MISSION VIEJO, CA -- (Marketwire) -- 01/02/13 -- Aeolus Pharmaceuticals, Inc. (OTCQB: AOLS), a biotechnology company leveraging significant government funding to develop a platform of novel compounds in oncology and biodefense, announced today financial results for the three months and twelve months ended September 30, 2012.

2012 Key Operational Accomplishments

• No-cost extension & modification of Biomedical Advanced Research and Development Authority (BARDA) base year contract
  
  
• BARDA exercised second year contract options worth over $9.1 million
  
  
• Several publications of key data, including data demonstrating that AEOL 10150 reduced lung damage after Neupogen® treatment (current standard of care for Heme-ARS) following radiation exposure, and to reduce oxidative stress and Nerve damage following exposure to nerve agents
  
  
• Reported significant improvements in the methods for producing AEOL 10150 Bulk Drug Substance, which are expected to reduce the cost of goods by more than 80 percent
  
  
• Shored-up balance sheet with additional cash
  
  
• Presented data on AEOL 11207, demonstrating a significant decrease in both the frequency and duration of spontaneous seizures; an increase in average life span; and protecting against neuronal death
  
  
• Reported positive results from pre-IND meeting with FDA where there agency agreed with the animal models and to be used under the Lung-ARS development program and provided input on the Company's phase 1 Human Safety study design.
  
  

2012 Key Financial Results

Total revenues for FY 2012 were $7.3 million as compared to $4.8 million in FY2011. Net income was $1.7 million, or $0.03 per basic share, which includes a non-cash gain of approximately $4.1 million related to decreases in the fair value of the warrants, for the fiscal year ended September 30, 2012, as compared to a gain of $0.3 million, or $0.01 per basic share, which includes a charge of approximately $3.9 million related to increases in the fair value of the warrants, for the fiscal year ended September 30, 2011. As of September 30, 2012, the Company had cash and cash equivalents of $281,000.

For the fourth quarter FY 2012, total revenues were $1.4 million as compared to $2.1 million in 2011. Net loss for the fourth quarter in FY 2012 was $7.1 million, which includes a loss of approximately $6.6 million related to increases in the fair value of the warrants, as compared to $2.1 million, which includes a gain of approximately $1.1 million related to decreases in the fair value of the warrants, in the fourth quarter of FY 2011.

The warrant liability and revaluations have not and will not have any impact on the Company's working capital, liquidity or business operations. The Company's outstanding warrants will continue to be revalued at each balance sheet date, which could result in significant and unpredictable changes to our reported liabilities and significant additional gains or losses charged to the statement of operations for each period regardless of any changes to the Company's working capital, liquidity or business operations.

The increase in research and development expense reflects the acceleration of our Pulmonary Acute Radiation Syndrome ("Lung-ARS") program related to the execution of our contract with BARDA in 2012. We currently have eleven research and development programs in progress: seven programs involving AEOL 10150 as a medical countermeasure against the effects of sulfur mustard gas on the skin and lungs, chlorine gas on the lungs, phosgene gas on the lungs, against the effects of radiation on the lungs and on the gastro-intestinal tract, against the effects of nerve agents, two programs focused on AEOL 11207 and several other compounds as potential treatments for Parkinson's disease and epilepsy, one program studying another one of our compounds, AEOL 10171 (Hexyl), as a protectant against radiation exposure and one program studying AEOL 10150 as a treatment for cancer.

"During fiscal year 2012, we continued to take major steps forward in the development of AEOL 10150, at minimal cost to our shareholders, based on the support of our medical countermeasure development program partners: BARDA, NIH-NIAID and NIH CounterACT," stated John L. McManus, President and Chief Executive Officer. "We look forward to 2013, when we expect to request the exercise of additional options under the BARDA contract, and report critical data in efficacy and safety that we believe will position AEOL 10150 for potential procurement by BARDA for the Strategic National Stockpile."

About AEOL 10150
AEOL 10150 is a broad-spectrum catalytic antioxidant specifically designed to neutralize reactive oxygen and nitrogen species. The neutralization of these species reduces oxidative stress, inflammation, and subsequent tissue damage-signaling cascades resulting from radiation exposure. AEOL 10150 could have a profound beneficial impact on people who have been exposed, or are about to be exposed, to high-doses of radiation in the treatment of oncology.

