MethylGene Inc.
TSX : MYG

MethylGene Inc.

May 12, 2008 07:30 ET

MethylGene Reports First Quarter 2008 Financial Results

MONTREAL, QUEBEC--(Marketwire - May 12, 2008) - MethylGene Inc. (TSX:MYG) today announced operational and financial results for the first quarter ended March 31, 2008.

Highlights

- Formed a worldwide research collaboration and license agreement with Otsuka Pharmaceutical Co. Ltd. for the development of novel, small molecule, kinase inhibitors for the treatment of ocular diseases, excluding cancer. As part of the agreement, MethylGene has received an upfront license fee of US$2 million and will receive research support of US$1.875 million for the initial 18-months of the collaboration. The Company may also receive additional payments based on successful development, regulatory, commercialization and sales milestones as well as an equity investment which could bring the potential deal value up to US$55 million.

- MethylGene's partner, Celgene initiated a Phase II clinical trial (Trial 012) evaluating MGCD0103 in combination with Vidaza® in patients with relapsed or refractory Hodgkin lymphoma (HL) and in patients with non-Hodgkin lymphoma (NHL). This trial includes pharmacokinetic and bioequivalency studies for improved MGCD0103 active pharmaceutical ingredient (API), including a formulated product.

- Initiated the first Phase I clinical trial (Trial 102) for MGCD265, an oral, multi-targeted (c-Met) kinase inhibitor, in patients with solid tumors.

- Received the 2008 Genesis "Entrepreneurship in Biotechnology / Biopharmaceutical" Award by BIOQuebec, at the 8th Annual Genesis Awards ceremony. This award recognizes a company with strong leadership in the life sciences industry, which contributes to the success of Quebec's biotechnology sector.

Financial Results Reported in Canadian Dollars

Total revenues of $4.2 million for the first quarter of 2008 were $0.7 million higher than for the first quarter of 2007 primarily due to clinical development related revenues for MGCD0103 and higher research-related revenues for the sirtuin oncology research program.

Total expenses of $9.5 million in the first quarter of 2008 were $2.7 higher than the first quarter of 2007 due primarily to increased expenditures for MGCD0103 and MGCD265 clinical programs, Investigational New Drug (IND) enabling studies for MGCD290, as well as some higher professional and legal fees relating to the Otsuka collaboration and our opt-out of the EnVivo collaboration.

At March 31, 2008 MethylGene had $54.5 million in cash, cash equivalents and marketable securities.

Milestones Anticipated during 2008

- MethylGene's partner, Celgene is expected to commence a randomized, three-arm Phase II clinical trial with MGCD0103 in combination with Vidaza® in acute myelogenous leukemia and myelodysplastic syndrome patients (Trial 013).

- Report additional clinical data for MGCD0103 at the American Society for Clinical Oncology (ASCO) annual meeting.

- Commence a second Phase I clinical trial for MGCD265 in solid tumors.

- Plan to file an IND application with the FDA for MGCD290, a fungal HDAC inhibitor.

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, isoform-selective HDAC inhibitor presently in multiple clinical trials for solid tumors and hematological malignancies, including Phase II monotherapy and Phase I, Phase I/II and Phase 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 and is in Phase I clinical trials for solid tumor cancers. In addition, MethylGene's preclinical programs include: MGCD290, an HDAC inhibitor in combination with azoles for fungal infections, a kinase inhibitor program for ocular diseases, and a sirtuin inhibitor program for cancer. MethylGene's development and commercialization partners include Celgene Corporation, Taiho Pharmaceutical Co. Ltd., Otsuka Pharmaceutical Co. Ltd. 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 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, 2007, 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)
March 31, December 31,
2008 2007
$ $
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ASSETS
Current
Cash and cash equivalents 22,952 3,208
Available-for-sale marketable securities 31,567 57,525
Research and development tax credits
receivable 825 465
Accounts receivable 2,053 -
Unbilled revenue 4,030 4,196
Interest receivable 306 612
Other current assets 1,507 886
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Total current assets 63,240 66,892
Security deposits 325 325
Property, plant and equipment 2,886 3,089
Intangible assets 1,931 2,007
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68,382 72,313
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 7,663 7,680
Current portion of unearned revenue 4,344 4,117
Current portion of lease abandonment cost 182 186
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Total current liabilities 12,189 11,983
Unearned revenue 15,337 14,558
Lease abandonment cost 482 524
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Total liabilities 28,008 27,065
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Shareholders' equity
Capital stock 118,095 118,095
Contributed surplus 8,607 8,445
Deficit (86,427) (81,196)
Accumulated other comprehensive loss 99 (96)
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Total shareholders' equity 40,374 45,248
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68,382 72,313
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UNAUDITED INTERIM STATEMENTS OF OPERATIONS AND DEFICIT

