MethylGene Inc.
TSX : MYG

MethylGene Inc.

November 07, 2007 07:30 ET

MethylGene Reports Third Quarter 2007 Financial Results

MONTREAL, QUEBEC--(Marketwire - Nov. 7, 2007) - MethylGene Inc. (TSX:MYG) today announced its operational and financial results for the third quarter ended September 30, 2007.

Highlights

- Established a research and development collaboration with Pharmion Corporation for small molecule inhibitors targeting sirtuins for cancer. Sirtuins are a distinct class of histone deacetylase enzymes (Class 3) implicated in cell survival and cell death. Financial terms include approximately U.S. $5 million in research support and up to U.S. $100 million in potential development, regulatory and commercial milestones from Pharmion to MethylGene. MethylGene retains the rights to unselected inhibitors in indications outside of cancer.

- Orphan drug designation was granted for MGCD0103 by the U.S. Food & Drug Administration (FDA) and the European Medicines Agency (EMEA) for the treatment of Hodgkin lymphoma.

- Initiated two additional clinical trials evaluating MGCD0103: a Phase I trial (Trial 011) in combination with Taxotere® in patients with solid tumors and a Phase II trial (Trial 009) in patients with refractory chronic lymphocytic leukemia (CLL).

- Presented preliminary clinical data at the AACR-NCI-EORTC International Conference for the Phase I portion of the MGCD0103 combination trial with gemcitabine (Trial 006) in patients with solid tumors, including pancreatic cancer. The maximum tolerated dose was reached and the data demonstrated preliminary evidence of activity in pancreatic cancer. The Phase II portion of the trial has been initiated in pancreatic cancer.

- Data from the Company's MGCD0103 single-agent Phase II trial in relapsed or refractory Hodgkin lymphoma (Trial 010) were presented at the 7th International Symposium on Hodgkin Lymphoma. The data presented were previously disclosed in June at the American Society of Clinical Oncology (ASCO) Annual Meeting.

- Data for MGCD290, an antifungal histone deacetylase inhibitor, were presented in a poster session at the 47th Annual Interscience Conference on Antimicrobial Agent and Chemotherapy (ICAAC). Data demonstrated synergy of MGCD290 with antifungal agents in clinical isolates from invasive fungal infections. In addition, the Company has demonstrated in vitro single-agent activity of MGCD290 against certain fungal pathogens.

Financial Results Reported in Canadian Dollars

Total revenues of $3.7 million for the third quarter of 2007 were $4.9 million lower than for the third quarter of 2006 primarily due to the recording of U.S. $5.5 million in milestone revenues from Pharmion Corporation and Taiho Pharmaceutical during the third quarter of 2006. As a result of the ongoing clinical development of MGCD0103, the Investigational New Drug (IND)-enabling studies for MGCD265, as well as the manufacturing and process development for MGCD265 and MGCD290, overall expenses of $9.2 million in the third quarter of 2007 were $3.8 million higher than in the third quarter of 2006, excluding the non-refundable tax credit recovery which occurred in the third quarter of 2006.

At September 30, 2007 MethylGene had $67.8 million in cash, cash equivalents, and marketable securities.

Milestones Anticipated for the Remainder of 2007

- Disclosure of additional MGCD0103 clinical trial data at The American Society of Hematology (ASH) 49th Annual Meeting from December 8 to 11 in Atlanta, Georgia.

- Pharmion expects to initiate a Phase II combination trial with Vidaza® in lymphomas (Trial 012). This trial will include a run-in bioequivalency study using an updated and improved manufacturing process for MGCD0103 required to support potential pivotal trials.

- We expect to file an IND for MGCD265, our multi-targeted kinase inhibitor, by year end.