AEOL 10150 has already performed well in preclinical and non-clinical studies, was well-tolerated in two human clinical trials, and has demonstrated statistically significant survival efficacy in an acute radiation-induced lung injury model. The Company believes it could have a profound beneficial impact on people who have been exposed, or are about to be exposed, to high-doses of radiation, whether from cancer therapy or a nuclear event.

About Aeolus Pharmaceuticals
Aeolus Pharmaceuticals is developing a platform of a new class of broad-spectrum, catalytic-antioxidant compounds that protect healthy tissue from the damaging effects of radiation. Its first compound, AEOL 10150, is being developed for oncology indications, where it is used in combination with radiation therapy. It is also being developed, with funding by the US Department of Health and Human Services, as a medical countermeasure against chemical and radiological weapons, where its initial target indications are as a protective agent against the effects of acute radiation syndrome and delayed effects of acute radiation exposure. Aeolus' strategy is to leverage the substantial investment in toxicology, manufacturing, and preclinical and clinical studies made by US Government agencies in AEOL 10150, including the contract with BARDA valued, with options, at up to $118.4 million, to efficiently develop the compound for use in oncology. For more information, please visit Aeolus's corporate website at www.aeoluspharma.com.

Forward-Looking Statements
The statements in this press release that are not purely statements of historical fact are forward-looking statements. Such statements include, but are not limited to, those relating to Aeolus' product candidates, proprietary technologies, and current and future research and development programs, as well as Aeolus' contract with BARDA. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Aeolus' actual results to be materially different from historical results or from any results expressed or implied by such forward-looking statements. Important factors that could cause results to differ include risks associated with uncertainties of progress and timing of clinical trials, scientific research and product development activities, difficulties or delays in development, testing, obtaining regulatory approval, the need to obtain funding for pre-clinical and clinical trials and operations, the scope and validity of intellectual property protection for Aeolus' product candidates, proprietary technologies and their uses, competition from other biopharmaceutical companies, and Aeolus' contract with BARDA, including whether Aeolus will continue to receive funding under the contract. Certain of these factors and others are more fully described in Aeolus' filings with the Securities and Exchange Commission, including, but not limited to, Aeolus' Annual Report on Form 10-K for the year ended September 30, 2012. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                   (In thousands, except per share data)

                                  Three Months Ended    Twelve Months Ended
                                     September 30,         September 30,
                                 --------------------  --------------------
                                    2012       2011       2012       2011
                                 ---------  ---------  ---------  ---------
Revenue

Contract Revenue                 $   1,399  $   2,124  $   7,293  $   4,821

Costs and expenses:
  Research and development           1,245      2,010      6,468      5,055
  General and administrative           651      1,122      3,196      3,668
                                 ---------  ---------  ---------  ---------
    Total costs and expenses         1,896      3,132      9,664      8,723
                                 ---------  ---------  ---------  ---------

Loss from operations                  (497)    (1,008)    (2,371)    (3,902)
Interest income (expense)                -          -          -        (21)
Warrant liability charges           (6,609)    (1,141)     4,069      3,887
Other Income (Expense)                   -          -          -        335
                                 ---------  ---------  ---------  ---------

Net Income (loss)                $  (7,106) $  (2,149) $   1,698  $     299
                                 =========  =========  =========  =========

Net loss per weighted share
 attributable to common
 stockholders:
Basic                            $   (0.11) $   (0.04) $    0.03  $    0.01
                                 =========  =========  =========  =========
Diluted                          $   (0.11) $   (0.04) $    0.02  $    0.00
                                 =========  =========  =========  =========

Weighted average common shares
 outstanding:
  Basic                             62,732     60,470     61,593     59,474
                                 =========  =========  =========  =========
  Diluted                           71,075     60,470     72,749     82,302
                                 =========  =========  =========  =========


Selected Balance Sheet Items:
(in thousands)

                                               September 30,  September 30,
                                                    2012           2011
                                               -------------  -------------

Cash and marketable securities                 $         281  $         518
Total assets                                   $       1,256  $       2,290
Stockholders' equity (deficit)                 $     (20,335) $     (23,259)

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