Pharmathene, Inc. (f/k/a PIP)

[surf1944]

PharmAthene Reports Year-End 2007 Financial Results
Monday March 31, 4:00 pm ET

ANNAPOLIS, Md., March 31 /PRNewswire-FirstCall/ -- PharmAthene, Inc. (Amex: PIP - News) a biodefense company developing medical countermeasures against biological and chemical threats, today reported financial results for the year ended December 31, 2007.

David P. Wright, President and Chief Executive Officer commented, "In 2007 we continued to advance both our corporate and product development objectives and achieved a number of important milestones which included, obtaining additional contract and appropriations funding for Valortim(TM) and Protexia® and generating promising new data in each of these programs. We also completed a merger with Healthcare Acquisition Corp. which provided a stronger financial foundation with enhanced access to capital with which to pursue our business objectives. Our goal was to use these resources to accelerate our growth, which was recently demonstrated by the execution of an agreement for the acquisition of Avecia's biodefense vaccines."

Current and Full Year 2007 Highlights

In addition to the recently announced sale and purchase agreement signed with Avecia, PharmAthene also demonstrated significant achievements in 2007, including:

-- Completing a merger with Healthcare Acquisition Corp. and building a
stronger financial foundation for the Company. As a result of the
merger PharmAthene obtained approximately $57.9 million in capital.

-- Receiving a contract for up to $13.9 million from the National
Institutes of Health to support the development of Valortim(TM) for use
as an anti-toxin therapeutic to prevent and treat inhalational anthrax
infection.

-- Obtaining up to an additional $2.4 million in funding for Valortim(TM)
in the FY 2007 and 2008 U.S. Congressional Appropriations budgets for
the Department of Defense.

-- Presenting new mechanistic data for Valortim(TM) showing that
Valortim(TM) may possess the ability to enhance macrophage killing of
Bacillus anthracis (anthrax) spores within macrophages, potentially
blocking the ability of the spores to develop into bacteria and
preventing toxin production and propagation of the infection.

-- Demonstrating new research showing that recombinant
butyrylcholinesterase (rBChE) may effectively block the formation of
amyloid fibrils, which are believed to be important precursors to
Alzheimer's disease.

-- Showing a therapeutic effect for Valortim(TM) in a new primate model of
established inhalation anthrax infection -- the African Green Monkey
model, which is believed to follow a similar disease course as would be
expected in humans exposed to aerosolized Bacillus anthracis (anthrax)
spores. The pilot study demonstrated 50% survival in Valortim(TM)-
treated animals compared to no animals in the control group; this was
perceived to be an encouraging survival result since the study animals
had bacteria multiplying in their blood and were poised to manifest
severe symptoms and death at the time they received treatment.


Financial Highlights

For the year ended December 31, 2007, PharmAthene recognized revenues of $14.6 million compared to $1.7 million for the period ended December 31, 2006. The Company's revenues consist primarily of contract and grant funding from the U.S. government. The increase in revenue in 2007 is primarily attributable to revenues of $14.6 million provided under the Department of Defense advanced development and procurement contract for Protexia®, which was executed in September 2006.

PharmAthene's research and development expenses were $16.6 million for the year ended December 31, 2007 and $7.3 million for the same period in 2006. Research and development expense increased $9.3 million in 2007 compared to 2006 primarily as a result of increased process development and manufacturing activities related to Protexia® and Valortim(TM) of $9.2 million, and employee-related expenses, including stock compensation expense of $1.8 million. These increases were partially offset by reduced preclinical and clinical activities related mostly to the Valortim(TM) clinical trial program.

General and administrative expenses for the Company in 2007 were $13.9 million compared to $8.5 million for the same period in 2006. The increase in general and administrative costs in 2007 was attributable to increased employee costs, a related increase in travel expense, increased stock compensation expense, and increased facilities costs as PharmAthene relocated its corporate headquarters in 2007 to larger facilities in Annapolis.

PharmAthene's net loss attributable to common shareholders for the year ended December 31, 2007 was $17.7 million or $1.88 per basic and diluted share. Non-cash adjustments for the year ended December 31, 2007 included a $2.4 million credit that resulted from the cancellation of former PharmAthene preferred stock warrants, a $0.9 million gain on the extinguishment of debt, and stock compensation expense of $1.7 million.

As of December 31, 2007, cash, cash equivalents and short term investments were $52.7 million, compared to $5.1 million at December 31, 2006. The $47.6 million increase in cash, cash equivalents and short term investments from December 31, 2006 is primarily attributable to the August 2007 merger with HAQ, which resulted in net cash proceeds of $57.9 million and to the March 2007 $10.0 million credit facility, partially offset by the funding of operations for fiscal year 2007.

On March 20, 2008, PharmAthene announced that the Company had signed a sale and purchase agreement with Avecia. Under the agreement PharmAthene will acquire the assets related to Avecia's biodefense vaccines business unit, including a recombinant Protective Antigen (rPA) anthrax vaccine, a novel dual antigen plague vaccine, RypVax(TM), and third generation anthrax vaccine technology.

On March 28, 2008, Avecia received a letter from the Defence Science and Technology Lab, a branch of the UK Ministry of Defence, advising Avecia of the recent resource allocation decision of the US Department of Defense (DoD) and that the DoD had decided not to fund Avecia's plague vaccine candidate beyond the current contractual commitments. The parties are engaged in discussions to amend the terms of the sale and purchase agreement to accommodate this change in circumstances. The Company is still working towards closing in early April.

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