MethylGene Inc.
TSX : MYG

MethylGene Inc.

November 01, 2006 07:30 ET

MethylGene Announces Third Quarter 2006 Results

MONTREAL, QUEBEC--(CCNMatthews - Nov. 01, 2006) - MethylGene Inc. (TSX:MYG) today announced operational and financial results for the third quarter ended September 30, 2006.

Highlights

- Initiated two Phase II clinical trials with MGCD0103 in Hodgkin's lymphoma (Trial 010) and in B-cell lymphomas (Trial 008). In October, we announced the initiation of a Phase I/II trial in combination with Gemzar® (gemcitabine HCl, Eli Lilly and Company) in pancreatic cancer (Trial 006).

- Continued dose-escalation and enrollment for the MGCD0103 Phase I/II clinical trial in combination with Vidaza® (azacitidine for injectable suspension, marketed by Pharmion) in patients with acute myeloid leukemia and myelodysplastic syndrome (Trial 005).

- Received milestone payment for the initiation of MGCD0103 Phase II trials from Pharmion Corporation of U.S. $4.0 million. The Phase II milestone payment from Taiho of U.S. $1.5 million was received in October.

- Reported preclinical in vitro results on our antifungal histone deacetylase (HDAC) inhibitor MG3290 to overcome fungal HDAC-mediated azole resistance at the 46th Annual ICAAC conference and at the 3rd Annual North American Genetic ABC Workshop.

Financial Results

Total revenues for the third quarter ended September 30th were $8.6 million compared with $1.7 million for the third quarter of 2005. The revenues in the third quarter of 2006 consist primarily of milestone payments, research collaborations, contract revenues and license and upfront fees stemming from our partnerships with Pharmion Corporation and Taiho Pharmaceutical. Total net expenditures from current operations, which exclude the recovery of non-refundable tax credits, were $5.4 million down from $5.6 million in the third quarter of 2005, as significantly higher interest income and a foreign exchange gain helped reduce overall net expense in the third quarter of 2006. Gross research and development and general administration costs were $5.4 million and $1.2 million in the third quarter of 2006 compared to $4.7 million and $1.1 million in the third quarter of 2005, respectively. At September 30th, MethylGene had $67.3 million in cash, cash equivalents, and short term investments. The Company believes that its cash position, with projected revenues from current collaborations and interest income; the projected timing of its clinical trials; and the refundable investment tax credits will be sufficient to carry out its currently planned research and development plans and operations into the fourth quarter of 2008.

Milestones Anticipated for the Balance of 2006

- Continue enrolment in the following MGCD0103 clinical trials: Trial 004, a Phase I trial in leukemia; Trial 005, a Phase I/II combination trial with Vidaza® in AML and MDS; Trial 006, a Phase I/II trial in combination with Gemzar® in pancreatic cancer; Trial 008, a Phase II trial in B-cell lymphomas; and Trial 010, a Phase II trial in Hodgkin's lymphoma.

- Commence two additional MGCD0103 Phase II monotherapy clinical trials by the end of the year.

- Select a c-met multi-targeted kinase clinical candidate for cancer.

- Continue the optimization and evaluation of lead compounds to identify a second generation oncology HDAC inhibitor clinical candidate for cancer.

- Continue research in non-oncology HDAC indications for Huntington's disease and for antifungals to overcome azole resistance.

- Update preclinical and clinical data during poster presentations at the 18th EORTC-NCI-AACR symposium (Prague, November 7-10, 2006) and at the 48th ASH annual meeting (Orlando, December 9-12, 2006).

About MethylGene

MethylGene is a publicly-traded biopharmaceutical company focused on the discovery, development and commercialization of novel therapeutics in cancer. Two cancer product candidates are currently in clinical development: MGCD0103, partnered with Pharmion Corporation and Taiho Pharmaceutical Co., Ltd., and MG98, partnered with MGI Pharma, Inc. MethylGene has an exclusive license agreement with Merck & Co. for the development and commercialization of small molecule beta-lactamase inhibitors to overcome antibiotic resistance. MethylGene has partnered its non-oncology HDAC program for neurodegenerative diseases with EnVivo Pharmaceuticals. MethylGene has a portfolio of preclinical programs for its multi-targeted kinase (c-met) and histone deacetylase (HDAC) inhibitors for both oncology and non-oncology indications, and continues to seek partnering opportunities in these areas. 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 or MG98; 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 and MG98. 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 2005, under the heading "risk factors," 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 Unaudited

September 30, December 31,
2006 2005
$ $
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ASSETS
Current
Cash and cash equivalents 28,845,831 530,262
Short-term investments 38,438,231 25,694,518
Research and development tax credits
receivable 70,000 635,161
Accounts receivable 3,373,937 547,613
Other current assets 1,859,999 1,373,100
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Total current assets 72,587,998 28,780,654
Property, plant and equipment -- net 3,961,119 4,195,464
Intangible assets -- net 2,030,588 2,007,147
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78,579,705 34,983,265
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LIABILITIES AND SHAREHOLDERS' EQUITY

