Penwest Sets Focused Priorities for 2009; Takes Actions to Further Reduce Costs

Expects to Achieve Quarterly Profitability in Fourth Quarter 2009


DANBURY, Conn., Jan. 22, 2009 (GLOBE NEWSWIRE) -- Penwest Pharmaceuticals Co. (Nasdaq:PPCO) today announced that its Board of Directors and senior management have set narrowed priorities for 2009, and that the Company is taking steps to further reduce overhead costs corresponding to these narrowed priorities. The Company also said that it expects to become cash flow positive and achieve quarterly profitability in the fourth quarter of 2009, as the Company takes actions to realize the full value of Opana ER.

Penwest has confirmed its strategy of developing differentiated pharmaceutical products that address unmet medical needs, primarily for disorders of the nervous system, as the best way to build value for Penwest shareholders. The Company plans to focus its resources in 2009 on the development of A0001, its compound for the treatment of mitochondrial diseases, in order to establish Phase II proof-of-concept in patients for the compound by the end of the year. As described below, the Company has set clearly defined goals for 2009 consistent with its sharpened focus.

They are to:



 * Maximize the value of Opana ER, working closely with its marketing
   partner Endo Pharmaceuticals.  During the year, the Company will
   continue to take steps to protect and prosecute the intellectual
   property around Opana ER, and explore licensing opportunities for
   Opana ER outside the U.S.

 * Advance the development of A0001.  The next steps in developing
   this compound are completing a multiple ascending dose safety study
   by the second quarter of 2009, and completing a Phase II proof-of-
   concept study in patients by the end of 2009.  The Company believes
   that these studies represent important value creation milestones
   and decision points for determining the future development of this
   compound and a new chemical entity the Company is entitled to under
   its collaboration agreement with Edison Pharmaceuticals.

 * Monetize the value of the Company's proven drug delivery
   technologies and drug formulation expertise by executing at least
   two drug delivery deals again this year.  The Company believes
   that with two new agreements per year, this aspect of its business
   can operate on a breakeven basis, funding a portion of the
   Company's overhead and providing Penwest with a financial stake in
   products, should they advance in development and commercialization.

 * Aggressively manage overhead and other costs to ensure that the
   Company's infrastructure is sized appropriately to its narrowed
   priorities.  These actions include an 18% reduction in personnel in
   January 2009, which builds on the significant decreases in the
   Company's spending on both general and administrative and research
   and development expenses over the past year.

Jennifer Good, President and Chief Executive Officer of Penwest, said, "Penwest is financially solid and has expertise in both drug development and licensing. We expect the Company to become cash flow positive and achieve quarterly profitability in the fourth quarter of 2009. However, we also understand the challenging environment in which we are currently operating, and the need to bring down the Company's costs to be responsive to that environment and our level of activity in 2009."

Penwest is reducing its staff from 60 to 49 people, which the Company believes is the level required to support its basic operations. After taking into account headcount reductions the Company made in 2008, this represents a decrease of 34% or 25 employees during the past year. Ongoing staff responsibilities will center on activities related to maximizing the value of Opana ER, advancing the development of A0001, supporting the Company's drug delivery technology deals, and performing functions related to Penwest's operation as a public company.

The staff reductions include the departure of the Company's Chief Financial Officer Ben Palleiko. Ms. Good, who served as Penwest's CFO from the formation of the Company in 1997 until mid-2006, when she was named Chief Executive Officer, will assume the added responsibilities of the CFO.

Ms. Good said, "We value each of our employees, so it is with deep regret that we make these staff reductions. However, given the difficult economic environment and our targeted organizational activity for 2009, they are necessary and appropriate. By realigning our cost structure, Penwest will be in a position to better focus on its drug development program for A0001 and other priorities for this year. As we have in the past, we will continue to monitor and evaluate our overhead relative to our development programs and plans for growth."

In connection with the announced staff reductions, Penwest will record a severance charge to earnings in the first quarter of 2009.

The Company plans to provide guidance for 2009 when it announces its financial results for the fourth quarter and full year 2008 during the first week of March.

About Penwest Pharmaceuticals

Penwest is a drug development company focused on identifying, developing and commercializing products that address unmet medical needs, primarily for disorders of the nervous system. Penwest is currently applying its drug development and drug delivery expertise to the development of products that are in various stages of development, and that it intends to commercialize independently or through third party alliances.

Forward-Looking Statements

The matters discussed herein contain forward-looking statements that involve risks and uncertainties, which may cause the actual results in future periods to be materially different from any future performance suggested herein. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words, "believes," "anticipates," "plans," "expects," "intends," "potential," and similar expressions are intended to identify forward-looking statements. Important factors that could cause results to differ materially include: risks relating to the potential disruption of the Company's operations that would result from the staff reductions, risks relating to the commercial success of Opana ER, including our reliance on Endo Pharmaceuticals Inc. for the commercial success of Opana ER and risks of generic competition, the need for capital; regulatory risks relating to drugs in development, including the timing and outcome of regulatory submissions and regulatory actions; uncertainty of success of collaborations; the timing of clinical trials; whether the results of clinical trials will warrant further clinical trials, warrant submission of an application for regulatory approval of, or warrant the regulatory approval of, the product that is the subject of the trial; whether the patents and patent applications owned by us will protect the Company's products and technology; actual and potential competition; and other risks as set forth under the caption Risk Factors in Penwest's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 10, 2008, which risk factors are incorporated herein by reference.

The forward-looking statements contained in this press release speak only as of the date of the statements made. Penwest disclaims any intention or obligation to update any forward-looking statements.

TIMERx is a registered trademark of Penwest. All other trademarks referenced herein are the property of their respective owners.



            

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