Spectral Announces Third Quarter Results

TORONTO, Nov. 10, 2011 /CNW/ - Spectral Diagnostics Inc., (TSX:SDI), a Phase III company developing the first theranostic treatment for patients with severe sepsis and septic shock, today announced its financial results for the third quarter ended September 30, 2011.

Third Quarter Highlights:

• Received approval from the U.S. FDA to increase the total number of clinical sites in its EUPHRATES trial from the current 15, to a total of 30. International sites may now also be included in the trial. Directed by the Company's Endotoxin Activity Assay (EAA™), the only FDA cleared diagnostic for the risk of developing sepsis, Spectral's EUPHRATES trial is the world's first theranostics trial in the area of sepsis. The trial is targeted to enrol approximately 360 patients at 30 U.S. and Canadian sites over a period of up to 30 months, with interim analysis expected at the midpoint of the trial around the end of 2012.
  
  
• In conjunction with Medwell Capital Corp. (TSX-V: MWC), announced that the two companies completed their plan of arrangement pursuant to which Medwell acquired a further 33,333,333 Spectral common shares for $10 million, at a subscription price of $0.30 per share.  Pursuant to the arrangement, Medwell also distributed 54,282,834 Spectral Shares to its shareholders, representing approximately $16.3 million in value based on the $0.30 Spectral Share subscription price.
  
  
• Announced the publication of a study utilizing Spectral's Endotoxin Activity Assay (EAA™) to identify children at high risk of complications from open heart surgery. The study, which was published in the online version of the American Journal of Respiratory and Critical Care Medicine (AJRCCM), showed that intestinal injury, endotoxemia and activation of endotoxin signaling pathways are prevalent in children with congenital heart disease.
  
  
• Concluded the reporting period with approximately $20 million in cash and short term investments.
  
  
• Subsequent to quarter end, announced it is expanding its U.S. Phase III EUPHRATES trial to Canadian clinical trial sites.

"With Eli Lilly's recent worldwide withdrawal of Xigris, its product for the treatment of severe sepsis, regrettably there are few effective therapeutic treatment options available for the more than 250,000 patients diagnosed with severe sepsis and septic shock in the U.S. each year," said Dr. Paul Walker, President and CEO of Spectral Diagnostics. "We worked diligently in our third quarter to fill that market need by continuing to move our fully funded, Phase III EUPHRATES trial closer to completion."

Financial Review

Revenues for the three months ended September 30, 2011 were $489,000 compared to $759,000 for the same period in 2010. For the nine months ended September 30, 2011, revenues were $1,802,000 compared to $2,269,000 for the same prior year period. Revenues were lower in the first nine months of 2011 primarily due to a decline in sales of the Company's EAA™ diagnostic and related instrumentation resulting from the timing and terms of certain renegotiated distribution contracts. In addition, U.S. denominated royalty revenues were impacted by the strengthening Canadian dollars.

For the three months ended September 30, 2011, the Company reported a loss of $1,615,000 ($0.02 per share), compared to $1,257,000 for the corresponding period in 2010. For the nine months ended September 30, 2011, the Company reported a loss of $4,773,000 or ($0.06) per share, compared to a loss of $4,488,000 or ($.07) per share for the corresponding period in 2010.

Cash, cash equivalents and short-term investments on hand at September 30, 2011 were $20,249,000, compared to $15,332,000 at December 31, 2010. Cash was used during the nine month period ended September 30, 2011 to fund operations and for working capital purposes.

The total number of shares outstanding for the Company was 113,883,394 as at September 30, 2011.

About Spectral Diagnostics

Spectral is a Phase III company seeking U.S. FDA approval for its lead theranostics product for the treatment of septic shock. Toraymyxin is a therapeutic hemoperfusion device that removes endotoxin, which can cause sepsis, from the bloodstream. Directed by the Company's Endotoxin Activity Assay (EAA™), the only FDA cleared diagnostic for the risk of developing sepsis, Spectral's EUPHRATES trial is the world's first theranostics trial in the area of sepsis.

Toraymyxin has been approved for therapeutic use in 18 countries, and has been used safely and effectively in more than 80,000 patients to date. In March, 2009, Spectral obtained the exclusive development and commercial rights in the U.S. for Toraymyxin, and in November, 2010, signed an exclusive distribution agreement for this product in Canada, where it is approved for sale by Health Canada. More than 250,000 patients are diagnosed with severe sepsis and septic shock in North America each year, representing a greater than $1 billion market opportunity for Spectral. Spectral is listed on the Toronto Stock Exchange under the symbol SDI. For more information please visit www.spectraldx.com.

Forward-looking statement

Information in this news release that is not current or historical factual information may constitute forward-looking information within the meaning of securities laws. Implicit in this information, particularly in respect of the future outlook of Spectral and anticipated events or results, are assumptions based on beliefs of Spectral's senior management as well as information currently available to it. While these assumptions were considered reasonable by Spectral at the time of preparation, they may prove to be incorrect. Readers are cautioned that actual results are subject to a number of risks and uncertainties, including the availability of funds and resources to pursue R&D projects, the successful and timely completion of clinical studies, the ability of Spectral to take advantage of business opportunities in the biomedical industry, the granting of necessary approvals by regulatory authorities as well as general economic, market and business conditions, and could differ materially from what is currently expected.

The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this statement.

Spectral Diagnostics Inc.
Condensed Interim Financial Statements

September 30, 2011
(Unaudited)

These unaudited condensed interim financial statements have been prepared by management of Spectral Diagnostics Inc. and have not been reviewed by the Company's auditors.

Spectral Diagnostics Inc.
Condensed Interim Statement of Financial Position
(unaudited)

(in thousands of Canadian dollars)

Spectral Diagnostics Inc.
Condensed Interim Statement of Loss and Comprehensive Loss
For the three and nine months ended September 30, 2011 and 2010
(unaudited)

(in thousands of Canadian dollars, except for share and per share data)

Spectral Diagnostics Inc.
Condensed Interim Statement of Changes in Equity
For the nine months ended September 30, 2011 and 2010
(unaudited)

(in thousands of Canadian dollars, except number of shares)

Spectral Diagnostics Inc.
Condensed Interim Statement of Cash Flows
For the nine months ended September  30, 2011 and 2010
(unaudited)

(in thousands of Canadian dollars)