Current
Accounts payable and accrued liabilities 3,734,394 3,864,335
Income tax payable 169,000 --
Current portion of unearned revenue 4,117,411 511,824
Current portion of lease abandonment
cost 174,094 149,205
Current portion of obligations under
capital leases -- 6,527
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Total current liabilities 8,194,899 4,531,891
Unearned revenue 19,704,472 2,164,532
Lease abandonment cost 424,354 235,383
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Total liabilities 28,323,725 6,931,806
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Shareholders' equity
Capital stock 99,317,269 74,370,551
Contributed surplus 7,763,737 5,343,134
Deficit (56,825,026) (51,662,226)
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Total shareholders' equity 50,255,980 28,051,459
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78,579,705 34,983,265
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STATEMENTS OF OPERATIONS AND DEFICIT

Unaudited

Three-month periods Nine-month periods
ended September 30, ended September 30,
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2006 2005 2006 2005
$ $ $ $
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REVENUES
Research
collaborations
and contract
revenue 7,556,429 1,562,352 9,777,205 3,973,389
License and
Upfront fees 1,029,599 128,904 2,778,216 1,647,804
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8,586,028 1,691,256 12,555,421 5,621,193
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EXPENSES
Research and
development 5,426,887 4,695,250 15,879,472 13,521,843
Government
assistance (409,509) (353,400) (984,692) (1,038,075)
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Net current
research and
development 5,017,378 4,341,850 14,894,780 12,483,768
Government
Assistance -
recovery of non
refundable tax
credits (1,646,000) - (5,921,000) -
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3,371,378 4,341,850 8,973,780 12,483,768
General and
administrative 1,160,635 1,097,747 3,713,525 3,548,559
Interest income (705,940) (211,456) (1,686,693) (684,036)
Amortization of
property,plant and
equipment 4,568 12,877 13,676 35,884
Lease abandonment
cost - - 348,482 441,781
Bank charges and
interest 5,510 5,101 16,193 13,194
Foreign exchange
loss (gain) (88,284) 341,865 249,258 179,055
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3,747,867 5,587,984 11,628,221 16,018,205
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Income (loss)
before income
taxes 4,838,161 (3,896,728) 927,200 (10,397,012)
Income taxes (1,815,000) -- (6,090,000) --
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Net income (loss)
for the period 3,023,161 (3,896,728) (5,162,800) (10,397,012)
Deficit, beginning
of period (59,848,187) (42,872,186) (51,662,226) (36,371,902)
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Deficit, end of
period (56,825,026) (46,768,914) (56,825,026) (46,768,914)
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Basic and diluted
earnings (loss)
per share 0.10 (0.18) (0.19) (0.48)
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Weighted average
number of
common shares
outstanding 31,006,384 21,736,289 27,464,311 21,734,540
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STATEMENTS OF CASH FLOWS

Unaudited

Three-month periods Nine-month periods
ended September 30, ended September 30,
---------------------------------------------------------------------
2006 2005 2006 2005
$ $ $ $
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OPERATING ACTIVITIES

Net income (loss)
for the period 3,023,161 (3,896,728) (5,162,800) (10,397,012)
Item not affecting
cash:
Amortization of
property,
plant and
equipment 340,661 303,001 975,295 858,659
Amortization of
intangible
assets 33,725 31,382 99,458 91,040
Unrealized foreign
exchange
(gain) losses on
short term
investments 1,340 (10,689) 2,978 (450)
Write-down of
patents 42,915 181 56,604 181
Gain on disposal
of property, plant
and equipment - (120) - (542)
Warrants related
to license
fees 1,354 1,350 4,009 3,448
Non-cash
stock-based
compensation
expense 158,342 146,178 525,853 612,584
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3,601,498 (3,425,445) (3,498,603) (8,832,092)
Changes in
non-cash
working
capital balances
relating to
operations (161,056) 146,394 926,827 (1,761,054)
Changes in
long-term
portion
of unearned
revenues (1,030,697) (129,306) 17,530,580 173,403
Changes in
long-term
portion
of lease
abandonment
cost (43,073) (34,290) 188,971 249,181
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Cash flows related
to operating
activities 2,366,672 (3,442,647) 15,147,775 (10,170,562)
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IINVESTIN ACTIVITIES

Acquisitions of
property,
plant and
equipment (454,659) (91,744) (740,950) (1,628,988)
Acquisitions of
intangible
assets (3,549) (104,262) (179,503) (219,965)
Purchases of
short-term
investments (32,757,329) (15,670,450) (76,482,222) (45,554,051)
Proceeds from
maturities of
short-term
investments 24,356,167 15,356,940 63,735,531 63,729,409
Proceeds from
disposition of
property, plant
and equipment - 120 - 1,070
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Cash flows related
to investing
activities (8,859,370) (509,396) (13,667,144) 16,327,475
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FINANCING ACTIVITIES

Issuance of common
shares 3,687 - 27,427,561 16,016
Share issue costs (126) - (586,096) -
Repayment of
obligation under
capital leases (950) (5,156) (6,527) (15,247)
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Cash flows related
to financing
activities 2,611 (5,156) 26,834,938 769
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Increase
(decrease)
in cash
and cash
equivalents (6,490,087) (3,957,199) 28,315,569 6,157,682
Cash and cash
equivalents,
beginning of
period 35,335,918 9,858,539 530,262 (256,342)
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Cash and cash
equivalents, end
of period 28,845,831 5,901,340 28,845,831 5,901,340
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Cash and cash
equivalents
consist of:
Cash 863,411 1,284,533 863,411 1,284,533
Cash equivalents 27,982,420 4,616,807 27,982,420 4,616,807
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