Penwest Reports Third Quarter 2009 Financial Results

DANBURY, Conn., Nov. 5, 2009 (GLOBE NEWSWIRE) -- Penwest Pharmaceuticals Co.
(Nasdaq:PPCO) today reported its financial results for the third quarter of
2009. Compared with the third quarter of 2008, revenues more than quadrupled,
and operating expenses decreased by 32%. The Company also achieved its first
quarterly net profit.

Operating and Financial Highlights for Third Quarter 2009

* Earned a net profit of $383,000, or $0.01 per share, compared
with a net loss of $7.3 million, or $0.23 per share, for the
third quarter of 2008. This increase in earnings is
attributable to both a significant increase in revenues as well
as a meaningful reduction in total operating expenses.

* Grew revenues to $6.3 million, including $4.9 million in
royalties recognized from Endo Pharmaceuticals Inc. (Endo) on
its net sales of Opana(R) ER, compared with revenues of $1.4
million in the third quarter of 2008. Net sales for Opana ER
experienced strong growth in the third quarter of 2009, with a
40% increase over the third quarter of 2008, and an 11% increase
compared with the second quarter of 2009.

* Achieved a milestone under a drug delivery collaboration with
Otsuka Pharmaceutical Co., Ltd. (Otsuka) as a formulation of an
Otsuka product developed by Penwest under the collaboration
demonstrated proof-of-principal in a Phase I pharmacokinetic
clinical trial conducted by Otsuka.

* Announced results of the Phase Ib clinical trial of A0001, a
compound Penwest is developing for the treatment of
mitochondrial diseases, indicating that the drug was well
tolerated by subjects, and that no serious adverse events were
reported. The Company expects to commence two Phase IIa
clinical trials of A0001 before the end of the year.
Jennifer L. Good, President and Chief Executive Officer, said, "This was a very
important quarter at Penwest, as we continued to execute our focused strategic
plan for 2009 and made strong progress on all fronts, culminating in the
achievement of our first profitable quarter. We are pleased with this and expect
to continue our financial growth and to be profitable for the full year of 2010.

"Equally important is the further progress we made on our business goals for
2009. Specifically, we advanced A0001 through Phase Ib and expect to initiate
two Phase II trials in the fourth quarter. We also continued to advance the
drugs under development in our drug delivery collaborations, earning a milestone
payment from Otsuka by achieving the target product profile in a
proof-of-principal Phase I study. Our development team is very active and
focused as we head into the fourth quarter moving forward not only on A0001 but
also on the compounds of our collaborators."

Penwest also announced that in order to further lower its overhead costs, the
Company is reducing its staff from 48 to 39, and plans to consolidate its
Danbury, Connecticut headquarters office space into its Patterson, New York
facility as of January 1, 2010. The Company has also decided to defer any new
development work on A0001 other than the two Phase IIa studies, pending review
and analysis of the results of those studies. The Company expects that these
actions will result in total annual cost savings of approximately $3 million.
Penwest anticipates taking a one-time restructuring charge in the fourth quarter
of 2009, primarily relating to its staff reduction.

Ms. Good noted, "Staff reductions are never easy, and today's announcement is no
different. However, our management and Board of Directors are committed to
continuing to challenge our cost structure as we execute our strategic plan and
to take action to ensure that our costs are commensurate with our business plan.
We will continue to monitor and evaluate our cost structure relative to our
development programs and plans for growth as we move forward."

Third Quarter 2009 Financial Results

Total revenues for the third quarter of 2009 were $6.3 million, compared with
$1.4 million for the third quarter of 2008. The increase was primarily due to
$4.9 million of revenue recognized in the third quarter of 2009 for royalties
from Endo on its sales of Opana ER and increased revenues earned by Penwest
under its drug delivery collaborations, including the milestone payment earned
under a collaboration with Otsuka.

Net income for the third quarter of 2009 was $383,000, or $0.01 per share,
compared with a net loss of $7.3 million, or $0.23 per share, for the third
quarter of 2008.

Selling, general and administrative (SG&A) expenses were $1.8 million for the
third quarter of 2009, compared with $2.2 million for the third quarter of 2008.
The decrease in the third quarter of 2009 was primarily attributable to a
non-recurring credit recorded in the third quarter of 2009 relating to the cash
surrender value of life insurance policies the Company holds for its
supplemental executive retirement and deferred compensation plans, lower
compensation expenses as a result of staff reductions implemented in January
2009 and lower share-based compensation expenses.

Research and product development (R&D) expenses were $3.3 million for the third
quarter of 2009, compared with $5.9 million for the third quarter of 2008. The
decrease of $2.6 million reflects lower contractual payments to Edison under the
Company's collaboration agreement with Edison. In addition, the decrease
reflects that the Company did not incur significant expenses in the third
quarter of 2009 related to development of any compounds other than A0001, and
that the Company had lower compensation expenses in the third quarter of 2009,
primarily due to increased allocations of internal R&D costs relating to its
drug delivery technology collaborations to cost of revenues and the staff
reductions implemented in January 2009.

Nine Months Ended September 30, 2009

Total revenues for the nine months ended September 30, 2009 were $16.8 million,
compared with $3.4 million for the nine months ended September 30, 2008. The
increase was due to $13.7 million of revenue recognized in the first nine months
of 2009 for royalties from Endo on its sales of Opana ER. The increase was
partially offset by lower royalties from Mylan Pharmaceuticals Inc. (Mylan) on
Mylan's net sales of Pfizer Inc.'s 30 mg generic version of Procardia XL(R).

