Pharmos Corporation Reports 2009 Third Quarter Results

ISELIN, N.J., Nov. 12 /PRNewswire-FirstCall/ -- Pharmos Corporation (Pink
Sheets: PARS) today reported financial results for the third quarter and
nine-month period ended September 30, 2009.

Third Quarter Ended September 30, 2009
The Company recorded a net loss of $1.4 million, or $0.02 per share, for the
third quarter 2009 compared to a net loss of $2.8 million, or $0.11 per share,
in the third quarter 2008. Cash and cash equivalents totaled $1.3 million at
September 30, 2009.

The decrease in net loss for the third quarter 2009 is due primarily to a 50%
decrease in operating expenses to $1.4 million from $2.8 million in the third
quarter 2008. The decline in operating expenses resulted from a 54% decrease
in net research and development expenses to $1.1 million compared to $2.3
million in the third quarter 2008. Also general and administrative expenses
decreased 22% in the third quarter 2009.

Research & development expenses decreased by $1,251,622 or 54% from $2,298,882
in 2008 to $1,047,260 in 2009, related to the Company's primary focus of cash
resources on the Dextofisopam Phase 2b trial and the downsizing and
curtailment of general research and development programs. The decline
reflects decreases in virtually every research and development expense
category. The primary reductions include a $175,000 reduction in payroll, a
$109,000 reduction in consultant and professional fees, an $858,000 reduction
in clinical studies and $110,000 reduction in various other areas. The
decrease in these costs, reflect the closing of the Rehovot facility effective
October 31, 2008 and the fact that the Dextofisopam trial is complete.

In the quarter ended September 30, 2009, the Company completed a Phase 2b
trial of its lead compound, Dextofisopam, in female IBS patients. The Phase 2b
trial was fully enrolled on April 9, 2009 at 324 patients. Costs of $971,000
were incurred during the quarter in connection with the trial, comprising
CRO-related activities. All patients in the trial have completed treatment in
July of 2009 and top line clinical data was released in September 2009. The
results of the Dextofisopam Phase 2b clinical trial were announced on
September 14, 2009. While the trial did not meet the primary endpoints for any
of the three drug dose arms, drug activity was clearly evident especially at
the 200 mg. dose level. On October 21, 2009 the Company announced that it had
engaged Cowen and Company as advisors to assist with accelerating a
partnership arrangement for Dextofisopam.

General and administrative expenses for the third quarter of 2009 decreased by
$94,438, or 22%, from $436,758 in 2008 to $342,320 in 2009. The primary
reductions are a $24,000 decrease in payroll, a $100,000 reduction in
miscellaneous expenses and an $8,000 reduction in investor relations. This is
offset in part, by increases of $29,000 in rent and utilities and $15,000 of
miscellaneous expenses. The decrease in payroll costs reflect the impact of
the 2008 restructuring plans which have reduced the Company's head count from
18 employees in December 2007 to 5 employees at the end of December 2008 and 4
employees at the end of September 2009. The decrease in investor relations
expenses is attributable to holding the annual meeting earlier in the year.
The increase in rent is the result of the settlement of the Rehovot lease in
which a third quarter charge was booked. The increase in 2009 miscellaneous
expenses is the result of a 2008 gain on the disposal of fixed assets at our
Rehovot facility which reduced the 2008 net expenses. Finally the cumulative
effect of the other areas was minimal in the overall numbers.

Depreciation and amortization expenses decreased by $22,823, or 92%, from
$24,853 in 2008 to $2,030 in 2009. The decrease is due to fixed assets which
have become fully depreciated and the disposition of various depreciable
assets in conjunction with the Company's 2008 restructuring plans.

Other expense net, decreased by $58,162 from $83,859 in other expense in 2008
to $25,697 in other expense in 2009. The reduction is related to the decreased
interest income of $42,285 from a decline in cash and cash equivalents offset
by a $92,973 reduction in interest expense attributable to reduced debenture
interest and a $7,474 decrease in translation gains and losses that were
recorded at our Rehovot location. In the third quarter of 2009 the Company
recorded $29,606 in interest expense related to the remaining of $1,000,000 in
convertible debentures issued on January 3, 2008.

Nine-months Ended September 30, 2009
For the nine months ended September 30, 2009, Pharmos recorded a net loss of
$7.3 million, or $0.16 per share compared to a net loss of $9.1 million, or
$0.35 per share for the nine months ended September 30, 2008. Total operating
expenses decreased 27% to $6.6 million from $9.0 million.

