TMX group

TORONTO, Aug. 11, 2011 /CNW/ - Spectral Diagnostics Inc., (TSX: SDI), a Phase III company developing the first theranostic treatment for patients with septic shock, today announced its financial results for the second quarter ended June 30, 2011.

Second Quarter Highlights:

• Continued to effectively manage its U.S. pivotal trial for Toraymyxin, a therapeutic hemoperfusion device that removes endotoxin from the bloodstream. The EUPHRATES trial is targeted to enrol approximately 360 patients at 30 U.S. and international sites over a period of up to 30 months, with interim results expected at the midpoint of the trial by the end of 2012;
  
  
• Announced that 15 carefully chosen clinical sites for the EUPHRATES trial are operational, enrolment in the Company's Phase III sepsis trial is underway and, subsequent to the quarter end, the U.S. FDA approved an additional 15 U.S. or international sites for the trial;
  
  
• Jointly announced, with Medwell Capital Corp. (TSX-V:MWC), an agreement whereby, pursuant to a plan of arrangement, Medwell will acquire a further 33,333,333 Spectral shares for $10 million, at a subscription price of $0.30 per share. Pursuant to the arrangement, Medwell will also distribute 54,282,834 Spectral Shares to its shareholders, thereby reducing its ownership position in Spectral from approximately 45 % to 13.4 %;
  
  
• Concluded the reporting period with approximately $12 million in cash and short term investments.

"Our capital markets initiatives in the second quarter, together with the recently approved increase in the number of clinical trial sites, will provide funds for our expanded clinical development activities and help us complete our Phase III EUPHRATES trial on a timely basis" said Dr. Paul Walker, President and CEO of Spectral Diagnostics. "There are few therapeutic treatment options available for the more than 250,000 patients diagnosed with severe sepsis and septic shock in the U.S. each year. Our trial is focused on reducing the very high mortality rate associated with septic shock."

Financial Review

The second quarter ended June 30, 2011 was the Company's second reporting period under International Financial Reporting Standards (IFRS). As anticipated and disclosed in the fourth quarter of 2010, the transition to IFRS had no material impact on Spectral's second quarter financial results.

Revenues for the three months ended June 30, 2011 were $691,000 compared to $685,000 for the same period in 2010. For the six months ended June 30, 2011, revenues were $1,313,000 compared to $1,510,000 for the same 2010 period. Revenues were lower in the first six months of 2011 primarily due to a decline in sales of the Company's EAA™ diagnostic and related instrumentation resulting from the expiry of certain distribution agreements in 2010. All significant previously expired contracts have now been renewed.

For the three months ended June 30, 2011, the Company reported a loss of $1,700,000 ($0.02 per share), compared to $1,291,000 ($0.02 per share) for the corresponding period in 2010. For the six months ended June 30, 2011, the Company reported a loss of $3,158,000 or ($0.04) per share, compared to a loss of $3,231,000 or ($0.06) per share for the corresponding period in 2010.

Cash, cash equivalents and short-term investments on hand at June 30, 2011 were $12,070, compared to $15,332 at December 31, 2010. Cash was used during the six month period ended June 30, 2011 to fund operations and for working capital purposes.

The total number of shares outstanding for the Company was 80,550,061 as at June 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 RD 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 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 six months ended June 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 six months ended June 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 six months ended June 30, 2011 and 2010
(unaudited)

(in thousands of Canadian dollars)