MethylGene Inc.
TSX : MYG

MethylGene Inc.

March 27, 2008 08:16 ET

MethylGene Announces Worldwide Research Collaboration and License Agreement With Otsuka Pharmaceutical Co. Ltd.

- US$55 million potential deal value - Leverages oncology-focused kinase research capabilities into ocular diseases - Otsuka is a leading, global pharmaceutical company

MONTREAL, QUEBEC--(Marketwire - March 27, 2008) - MethylGene Inc. (TSX:MYG), today announced a worldwide research collaboration and license agreement with Otsuka Pharmaceutical Co. Ltd., a global pharmaceutical company, for the development of novel, small molecule, kinase inhibitors for the local delivery and treatment of ocular diseases, excluding cancer.

MethylGene will be responsible for the design, synthesis, characterization and initial screening of kinase inhibitors. Otsuka will be responsible for and fund efficacy and toxicology studies, as well as preclinical and clinical development of compounds. Otsuka is also responsible for the global commercialization of any resulting product.

Under the financial terms of the agreement, MethylGene will receive an upfront license fee of US$2 million and may receive additional payments based on successful development, regulatory, commercialization and sales milestones that could total US$50.5 million. Otsuka will also provide MethylGene with a minimum of US$1.875 million in research funding for the initial 18 months of the research collaboration, which can be extended with additional funding from Otsuka. MethylGene will receive royalties on net sales for any resulting product. In addition, Otsuka is committed over the next 18 months to make an equity investment of US$3 million in MethylGene stock in the event the Company completes a concurrent financing of at least US$10 million and is listed on a U.S. stock exchange; or alternatively, a US$1.5 million equity investment at a 20% premium if MethylGene is solely listed on the Toronto Stock Exchange (TSX) after such 18-month period.

"We are pleased to have Otsuka, a leading Japanese multi-national pharmaceutical company, as our partner for this exciting project," said Donald F. Corcoran, President and Chief Executive Officer of MethylGene Inc. "This is another example of leveraging our strong research capability into indications beyond cancer and our ability to strategically partner with industry leaders in order to fully realize the value of our technology."

The compounds which are the subject of the collaboration were initially evaluated under a material transfer agreement with Otsuka. The chemical basis for these compounds was identified as part of MethylGene's effort to develop multi-targeted kinase inhibitors for oncology. MethylGene's multi-targeted (c-Met) kinase inhibitor clinical candidate for oncology, MGCD265, is expected to enter Phase I clinical trials in patients with advanced solid malignancies. The compounds that are included in the collaboration with Otsuka are expected to be distinct and separate from MethylGene's kinase compounds for oncology.

About Kinases

Kinases are a large set of enzymes which regulate the transmission of signals in cells to control biological processes such as cell growth and differentiation. Many kinases exist and each one has a particular role in normal cell function. Although needed in normal cell function, kinases may be inappropriately regulated and play a role in the pathogenesis of various disease states such as inflammation, abnormal blood vessel formation and plasma leakage from blood vessels. Therefore, kinases may be appropriate targets for diseases in which these inappropriate biological responses are involved, such as macular degeneration and other ocular diseases.

About MethylGene

MethylGene Inc. (TSX:MYG) is a publicly-traded, clinical stage, 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 and Phase I/II combination trials with Vidaza®, Gemzar® and Taxotere®. MGCD265 is an oral, multi-targeted kinase inhibitor targeting the c-Met, Tie-2, Ron and VEGF receptor tyrosine kinases which is expected to commence Phase I clinical trials in March or April 2008. In addition, MethylGene's preclinical programs include: MGCD290, an HDAC inhibitor in combination with azoles for fungal infections, a kinase program for ocular diseases, and a sirtuins program for cancer. MethylGene's development and commercialization partners include Celgene Corporation, Otsuka Pharmaceutical Co. Ltd., Taiho Pharmaceutical and EnVivo Pharmaceuticals. Please visit our website at www.methylgene.com.

About Otsuka Pharmaceutical Co. Ltd.

Founded in 1964, Otsuka Pharmaceutical Co. Ltd. is a healthcare company with the mission statement: "Otsuka-people creating new products for better health worldwide." Otsuka researches, develops, manufactures and markets innovative original products, focusing its core businesses on pharmaceutical products for the treatment of disease and consumer products for the maintenance of everyday health. The Otsuka Pharmaceutical Group comprises 99 companies and employs approximately 31,000 people in 18 countries and regions worldwide. Otsuka and its consolidated subsidiaries earned US$7.2 billion in consolidated annual revenues in fiscal 2006. For additional information, please visit www.otsuka-global.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, 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.

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