Other income (expense) during each of the fourth quarters of 2009 and 2008 amounted to net expense of $0.3 million. The primary component of other income (expense) in both quarters is interest expense and foreign exchange loss.

Full Year 2009 vs. Full Year 2008

Revenue

During the years 2009 and 2008, the Company recognized deferred revenue of $0.4 million and $0.3 million, respectively. During 2009 revenue was primarily related to the recognition of deferred revenue from the Company ™s license agreements with Myriad Genetics, Endo Pharmaceuticals and Durect, as well as royalties with respect to certain technology and sales of Ceplene?®. During 2008 revenue was primarily related to the recognition of deferred revenue from the Company ™s license agreements with Myriad Genetics, Endo Pharmaceuticals and Durect.

General and Administrative (G&A) Expense

General and administrative expense in 2009 decreased by approximately 21%, or $2.1 million, to $7.5 million compared with $9.6 million in 2008. The decrease in administrative expense can be attributed to a cost reduction effort implemented in 2008 and continued into 2009. For 2009 stock-based compensation expense amounted to $0.9 million, down $0.9 million from 2008. In addition, the Company ™s legal, accounting and public reporting expense decreased $0.5 million and the Company ™s facility, insurance and other administrative expenses decreased $0.7 million for 2009, compared with 2008.

Research and Development (R&D) Expense

Research and development expense in 2009 decreased by approximately 8%, or $1.0 million, to $11.6 million compared with $12.6 million in 2008. The decrease was primarily attributable to lower clinical trial and consulting expenses totaling $0.4 million, lower compensation expenses of $1.1 million and lower patent expenses of $0.2 million in 2009, compared with 2008, partially offset by $0.8 million in facility expense and $0.2 million in severance expenses related to the closing of the Company ™s research facility in San Diego in 2009.

Other Income (Expense)

Other income (expense) during 2009 amounted to a net expense of $20.1 million compared with a net expense of $3.4 million during 2008. The $16.7 million increase in other expense, net was primarily related to $10.5 million in amortization of debt issuance costs and discount and $9.3 million in interest expense, which was paid from restricted cash, as a result of the conversion of $24.5 million of the Company ™s 7.5556% convertible subordinated notes due 2014 into approximately 9.1 million shares of common stock in 2009. Other income (expense) was positively impacted by a $0.5 million change in foreign exchange gains though it was substantially offset by a $0.4 million decrease in the fair value of certain warrants and derivatives. The Company experienced a loss on extinguishment of debt of $2.0 million in 2008.

EpiCept also announced today that in its Annual Report on Form 10-K for the year ended December 31, 2009, the Company ™s independent registered public accounting firm is expected to express an unqualified opinion on the December 31, 2009 consolidated financial statements and will include an explanatory paragraph expressing substantial doubt about the Company ™s ability to continue as a going concern.

Liquidity

As of December 31, 2009 EpiCept had approximately $5.1 million in cash and cash equivalents. In January 2010, the Company received $3 million from Meda in connection with the signing of the Ceplene?® European marketing and distribution agreement. Meda is also required to pay an additional $2 million upon its commercial launch of Ceplene?® and a royalty on net sales. The Company believes that its cash is sufficient to fund operations into the third quarter 2010. The Company may receive cash from certain licensing activities during 2010 and upon achievement of specified clinical milestones.

In February 2010 EpiCept established an At-the-Market offering program through which the Company may, from time to time, offer and sell shares of its common stock having an aggregate offering price of up to $15.0 million through its sales agent. Sales of the shares, if any, will be made by means of ordinary brokers ™ transactions on The Nasdaq Capital Market or, to the extent allowable by law, the Nasdaq OMX Stockholm Exchange, at market prices. EpiCept may utilize this program at such times and in such amounts to minimize any disruption to the trading of its stock. In times of low trading volume the Company may severely limit or refrain altogether from using the program. No offerings under this program have yet occurred. The Company expects to use this facility to meet liquidity needs that may arise in the event any of the anticipated cash inflows are delayed or do not occur, and it may seek alternative sources of debt or equity should funds raised through the program be insufficient to timely meet the Company ™s liquidity requirements.

Source EpiCept Corporation