Research & development expenses decreased by $2,940,572 or 41% from $7,206,909
in 2008 to $4,266,337 in 2009, related to the Company's primary focus of cash
resources on the Dextofisopam Phase 2b trial and the downsizing and
curtailment of general research and development programs. The decline
reflects decreases in virtually every research and development expense
category. The primary reductions include a $724,000 reduction in payroll, a
$327,000 reduction in consultant and professional fees, a $1,547,000 reduction
in clinical studies and $342,000 reduction in various other areas. The
decrease in these costs reflect the closing of the Rehovot facility effective
October 31, 2008 and the fact that the Dextofisopam trial is complete.

In the first nine months of 2009, the Company completed a Phase 2b trial of
its lead compound, Dextofisopam, in female IBS patients. The Phase 2b trial
was fully enrolled on April 9, 2009 at 324 patients. Costs of $3,946,000 were
incurred during the first nine months of 2009 in connection with the trial,
comprising CRO-related activities. All patients in the trial completed
treatment in July of 2009 and top line clinical data was released in September
2009. The results of the Dextofisopam Phase 2b clinical trial were announced
on September 14, 2009. While the trial did not meet the primary endpoints for
any of the three drug dose arms, drug activity was clearly evident at the 200
mg. dose level. On October 21, 2009 the Company announced that it had engaged
Cowen and Company as advisors to assist with accelerating a partnership
arrangement for Dextofisopam.

In process research and development costs which were related to the Vela
milestone increased by $1,180,000 from $0 in 2008 to $1,180,000 in 2009. On
April 9, 2009 the last patients were enrolled in the Phase 2b trial thus
triggering the following milestone: $1 million cash + 2 million shares of
Pharmos common stock: Final patient enrolled in Phase 2b trial. The expense of
the milestone of $1,180,000 has been reflected in the 1Q 2009 results. The
payment of the cash portion of the milestone has been deferred under an
amendment to the acquisition agreement. Under the terms of the Vela
acquisition agreement as amended, the 2 million shares will be issued on
November 2, 2009. Since the trial results were not successful, no other
milestones have been achieved.

General and administrative expenses for the first nine months of 2009
decreased by $585,882, or 35%, from $1,687,747 in 2008 to $1,101,865 in 2009.
The decline reflects decreases in virtually every general and administrative
expense category. The primary reductions include a $359,000 reduction in
payroll, a $100,000 reduction in miscellaneous expenses, a $123,000 reduction
in consultant and professional fees and a reduction in various other expenses
of $75,000. This is offset in part, by increases of $36,000 in investor
relations and $34,000 of miscellaneous expenses. The decrease in payroll costs
reflect the impact of the 2008 restructuring plans which have reduced the
Company's head count from 18 employees in December 2007 to 5 employees at the
end of December 2008 and 4 employees at the end of September 2009. The
decrease in consulting and professional fees in 2009 result from a decline in
legal costs and a one time IRS section 382 tax analysis cost incurred in 2008.
The decrease in the various costs result primarily from a reduction in
facility related expenses. The increase in investor relations expenses is
attributable to holding the annual meeting earlier in the year. The increase
in 2009 miscellaneous expenses is the result of a 2008 gain on the disposal of
fixed assets at our Rehovot facility as this event was classified as a
reduction of overall expenses.

Depreciation and amortization expenses decreased by $83,231, or 93%, from
$89,514 in 2008 to $6,283 in 2009. The decrease is due to fixed assets which
have become fully depreciated and the disposition of various depreciable
assets in conjunction with the Company's 2008 restructuring plans.

Other expense net, increased by $669,151 from $122,623 in other expense in
2008 to $791,774 in other expense in 2009. The majority of this increase is
related to the conversion of debentures into equity resulting in an expense of
$596,104 and from decreased interest income of $230,003 from a decline in cash
and cash equivalents. We also recorded an increase in other expenses of
$15,801 which is a net of translation losses on assets held in Israel due to
currency translation fluctuations and other income which relates to Amino
Labs. Finally we recorded a decrease in interest expense of $172,757 as the
decrease is attributable to reduced debenture interest. In the first nine
months of 2009 the Company recorded $196,536 in interest expense related to
the issuance of $4,000,000 in convertible debentures issued on January 3,
2008.

