results for the 2010 financial year

25 August 2010
ASX / MEDIA ANNOUNCEMENT
Alchemia Announces Audited Financial
Results for the 2010 Financial Year
Alchemia, Brisbane, Australia (ASX:ACL), today announced its audited financial results for the financial year to 30 June 2010.

Alchemias Chief Executive Officer and Managing Director Dr Pete Smith stated that the 2010 financial year had been a year of significant progress for the Company. We have managed to drive all of our existing programs forward, expanded partnerships and substantially strengthened our balance sheet through the successful capital raising in late 2009. The Company has two extremely promising late stage assets in generic fondaparinux and HA-Irinotecan and, at the same time, continues to pursue ways to extract value from our VAST chemistry platform.

We were delighted at the support of our shareholders who subscribed to the Companys 2 for 11 renounceable rights issue, enabling the Company to successfully raise over $15 miilion. This has allowed the Company to undertake the significant preparation for our pivotal Phase III clinical trial of HA-Irinotecan
and to commence a number of other vital programs, including the preparation of the Phase I/IIa Small Cell Lung Cancer (SCLC) trial and Emispheres Oral Fondaparinux collaboration, in advance of receipts from the sale of fondaparinux. Dr Smith noted that the US FDA has taken longer than originally expected to approve the Companys generic fondaparinux ANDA. Based upon the Companys internal analysis, priority reviews are now typically taking 13months +/-3months from acceptance to approval due to the increasing backlog of applications at the FDA. However based on the interactions with the FDA we remain very pleased with the progress of the fondaparinux application.

Financial Position
The Group reported a net loss of $8.8 million for the 2010 financial year, up from $8.4 million loss in 2009.

Total income for the period was $0.6 million, down from the previous period (2009: $2.2 million). This reduction was driven predominantly by lower grant income, in-line with lower R&D spend on related projects, received from both (i) the Queensland State Government under the Smart State Innovation Fund for the Companys collaboration with Euroscreen SA to discover new drug candidates for G-Protein coupled receptors and (ii) the Federal Government Commercial Ready Grant for the commercialisation of the Companys, new tumour-targeted anti-cancer agent, HA irinotecan, Interest income was also down due to the steady reduction in the cash balance held over the period compared to the corresponding previous period (prior to the conclusion of the rights issue in January 2010), together with comparatively lower deposit rates on average in 2010 viz-a-viz 2009.

Operating expenditure of $9.8 million was lower than the corresponding period (2009: $11.0 million). The 2010 spend represents expenditure on ongoing research and development programs together with $1.4 million on the preparatory work for the HA-Irinotecan Phase III trial. The prior year was impacted by one-off costs of $1.2 million associated with the execution of the Companys cash management strategy which resulted in a reduction in staff numbers by 60% and the cessation and/or mothballing of a number of projects, particularly around the Companys VAST technology. In addition, the prior reporting period was favourably impacted by the recognition of $1.2 million of reimbursable costs (refunds) from Dr Reddys following achievement of a significant milestone towards the commercialisation of the Companys lead product, generic fondaparinux in December 2008. This receipt related to the reimbursement of R&D costs previously incurred by the Company on the fondaparinux campaign and accordingly has been treated as a reduction in current period R&D spend.

The cash management strategy significantly reduced the Companys cash burn following its implementation in October 2008, with this lower cash burn continuing through much of financial year 2010. The Companys cash burn however increased in the second half of the 2010 financial year as it commenced preparing for its HA-Irinotecan Phase III clinical trial.

The consolidated cash position of the group over the reporting period has seen a net increase in cash balances, following the rights issue, from $8.3 million to $17.4 million at 30 June 2010. Net cash outflows from operating activities were down by $1.5 million to $5.7 million due to a reduction in R&D and associated staff spend offset by Phase III start up costs. Net proceeds from the capital raising were $14.7 million, after deduction of capital raising costs of $0.8 million. Based upon projected rates of expenditure, and excluding any revenue from the sales of generic fondaparinux, the Company has sufficient funds to finance operating activities until mid 2012.

Generic Fondaparinux
The Companys lead asset is fondaparinux sodium for injection, a generic version of the anti-coagulant drug sold under the brand name Arixtra by GlaxoSmithKline. Arixtra is approved for the treatment of deep vein thrombosis (DVTs) and pulmonary embolism (PE) and has label indications for prophylaxis treatment for multiple indications both in the U.S. and in Europe. Sales of Arixtra in the US continue to grow with salesfor the year to 30 June 2010 of US$251 million (30% up on the prior year).

In May 2009, the Abbreviated New Drug Application (ANDA which was filed by Alchemias partner, Dr Reddys, in March 2009, was officially accepted by the Food and Drug Administration (FDA). ANDA filings for generic agents do not follow the same regulated timelines as other new drug applications and therefore the approval deadlines are difficult to predict. In addition, the median ANDA approval timelines increased significantly in 2008 and 2009, increasing to a median approval time of 27 months in 2009 compared to 18 months in 2007. That said, we are pleased with the progress of our ANDA, as our application is receiving a priority review which would typically see approval in half the average review time. We have seen several recent approvals for ANDAs filed at around the same time as fondaparinux Dr Smith stated that we are confident in our partner Dr Reddys as it has a proven regulatory track record with the FDA.

In July the Company announced the expansion of its collaboration with Dr Reddys for marketing rights globally. This is an extension of the previous agreement that just included North America. Under the terms of the expanded agreement, Dr Reddys will pay to Alchemia a royalty on sales that will vary according to the cost of manufacture and the selling price of the drug. While the Company had been approached by a number of companies interested in marketing fondaparinux in a number of different territories, Dr Reddys continued to demonstrate a high level of interest in the compound from both a manufacturing and commercial perspective and, accordingly, the Company believes Dr Reddys is the ideal partner to make this drug available worldwide.