(In thousands of Canadian dollars,
except for share and per share amounts)
Three-month periods
ended March 31,
-----------------------------------------------------------------------
2008 2007
$ $
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REVENUES
Research collaborations and contract revenues 3,199 2,525
License and up-front fees 1,029 1,017
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4,228 3,542
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EXPENSES
Research and development 8,890 6,735
Government assistance (363) (365)
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Net current research and development 8,527 6,370
General and administrative 1,681 1,184
Interest income (594) (756)
Amortization of property, plant and equipment 4 5
Bank charges and interest 10 13
Foreign exchange gain (169) (20)
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9,459 6,796
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Net loss for the period (5,231) (3,254)

Deficit, beginning of period (81,196) (59,174)
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Deficit, end of period (86,427) (62,428)
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Basic and diluted loss per share (0.14) (0.10)
Weighted average number of common shares 36,682,398 32,872,817
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UNAUDITED INTERIM STATEMENTS OF COMPREHENSIVE LOSS

(In thousands of Canadian dollars)
Three-month periods
ended March 31,
-----------------------------------------------------------------------
2008 2007
$ $
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Net loss for the period (5,231) (3,254)
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Other comprehensive loss
Change in unrealized gains (losses) on
available-for-sale cash equivalents
and marketable securities 131 (203)
Reclassification adjustment to net loss of
realized losses on available-for-sale
cash equivalents and marketable securities 64 42
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195 (161)
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Comprehensive loss for the period (5,036) (3,415)
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UNAUDITED INTERIM STATEMENTS OF CASH FLOWS

(In thousands of Canadian dollars)
Three-month periods
ended March 31,
-----------------------------------------------------------------------
2008 2007
$ $
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OPERATING ACTIVITIES
Net loss for the period (5,231) (3,254)
Items not affecting cash:
Amortization of property, plant
and equipment 314 347
Amortization of intangible assets 31 38
Stock-based compensation expense 162 67
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(4,724) (2,802)

Net change in non-cash working capital
balances related to operations (2,347) (1,712)
Unrealized gain (loss) on available-for-sale
cash equivalents 141 (128)
Change in long-term portion of unearned revenue 773 (972)
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Cash flows related to operating activities (6,157) (5,614)
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INVESTING ACTIVITIES
Acquisitions of property, plant and equipment (111) (166)
Acquisitions of intangible assets - (133)
Purchases of available-for-sale marketable
securities (26,002) (28,837)
Proceeds from maturities of available-for-sale
marketable securities 52,014 55,763
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Cash flows related to investing activities 25,901 26,627
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FINANCING ACTIVITIES
Issuance of common shares - 20,138
Share issue costs - (1,373)
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Cash flows related to financing activities - 18,765
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Increase in cash and cash equivalents 19,744 39,778
Cash and cash equivalents, beginning of period 3,208 679
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Cash and cash equivalents, end of period 22,952 40,457
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Cash and cash equivalents consist of:
Cash 1,239 611
Cash equivalents 21,713 39,847
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22,952 40,458
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