MethylGene Inc.
TSX : MYG

MethylGene Inc.

November 05, 2009 07:30 ET

MethylGene Reports Third Quarter 2009 Financial Results

MONTREAL, QUEBEC--(Marketwire - Nov. 5, 2009) - MethylGene Inc. (TSX:MYG) today announced financial results for the third quarter ended September 30, 2009.

Operational highlights of the quarter include:

- The U.S. Food and Drug Administration lifted the partial clinical hold for new patient enrollment previously placed on mocetinostat (MGCD0103), a histone deacetylase inhibitor for cancer. With the partial hold lifted, the Company expects to enroll new patients as soon as possible in its Phase II clinical trial in patients with relapsed or refractory follicular lymphoma (Trial 008).

- The Company initiated its Phase II program for MGCD265, a multi-targeted (c-Met) kinase inhibitor. The initial trial which is divided into two stages will first enroll patients with advanced metastatic malignancies and then patients with advanced non-small cell lung cancer. MGCD265 will be tested alone and also in combination with either Tarceva® (erlotinib) or docetaxel. Two Phase I trials are ongoing. Data will be reported in a poster presentation at the upcoming EORTC-NCI-AACR conference in Boston for Trial 102 (intermittent schedule).

- MGCD290, MethylGene's antifungal compound, demonstrated favorable results in three Phase I clinical studies. The data were reported at the 49th Annual Interscience Conference on Antimicrobial Agents and Chemotherapy (ICAAC) Annual Meeting in September. Plans to initiate a 14-day study in combination with fluconazole are currently underway. This study is expected to commence by year-end.

- The Company also announced that Otsuka Pharmaceutical Co. Ltd. extended its funded research collaboration with MethylGene, initially formed in March 28, 2008, for an additional six-month period ending March 2010. This research in kinase inhibitors for ocular diseases provides MethylGene with an additional US$625,000 in research funding and Otsuka maintains the right to further extend the collaboration. Also in October, as part of the original March 2008 agreement, Otsuka purchased US$1.5 million of MethylGene common shares.

Financial Results Reported in Canadian Dollars

Total revenues for the third quarter ended September 30, 2009 were $485,000 compared to $5.8 million for the same period last year. This reduction in revenue was primarily due to the termination of our collaboration agreement with Celgene Corporation which was partially offset by revenues from our collaboration with Otsuka. Partially offsetting the decline in revenue, were savings in net research and development of $4.1 million or 48.6 percent compared to the third quarter of 2008.

Gross research and development expenditures in the third quarter of 2009 were $4.6 million compared to $8.8 million in the third quarter of 2008. This decrease relates primarily to lower expenses for discovery research and for development of mocetinostat and MGCD290. These decreases were partially offset by higher clinical trial expenditures for MGCD265, including scale-up and optimization efforts for MGCD265 clinical drug supply. General and administrative expenses in the third quarter of 2009 of $1.3 million were essentially flat with the same period last year. MethylGene incurred a foreign exchange loss of $188,000 in the third quarter of 2009 versus a gain of $437,000 in the third quarter of 2008 and earned interest income of $13,000 in the third quarter of 2009 versus $331,000 in the third quarter of 2008. As a result, the net loss for the third quarter ended September 30, 2009 was $5.4 million or ($0.15) per share compared to a net loss of $3.3 million or ($0.09) per share for the corresponding period last year.

As at September 30, 2009, the Company had $19.6 million (excluding the US$1.5 million received from Otsuka in October) of cash, cash equivalents and marketable securities, a decrease of $19.0 million from December 31, 2008. Operations were realigned in order to focus our resources on development of our clinical pipeline and significant non-funded discovery research has been discontinued. Based on our current assumptions, the Company believes that its current cash, cash equivalents, marketable securities, interest income, projected revenues from current collaborations, projected timing of clinical trials and refundable investment tax credits will be sufficient to carry out its currently planned research and development plans and operations into the fourth quarter of 2010. In the event of a material change to our assumptions, the impact could result in an increase to the cash outflow and a shortfall into the third quarter of 2010. The Company continues to evaluate various options to extend its financial resources beyond these timelines.

