Dr. Tony Cruz reports

TRANSITION THERAPEUTICS ANNOUNCES SECOND QUARTER FISCAL 2013 FINANCIAL RESULTS

Transition Therapeutics Inc. has released its financial results for the three and six-month periods ended Dec. 31, 2012.

Selected highlights

During fiscal 2013 and up to the date of this press release, the company announced the following:

• On Nov. 28, 2012, Transition announced that its licensing partner Elan had enrolled the first patient in a phase II study of ELND005 for the treatment of agitation/aggression in patients with moderate to severe Alzheimer's disease;
• On Aug. 30, 2012, Transition announced that its licensing partner Elan had dosed the first patient in a phase II clinical study of ELND005 in bipolar disorder. The study is a placebo-controlled, safety and efficacy study of oral ELND005 as an adjunctive maintenance treatment in patients with bipolar 1 disorder to delay the time to occurrence of mood episodes. As the first patient has been dosed in the study, Transition received a milestone payment of $11-million (U.S.) from Elan.

Financial liquidity

The company's cash and cash equivalents, and short-term investments were $24,958,522 at Dec. 31, 2012.

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 well beyond the next 12 months.

Financial review

For the three-month period ended Dec. 31, 2012, the company recorded a net loss of $2,754,534 (10-cent loss per common share) compared with net loss of $3,790,421 (15-cent loss per common share) for the three-month period ended Dec. 31, 2011.

For the six-month period ended Dec. 31, 2012, the company recorded a net income of $4,981,512 (19-cent income per common share) compared with a net loss of $6,661,178 (28-cent loss per common share) for the six-month period ended Dec. 31, 2011.

Revenue is nil and $10,815,200 in the three- and six-month periods ended Dec. 31, 2012, respectively, compared with nil in both three- and six-month periods ended Dec. 31, 2011.

In August, 2012, Elan dosed the first patient in a phase II clinical study of ELND005 in bipolar disorder. In light of the amendments to the Elan agreement, the company has recognized $10,815,200 ($11-million (U.S.)) as revenue during the first quarter of fiscal 2013, which represents the milestone payment received from Elan upon its commencement of the next ELND005 clinical trial. The payment from Elan was received on Oct. 1, 2012.

Research and development expenses increased $80,635 or 4 per cent from $2,060,622 for the three-month period ended Dec. 31, 2011, to $2,141,257 for the three-month period ended Dec. 31, 2012. The increase is largely due to an increase in clinical development costs related to TT-401/402, which has been offset by decreases in clinical development costs related to TT-301/302, and salaries and related costs associated with head-count reductions.

For the six-month period ended Dec. 31, 2012, research and development expenses decreased $118,543 or 3 per cent to $4,195,803 from $4,314,346 for the same period in fiscal 2012. The decrease is primarily due to decreases in clinical development costs related to TT-301/302, and salaries and related costs associated with head-count reductions. The decrease is largely offset by increased clinical development costs related to TT-401/402.

General and administrative expenses decreased by $683,472 or 45 per cent from $1,532,912 for the three-month period ended Dec. 31, 2011, to $849,440 for the three-month period ended Dec. 31, 2012. For the six-month period ended Dec. 31, 2012, general and administrative expenses decreased $956,616 or 36 per cent to $1,666,342 from $2,622,958 for the same period in fiscal 2012.

The decreases in general and administrative expenses for both the three- and six-month periods ended Dec. 31, 2012, are due to decreases in legal consulting fees, facility lease costs, and investor relation and business development expenses, as well as decreased salaries and related costs resulting from head-count reductions as the comparative periods included severances relating to terminations.

                   CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
                      For the six- and three-month periods ended Dec. 31, 2012, and 2011

                                           Six-month period ended Dec. 31, Three-month period ended Dec. 31,
                                                     2012            2011              2012            2011
Revenues
Licensing fees                                $10,815,200               -                 -               -
Expenses
Research and development                        4,195,803      $4,314,346        $2,141,257      $2,060,622
Selling, general and administrative expenses    1,666,342       2,622,958           849,440       1,532,912
Loss on disposal of property and equipment              -         118,623                 -          38,709
Operating income (loss)                         4,953,055      (7,055,927)       (2,990,697)     (3,632,243)
Interest income                                    68,489          80,339            34,872          40,412
Interest (expense)                                      -            (851)                -            (241)
Foreign exchange gain (loss)                      (40,032)        315,261           201,291        (198,349)
Net income (loss) and comprehensive income
(loss) for the period                           4,981,512      (6,661,178)       (2,754,534)     (3,790,421)
Basic and diluted net income (loss) per
common share                                         0.19           (0.28)            (0.10)          (0.15)

We seek Safe Harbor.