The net loss for the nine months ended September 30, 2009 was $2.7 million, or
$0.09 per share, compared with a net loss of $24.5 million, or $0.83 per share,
for the nine months ended September 30, 2008.

SG&A expenses were $7.4 million for the nine months ended September 30, 2009,
compared with $9.6 million for the nine months ended September 30, 2008. The
decrease was attributable to several factors, including lower share-based
compensation expense, largely due to a credit recorded in the first quarter of
2009 that resulted from the forfeiture of stock options held by former
employees, and lower compensation expenses primarily due to the January 2009
staff reductions. The decrease also reflects the $1.0 million reserve
established in the first quarter of 2008 related to a loan the Company made to
Edison in February 2008 and the credit related to the cash surrender value of
the Company's insurance policies as noted above. Partially offsetting these
decreased expenses were $1.3 million in costs incurred in connection with this
year's proxy contest and the related litigation.

R&D expenses were $9.7 million for the nine months ended September 30, 2009,
compared with $16.8 million for the nine months ended September 30, 2008. The
decrease of $7.1 million reflects that the Company had lower contractual
payments to Edison under the collaboration agreement with Edison, no expenses
related to the development of nalbuphine ER and PW4153, and lower compensation
expenses, primarily as a result of the staff reductions implemented in the first
quarter of 2008 and the first quarter of 2009, and increased allocations of
internal R&D costs relating to its drug delivery technology collaborations to
the cost of revenues. These decreases in R&D expenses were partially offset by
increased expenses for the development of A0001.

As of September 30, 2009, Penwest had $11.5 million in cash, cash equivalents
and marketable securities, compared with $16.7 million as of December 31, 2008.

Conference Call and Webcast

Penwest will hold a conference call today at 11:00 am ET to review the Company's
financial results for the third quarter of 2009 and operational developments.

The conference call will include remarks by Ms. Good and Frank Muscolo,
Controller and Chief Accounting Officer. The dial-in numbers for the call are:

Domestic Telephone Number: (888) 277-5064
International Telephone Number: (816) 650-7863
The conference ID is: 37239507
Please dial in 10 minutes prior to the scheduled start time. The conference call
will also be accessible live and as a replay on the Investor Relations section
of the Penwest Web site at www.penwest.com. The replay will be available until
November 18, 2009.

About Penwest Pharmaceuticals

Penwest is a drug development company focused on identifying and developing
products that address unmet medical needs, primarily for rare disorders of the
nervous system. Penwest is currently developing A0001, or alpha tocopherol
quinone, a coenzyme Q10 analog demonstrated in-vitro to improve mitochondrial
respiratory chain diseases. Penwest is also applying its drug delivery
technologies and drug formulation expertise to the formulation of our
collaborators' product candidates under licensing collaborations.

Penwest Forward-Looking Statements

The matters discussed herein contain forward-looking statements for purposes of
the safe harbor provisions under The Private Securities Litigation Reform Act of
1995 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," "appears," "estimates," "projects,"
"targets," "may," "could," and similar expressions are intended to identify
forward-looking statements. Important factors that could cause results to differ
materially include the following: 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 be indicative of the results of future clinical trials and
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 August 10, 2009, 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, and these statements should not be
relied upon as representing the Company's estimates or views as of any date
subsequent to the date of this release.

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

Penwest Pharmaceuticals Co.
Statements of Operations
(Thousands of dollars, except per share data, Unaudited)

Three Months Ended Nine Months Ended
September 30 September 30
-------------------- --------------------
2009 2008 2009 2008
--------- --------- --------- ---------
Revenues:
Royalties $ 5,286 $ 1,039 $ 14,859 $ 1,998
Product sales 134 52 472 581
Collaborative licensing
and development revenue 874 270 1,492 837
--------- --------- --------- ---------
Total revenues 6,294 1,361 16,823 3,416
Operating expenses:
Cost of revenues 708 322 1,830 999
Selling, general and
administrative 1,758 2,247 7,362 9,642
Research and product
development 3,256 5,888 9,687 16,797
--------- --------- --------- ---------
Total operating
expenses 5,722 8,457 18,879 27,438
--------- --------- --------- ---------
Income (loss) from
operations 572 (7,096) (2,056) (24,022)
Investment income 3 127 14 506
Interest expense (192) (308) (675) (986)
--------- --------- --------- ---------
Net income (loss) $ 383 $ (7,277) $ (2,717) $(24,502)
========= ========= ========= =========

Net income (loss) per
share:
Basic $ 0.01 $ (0.23) $ (0.09) $ (0.83)
========= ========= ========= =========
Diluted $ 0.01 $ (0.23) $ (0.09) $ (0.83)
========= ========= ========= =========

Weighted average shares
of common stock
outstanding:
Basic 31,760 31,521 31,652 29,381
========= ========= ========= =========
Diluted 31,805 31,521 31,652 29,381
========= ========= ========= =========
Other Information
September 30, 2009 December 31, 2008
-------------------- --------------------
Cash, cash equivalents
and marketable securities $11,521 $16,692
-0-
CONTACT: Penwest Pharmaceuticals
Investors:
Jennifer Good
(203) 796-3701

Kekst and Company
Media:
John Patteson
(212) 521-4800