About MethylGene

MethylGene Inc. (TSX:MYG) is a publicly-traded, clinical stage, biopharmaceutical company focused on the discovery, development and commercialization of novel therapeutics with a focus on cancer. The Company's product candidates include: MGCD265, an oral, multi-targeted kinase inhibitor targeting the c-Met, VEGF, Ron and Tie-2 receptor tyrosine kinases that is in Phase I and Phase II clinical trials for cancers; MGCD290, a fungal Hos2 inhibitor being developed for use in combination with fluconazole for serious fungal infections that is in Phase I clinical studies; and mocetinostat (MGCD0103), an oral, isoform-selective HDAC inhibitor for cancers which has been in multiple Phase II clinical trials and is licensed to Taiho Pharmaceutical Co. Ltd in certain Asian countries. A fourth compound discovered using MethylGene's HDAC platform, EVP-0334 - a potential cognition enhancing agent, is in a Phase I study sponsored by EnVivo Pharmaceuticals Inc. MethylGene also has a funded collaboration with Otsuka Pharmaceutical Co. Ltd. for applications in ocular diseases using the Company's proprietary kinase inhibitor chemistry. 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 results of clinical trials; 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, 2008, under the heading 'risk factors 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

UNAUDITED INTERIM BALANCE SHEETS

(In thousands of Canadian dollars)

September 30, December 31,
2009 2008
$ $
-------------------------------------------------------------------------
(Restated)
ASSETS
Current
Cash and cash equivalents 15,027 5,947
Marketable securities 4,568 32,659
Research and development tax credits receivable 2,276 1,473
Unbilled revenue 335 4,435
Interest receivable 91 326
Other current assets 1,174 1,034
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Total current assets 23,471 45,874
Security deposits 385 325
Property, plant and equipment 1,382 2,131
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25,238 48,330
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 5,336 9,192
Current portion of unearned revenue 549 549
Current portion of lease abandonment cost 189 192
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Total current liabilities 6,074 9,933
Unearned revenue 2,447 2,859
Lease abandonment cost 259 399
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Total liabilities 8,780 13,191
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Shareholders' equity
Capital stock 118,095 118,095
Contributed surplus 8,986 8,855
Deficit (110,570) (92,122)
Accumulated other comprehensive income (53) 311
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Total shareholders' equity 16,458 35,139
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25,238 48,330
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MethylGene Inc.

UNAUDITED INTERIM STATEMENTS OF OPERATIONS AND DEFICIT

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

Three-month Nine-month
periods September 30, periods September 30,
2009 2008 2009 2008
$ $ $ $
-------------------------------------------------------------------------
(Restated) (Restated)
REVENUES
Research collaborations
and contract revenues 347 2,994 2,125 9,385
License and up-front
fees 138 2,838 413 4,955
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485 5,832 2,538 14,340
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EXPENSES
Research and
development 4,579 8,796 17,741 28,104
Government assistance (238) (346) (803) (1,128)
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Net current research
and development 4,341 8,450 16,938 26,976
General and
administrative 1,283 1,250 3,621 4,308
Interest income (13) (331) (169) (1,344)
Amortization and
write-off of property,
plant and equipment 3 4 13 13
Gain on sale of
property, plant and
equipment - - (6) -
Corporate and other
transaction costs 42 222 160 725
Bank charges and interest 6 8 21 27
Foreign exchange loss
(gain) 188 (437) 269 (481)
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5,850 9,166 20,847 30,224
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Loss for the period
before income tax (5,365) (3,334) (18,309) (15,884)
Future income tax
expense 55 - 139 -
-------------------------------------------------------------------------
Net loss for the
period (5,420) (3,334) (18,448) (15,884)
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Deficit, beginning of
period, as
previously reported (105,150) (93,798) (90,175) (81,196)
Change in accounting
policy - (1,955) (1,947) (2,007)
-------------------------------------------------------------------------
Deficit, beginning
of period,
as adjusted (105,150) (95,753) (92,122) (83,203)
-------------------------------------------------------------------------
Deficit, end of
period (110,570) (99,087) (110,570) (99,087)
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Basic and diluted
loss per share (0.15) (0.09) (0.50) (0.43)
Weighted average
number of
common shares 36,682,398 36,682,398 36,682,398 36,682,398
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MethylGene Inc.