About MethylGene

MethylGene Inc. (TSX:MYG) is a publicly-traded biopharmaceutical company focused on the discovery, development and commercialization of novel therapeutics for cancer. The Company's lead product, MGCD0103, is an oral isotype-selective HDAC inhibitor presently in multiple clinical trials for solid tumors and hematological malignancies, including Phase II monotherapy and Phase I/II combination trials with Vidaza®, Gemzar® and Taxotere®. MGCD265 is an oral kinase inhibitor targeting the c-Met, Tie-2, Ron and VEGF receptor tyrosine kinases. In addition, MethylGene has several preclinical programs: MGCD290 an HDAC inhibitor in combination with azoles for fungal infections; an HDAC program for Huntington's disease; a sirtuins program for cancer; and a beta-lactamase program to overcome antibiotic resistance. MethylGene's development and commercialization partners include Pharmion Corporation, Taiho Pharmaceutical and EnVivo Pharmaceuticals. Please visit our website at www.methylgene.com.

Certain statements contained in this news release, other than statements of fact that are independently verifiable at the date hereof, may constitute forward-looking statements. Such statements, based as they are on the current expectations of management of MethylGene, inherently involve numerous risks and uncertainties, known and unknown, many of which are beyond MethylGene's control. These risks and uncertainties could cause future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements. Such results, performance or achievements include, but are not limited to, the timing and effects of regulatory action; the continuation of collaborations; the impact of unilateral decisions and/or strategies of our collaborators; the results of clinical trials; the ability to demonstrate pharmacokinetic / bioequivalency; the timing of enrollment or completion of clinical trials; the success, efficacy or safety of MGCD0103, MGCD265 or MGCD290; the ability to scale up, formulate and manufacture sufficient GMP, clinical or commercialization quantities of MGCD0103, MGCD265 or MGCD290, and the relative success or the lack of success in developing and gaining regulatory approval and/or market acceptance for any compound or new product including MGCD0103, MGCD265 or MGCD290. Such risks include, but are not limited to, the impact of general economic conditions, economic conditions in the pharmaceutical industry, changes in the regulatory environment in the jurisdictions in which MethylGene does business, stock market volatility, fluctuations in costs, expectations with respect to our intellectual property position and our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others, changes in the competitive landscape including changes in the standard of care for the various indications in which MethylGene is involved, and changes to the competitive environment due to consolidation, as well as other risks, which you are urged to read, as described in MethylGene's Annual Information Form for the fiscal year ending December 31, 2006, under the heading 'risk factors,' the final prospectus filed on February 23, 2007, and all other documents filed by the Company that can be found at www.sedar.com. Consequently, actual future results may differ materially from the anticipated results expressed in the forward-looking statements. The reader should not place undue reliance on the forward-looking statements included in this presentation. These statements speak only as an update on the date they are made and MethylGene is under no obligation to revise such statements as a result of any event, circumstance or otherwise except in accordance with law.



MethylGene Inc.
Incorporated under the Quebec Companies Act

BALANCE SHEETS

As at December 31
(In thousands of Canadian dollars) Unaudited

September 30, December 31,
2007 2006
$ $
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Assets
Current
Cash and cash equivalents 50,255 680
Available-for-sale marketable securities 17,509 65,100
Research and development tax credits receivable 146 718
Unbilled revenue 3,129 2,505
Interest receivable 479 767
Other current assets 1,140 1,127
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Total current assets 72,658 70,897
Property, plant and equipment - net 3,100 3,665
Intangible assets - net 2,238 2,101
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77,996 76,663
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Liabilities and shareholders' equity
Current
Accounts payable and accrued liabilities 6,455 5,074
Current portion of unearned revenue 4,066 4,331
Current portion of lease abandonment cost 145 173
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Total current liabilities 10,666 9,578
Unearned revenue 15,677 18,675
Lease abandonment cost 279 381
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Total liabilities 26,622 28,634
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Shareholders' equity
Capital stock 118,096 99,294
Contributed surplus 8,256 7,909
Deficit (74,193) (59,174)
Accumulated other comprehensive loss (785) -
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Total shareholders' equity 51,374 48,029
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77,996 76,663
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MethylGene Inc.

