, their potential, and its plans for
clinical development for Z944, the Zalicus selective ion channel modulation
technology, and related preclinical product candidates, Zalicus’s combination
drug discovery technology, cHTS, and its financial condition, results of
operations, and other business plans. These forward-looking statements about
future expectations, plans, objectives and prospects of Zalicus and its
product candidates may be identified by words like "believe," "expect," "may,"
"will," "should," "seek," “plan,” “project” or “could” and similar expressions
and involve significant risks, uncertainties and assumptions, including risks
related to the formulation and clinical development of its product candidate
Z944, the unproven nature of the Zalicus ion channel drug discovery
technology, Zalicus’s ability to obtain additional financing or funding for
its research and development, and those other risks that can be found in the
"Risk Factors" section of Zalicus' annual report on Form 10-K on file with the
Securities and Exchange Commission and the other reports that Zalicus
periodically files with the Securities and Exchange Commission. Actual results
may differ materially from those Zalicus contemplated by these forward-looking
statements. These forward-looking statements reflect management’s current
views and Zalicus does not undertake to update any of these forward-looking
statements to reflect a change in its views or events or circumstances that
occur after the date of this release except as required by law.

(c) 2014 Zalicus Inc. All rights reserved.

Zalicus Inc.

Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)
                                                            
                              Year Ended December 31,
                              2013             2012             2011
Revenue:
Royalties                     $ 6,661          $ 5,220          $ 2,521
cHTS services and other        8,070          7,330          5,663      
collaborations
                                                                
Total revenue                  14,731         12,550         8,184      
                                                                
Operating expenses:
Research and development        33,964           41,423           35,294
General and administrative      7,523            8,977            10,400
Amortization of intangible      8,722            3,892            5,141
Impairment charge               1,732            —                —
Restructuring                  —              1,094          —          
                                                                
Total operating expenses       51,941         55,386         50,835     
                                                                
Loss from operations            (37,210    )     (42,836    )     (42,651    )
Interest income                 46               150              136
Interest expense                (1,467     )     (2,173     )     (976       )
Other income                   14             91             20         
                                                                
Net loss before benefit for     (38,617    )     (44,768    )     (43,471    )
income taxes
Benefit for income taxes       —              441            1,428      
                                                                
Net loss                      $ (38,617    )   $ (44,327    )   $ (42,043    )
                                                                
Net loss per share—basic      $ (1.68      )   $ (2.27      )   $ (2.59      )
and diluted
                                                                
Weighted average number of
common shares used in net      22,932,675     19,552,828     16,224,532 
loss per share calculation
—basic and diluted
                                                                
                                                                
Net loss                      $ (38,617    )   $ (44,327    )   $ (42,043    )
Other comprehensive loss:
Unrealized (loss) gain on      (10        )    18             12         
investments
                                                                
Comprehensive loss            $ (38,627    )   $ (44,309    )   $ (42,031    )
                                                                

Zalicus Inc.

Consolidated Balance Sheets

(in thousands, except per share data)
                                                               
                                                   December 31,
                                                   2013           2012
Assets
Current assets:
Cash and cash equivalents                          $ 17,958       $ 4,531
Restricted cash                                      50             50
Short-term investments                               —              30,059
Accounts receivable                                  2,511          3,045
Prepaid expenses and other current assets           223          684      
                                                                  
Total current assets                                 20,742         38,369
Property and equipment, net                          2,363          3,535
Intangible asset, net                                7,200          17,654
Restricted cash and other assets                    1,801        1,817    
                                                                  
Total assets                                       $ 32,106      $ 61,375   
                                                                  
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable                                   $ 2,237        $ 3,261
Accrued expenses and other current liabilities       3,339          4,841
Deferred revenue                                     2,392          4,918
Current portion of term loan payable                 6,640          6,327
Current portion of lease incentive obligation       284          284      
                                                                  
Total current liabilities                            14,892         19,631
Term loan payable, net of current portion            2,132          8,772
Deferred revenue, net of current portion             —              600
Deferred rent, net of current portion                309            457
Lease incentive obligation, net of current           591            875
portion
Other long-term liabilities                          —              14
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000 shares      —              —
authorized; no shares issued and outstanding
Common stock, $0.001 par value; 200,000 shares
authorized; 26,090 and 21,170 shares issued and      26             21
outstanding at December 31, 2013 and 2012,
respectively
Additional paid-in capital                           393,796        372,018
Accumulated other comprehensive income               —              10
Accumulated deficit                                 (379,640 )    (341,023 )
                                                                  
Stockholders’ equity                                14,182       31,026   
                                                                  
Total liabilities and stockholders’ equity         $ 32,106      $ 61,375   

Contact:

Zalicus Inc.
Justin Renz, 617-301-7575
CFO
JRenz@zalicus.com
or
Gina Nugent, 617-460-3579
gnugent@zalicus.com
 
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