Management believes that the current cash and cash equivalents, totaling $1.3
million as of September 30, 2009, will be sufficient to support the Company's
currently planned continuing operations at least through December 31, 2009.
The Company is working on securing cash resources to extend operations beyond
December 31, 2009. Cowen and Company have been retained as advisors to help
accelerate the process of a partnership arrangement for our lead compound,
Dextofisopam. Additionally any proceeds for the sale of the New Jersey NOL's
are expected to extend operations beyond December 31, 2009. The Company's
expected cash expenditures in the last quarter of 2009 will be less than the
first three quarters of 2009 as the Dextofisopam Phase 2b trial completed
patient treatment in July and statistical analysis was completed in September
2009. The majority of ongoing costs will be general and administrative which
will be significantly less than funding a clinical trial. The Company
routinely pursues various funding options, including additional equity
offerings, equity-like financing, strategic corporate alliances, business
combinations and the establishment of product related research and development
limited partnerships, to obtain additional financing to continue the
development of its products and bring them to commercial markets. On April
21, 2009, the Company completed a private placement of common stock and
warrants. At the closing, the Company issued 18,000,000 shares of common
stock and warrants exercisable for an additional 18,000,000 shares of common
stock for an aggregate purchase price of $1,800,000. The exercise price of
the warrants, which have a five-year term, is $0.12 per share. The details of
the financing, made by existing investors and current board members, are
described in Note 2 to the financial statements. This financing would also
support additional efforts to negotiate a strategic partnership or license
arrangement with a pharmaceutical company. This is consistent with Pharmos'
strategy as previously communicated, since the Company does not have the
resources to continue to develop Dextofisopam through a Phase 3 trial.

About Pharmos Corporation
Pharmos discovers and develops novel therapeutics to treat a range of
indications including specific diseases of the nervous system such as
disorders of the brain-gut axis (IBS), pain/inflammation, and autoimmune
disorders. The Company's lead product in development is Dextofisopam for the
treatment of IBS which has been developed through Phase 2b clinical trials.
The Company also has a proprietary technology platform focusing on discovery
and development of synthetic cannabinoid compounds with a focus on CB2
receptor selective agonists. Various CB2-selective compounds from Pharmos'
pipeline have completed preclinical studies targeting pain, multiple
sclerosis, rheumatoid arthritis, inflammatory bowel disease and other
disorders. These are available for licensing / partnering.

Safe Harbor Statement
Statements made in this press release related to the business outlook and
future financial performance of Pharmos, to the prospective market penetration
of its drug products, to the development and commercialization of its pipeline
products and to its expectations in connection with any future event,
condition, performance or other matter, are forward-looking and are made
pursuant to the safe harbor provisions of the Securities Litigation Reform Act
of 1995. Such statements involve risks and uncertainties that may cause
results to differ materially from those set forth in these statements.
Additional economic, competitive, governmental, technological, marketing and
other factors identified in Pharmos' filings with the Securities and Exchange
Commission could affect such results.

PHARMOS CORPORATION
Condensed Consolidated Statements of Operations

Three months ended Nine months ended
September 30, September 30,
------------------ -----------------
2009 2008 2009 2008
---- ---- ---- ----
Expenses
Research and
development $1,047,260 $2,298,882 $4,266,337 $7,206,909
In-process research &
development
Vela milestone - - 1,180,000 -
General and
administrative 342,320 436,758 1,101,865 1,687,747
Depreciation and
amortization 2,030 24,853 6,283 89,514
----- ------ ----- ------
Total operating
expenses 1,391,610 2,760,493 6,554,485 8,984,170
--------- --------- --------- ---------

Loss from operations (1,391,610) (2,760,493) (6,554,485) (8,984,170)
--------- --------- --------- ----------

Other (expense) income
Debt conversion expense - - (596,104) -
Interest income 776 43,061 8,149 238,152
Interest expense (29,607) (122,580) (196,537) (369,294)
Other income (expense) 3,134 (4,340) (7,282) 8,519
----- ------ ------ -----
Other expense, net (25,697) (83,859) (791,774) (122,623)
------- ------- -------- --------

Net loss ($1,417,307) ($2,844,352) ($7,346,259)($9,106,793)
=========== =========== =========== ===========

Net income (loss)
per share
- basic and diluted ($0.02) ($0.11) ($0.16) ($0.35)
====== ====== ====== ======

Weighted average shares
outstanding
- basic and diluted 57,264,340 26,023,311 44,724,194 25,842,264
========== ========== ========== ==========

Select Consolidated Balance Sheet Data

September 30, 2009 December 31, 2008
------------------ -----------------
Cash and short-term investments $1,276,793 $4,730,282
Working capital $903,967 $4,232,549
Shareholder's (deficit) equity ($1,067,449) $341,219

SOURCE Pharmos Corporation

S. Colin Neill, President & CFO, Pharmos U.S., +1-732-452-9556