STATEMENTS OF OPERATIONS AND DEFICIT

(In thousands of Canadian dollars,
except share and per share amounts) Unaudited

Three-month periods Nine-month periods
ended September 30, ended September 30,
2007 2006 2007 2006
$ $ $ $
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REVENUES
Research collaborations
and contract revenues 2,639 7,556 7,800 9,777
License and up-front
fees 1,016 1,030 3,051 2,778
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3,655 8,586 10,851 12,555
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EXPENSES
Research and development 9,233 5,427 24,771 15,880
Government assistance (695) (410) (1,373) (985)
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Net current research and
development 8,538 5,017 23,398 14,895
Government assistance
- recovery of
non-refundable tax
credits - (1,646) - (5,921)
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8,538 3,371 23,398 8,974
General and
administrative 1,189 1,161 3,650 3,714
Interest income (773) (706) (2,361) (1,687)
Amortization of
property, plant
and equipment 4 5 13 14
Lease abandonment cost - - - 348
Bank charges and
interest 8 5 23 16
Foreign exchange
loss (gain) 248 (88) 1,147 249
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9,214 3,748 25,870 11,628
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Income (loss) before
income taxes (5,559) 4,838 (15,019) 927
Income taxes - (1,815) - (6,090)
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Net income (loss)
for the period (5,559) 3,023 (15,019) (5,163)

Deficit, beginning
of period (68,634) (59,848) (59,174) (51,662)
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Deficit, end of period (74,193) (56,825) (74,193) (56,825)
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Basic and diluted
earnings (loss) per
share (0.15) 0.10 (0.42) (0.19)
Weighted average
number of common
shares outstanding 36,682,197 31,006,384 35,423,592 27,464,311
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MethylGene Inc.

STATEMENTS OF COMPREHENSIVE LOSS

(In thousands of Canadian dollars) Unaudited

Three-month period Nine-month period
ended September 30, ended September 30,
2007 2007
$ $
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Net loss for the period (5,559) (15,019)
Other comprehensive loss
Change in unrealized losses on
available-for-sale securities (619) (1,024)
Reclassification to income of realized
losses on available-for-sale
securities 136 311
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(483) (713)
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Comprehensive loss for the period (6,042) (15,732)
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MethylGene Inc.

STATEMENTS OF CASH FLOWS

(In thousands of Canadian dollars) Unaudited

Three-month periods Nine-month periods
ended September 30, ended September 30,
2007 2006 2007 2006
$ $ $ $
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OPERATING ACTIVITIES
Net income (loss) for
the year (5,559) 3,023 (15,019) (5,163)
Items not affecting
cash:
Amortization of
property, plant
and equipment 315 341 993 975
Amortization of
intangible assets 39 34 117 99
Unrealized foreign
exchange gain on
short-term
investments - 1 - 3
Lease abandonment cost - - - 348
Write-down of patents 37 43 37 57
Write-off of property,
plant and equipment 3 - 37 -
Warrants related
to license fees 1 1 4 4
Non-cash stock-based
compensation expense 111 158 358 526
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(5,053) 3,601 (13,473) (3,151)
Changes in non-cash
working capital balances
related to operations 3,529 (204) 1,214 768
Changes in
available-for-sale
cash equivalents (171) - (165) -
Changes in long-term
portion of unearned
revenue (1,018) (1,030) (3,008) 17,531
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Cash flows related to
operating activities (2,713) 2,367 (15,432) 15,148
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INVESTING ACTIVITIES
Acquisitions of
property, plant and
equipment (149) (455) (465) (741)
Acquisitions of
intangible assets (28) (4) (291) (180)
Purchases of
available-for-sale
marketable securities (4,738) (32,757) (78,418) (76,482)
Proceeds from maturities
of available-for-sale
marketable securities 41,997 24,356 125,390 63,736
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Cash flows related to
investing activities 37,082 (8,860) 46,216 (13,667)
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FINANCING ACTIVITIES
Issuance of common
shares 1 4 20,193 27,428
Share issue costs - - (1,402) (586)
Repayment of obligation
under capital leases - (1) - (7)
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Cash flows related
to financing activities 1 3 18,791 26,835
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Increase (decrease) in
cash and cash
equivalents 34,370 (6,490) 49,575 28,316
Cash and cash
equivalents, beginning
of period 15,885 35,336 680 530
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Cash and cash
equivalents, end of
period 50,255 28,846 50,255 28,846
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Cash and cash
equivalents consist of:
Cash 1,726 863 1,726 863
Cash equivalents 48,529 27,983 48,529 27,983
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50,255 28,846 50,255 28,846
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