UNAUDITED INTERIM STATEMENTS OF COMPREHENSIVE LOSS

(In thousands of Canadian dollars)

Three-month Nine-month
periods ended September 30, periods September 30,
2009 2008 2009 2008
$ $ $ $
-------------------------------------------------------------------------
(Restated) (Restated)

Net loss for
the period (5,420) (3,334) (18,448) (15,884)
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Other comprehensive
loss
Change in unrealized
gains and (losses)
on cash equivalents
and marketable
securities, net of
income tax recovery
of nil for the
three-month
period ended
September 30, 2009
and tax expense of
$81 for the nine-
month period ended
September 30, 2009
(2008-nil) (54) 193 127 486

Reclassification
adjustment to net
loss of realized
(gains) losses on
cash equivalents
and marketable
securities, net of
income tax recovery
of $55 for the three-
month period ended
September 30, 2009
and $220 for the
nine-month period
ended September 30,
2009 (2008-nil) (122) (163) (491) (270)
-------------------------------------------------------------------------
(176) 30 (364) 216
-------------------------------------------------------------------------
Comprehensive loss
for the period (5,596) (3,304) (18,812) (15,668)
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MethylGene Inc.

UNAUDITED INTERIM STATEMENTS OF CASH FLOWS

(In thousands of Canadian dollars)

Three-month Nine-month
periods ended September 30, periods September 30,
2009 2008 2009 2008
$ $ $ $
-------------------------------------------------------------------------
(Restated) (Restated)

OPERATING ACTIVITIES
Net loss for
the period (5,420) (3,334) (18,448) (15,884)
Items not
affecting cash:
Amortization of
property, plant
and equipment 241 285 758 897
Write-off of property,
plant and equipment - - 2 -
Gain on sale of
property, plant
and equipment - - (6) -
Future income tax
expense 55 - 139 -
Stock-based
compensation expense 21 80 131 334
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(5,103) (2,969) (17,424) (14,653)
Net change in non-cash
working capital
balances related to
operations (869) 8,714 (666) 8,272
Change in long-term
portion of unearned
revenue (138) (11,248) (412) (11,562)
-------------------------------------------------------------------------
Cash flows related to
operating activities (6,110) (5,503) (18,502) (17,943)
-------------------------------------------------------------------------

INVESTING ACTIVITIES
Acquisitions of
property, plant and
equipment (7) (89) (16) (242)
Purchases of
marketable securities (1,500) (32,525) (25,578) (76,208)
Proceeds from
maturities of
marketable securities 13,177 21,683 53,119 101,196
Proceeds from
disposition of
property, plant and
equipment - - 11 -
-------------------------------------------------------------------------
Cash flows related to
investing activities 11,670 (10,931) 27,536 24,746
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Foreign exchange on
cash equivalents
held in foreign
currency (138) (89) 46 63
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Increase (decrease)
in cash and cash
equivalents during
the period 5,422 (16,523) 9,080 6,866
Cash and cash
equivalents,
beginning of period 9,605 26,597 5,947 3,208
-------------------------------------------------------------------------
Cash and cash
equivalents, end
of period 15,027 10,074 15,027 10,074
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Cash and cash
equivalents
consist of:
Cash 3,549 1,888 3,549 1,888
Cash equivalents 11,478 8,186 11,478 8,186
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15,027 10,074 15,027 10,074
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