Cash Reserves Augmented with Recently Completed Financing Expected to Fund Operations into 2011

SAN DIEGO, July 30 /PRNewswire-FirstCall/ -- Anadys Pharmaceuticals, Inc. (Nasdaq: ANDS), a biopharmaceutical company dedicated to improving patient care by developing novel medicines for the treatment of hepatitis C, today reported its financial results and program highlights for the second quarter ended June 30, 2009.

"With our enhanced cash position, reduced cost structure and Phase II protocol allowance from the FDA, we are well positioned to continue advancing the development of ANA598 as a treatment for chronic hepatitis C," said Steve Worland, Ph.D., President and CEO of Anadys. "ANA598 has demonstrated potent antiviral activity and good tolerability in Phase I, as well as preclinical properties indicative of likely synergy when used clinically in combination regimens. The upcoming Phase II trial has several important elements, including twelve weeks of ANA598 combination treatment and a randomized exploration of shortening the overall duration of HCV therapy in conjunction with ANA598 treatment. We look forward to receiving the first data from this trial by year-end 2009 and additional data in the first half of 2010."

Financial Results

As of June 30, 2009, the Company's cash, cash equivalents and securities available-for-sale totaled $30.6 million compared to $27.9 million as of December 31, 2008. The increase in cash, cash equivalents and securities available-for-sale is the result of proceeds received from a "registered direct" offering of common stock and warrants in early June 2009, partially offset by the year-to-date cash utilization.

Research and development expenses were $4.6 million for the second quarter of 2009, compared to $5.5 million for the second quarter of 2008. The $0.9 million decrease was primarily attributable to a $1.3 million decrease in ANA773 development costs partially offset by $0.5 million in severance costs recorded in conjunction with the strategic restructuring initiated in June 2009. ANA773 development costs during the second quarter of 2009 were primarily driven by the ongoing Phase I clinical trial for the treatment of hepatitis C. During the second quarter of 2008, ANA773 development costs were primarily driven by the now completed 13-week GLP animal toxicology studies and the Phase I oncology clinical trial. The ANA598 development costs during the second quarter of 2009 were primarily associated with the 14-day healthy volunteer study and the ongoing long-term chronic toxicology studies which were initiated in September 2008.

General and administrative expenses were $2.5 million for the second quarter of 2009, compared to $2.0 million for the second quarter of 2008. The $0.5 million increase primarily resulted from severance costs recorded in conjunction with the strategic restructuring initiated in June 2009.

Operating expenses were $7.2 million for the second quarter of 2009, compared to $7.5 million for the second quarter of 2008. Included as a component of Anadys' operating expenses were non-cash, share-based expenses of $1.1 million and $0.7 million for the second quarter of 2009 and 2008, respectively.

The net loss was $6.5 million for the second quarter of 2009, compared to a net loss of $7.1 million for the second quarter of 2008. Included in the net loss for the second quarter of 2009 is a $0.4 million gain resulting from a reduction between issuance and June 30, 2009 in the liability associated with common stock warrants issued in conjunction with the "registered direct" financing. Basic and diluted net loss per common share was $0.21 in the second quarter of 2009, compared to $0.25 in the second quarter of 2008. Non-cash share-based expense resulted in a $0.03 and $0.02 increase in basic and diluted net loss per share for the second quarter of 2009 and 2008, respectively.

For the six months ended June 30, 2009, Anadys reported a net loss of $15.3 million, compared to $14.5 million for the same period last year. Basic and diluted net loss per common share was $0.51 for the six months ended June 30, 2009 and 2008.

Operational Highlights

• Closed Registered Direct Financing. In early June, Anadys closed a "registered direct" offering through the sale of units to institutional investors, with each unit consisting of one share of common stock and a warrant to purchase 0.35 of a share of common stock. $17.5 million in gross proceeds were raised, with net proceeds of approximately $16.0 million, after deducting placement agent fees and estimated offering expenses. Proceeds from the transaction are being used to further the development of ANA598, as well as for other general corporate purposes.
• Future Operations to Focus on Development of ANA598. In June, Anadys initiated a strategic restructuring to focus its operations on the continued development of ANA598, in particular a Phase II study in combination with pegylated interferon-alpha and ribavirin. The restructuring included a reduction in Anadys' workforce expected to generate annual savings of $4 to $5 million, while retaining the clinical development infrastructure required to conduct the Phase II study of ANA598, key capabilities directed toward pharmaceutical development and next generation non-nucleosides, and a streamlined administrative staff. Also included in the restructuring is an expected reduction in annual facility expense of approximately $1.8M associated with our completed move to a smaller facility.
  

Development Program Highlights

ANA598

ANA598 is the Company's non-nucleoside HCV polymerase inhibitor.

• Finalization of ANA598 Phase II Protocol. Anadys has finalized its protocol and received FDA clearance for the Phase II study of ANA598 in combination with pegylated interferon-alpha and ribavirin for the treatment of chronic hepatitis C. In the Phase II study, naive genotype 1 patients will receive ANA598 or placebo in combination with Pegasys(R) (peginterferon alfa-2a) and Copegus(R) (ribavirin, USP) (a current standard of care, or SOC) for 12 weeks at dose levels of 200 mg or 400 mg twice daily (bid), each with a loading dose of 800 mg bid on day one. After week 12, patients will continue to receive SOC alone.