MethylGene Inc.
TSX : MYG

MethylGene Inc.

March 07, 2008 07:30 ET

MethylGene Reports Fourth Quarter and Full Year 2007 Financial Results

MONTREAL, QUEBEC--(Marketwire - March 7, 2008) - MethylGene Inc. (TSX:MYG) today announced operational and financial results for the fourth quarter and year ended December 31, 2007.

"MethylGene continued to make significant progress with its three product candidates: MGCD0103, MGCD265 and MGCD290," said Donald F. Corcoran, President and Chief Executive Officer of MethylGene Inc. "Our 2008 goals are to identify a potential registrational pathway for MGCD0103, with our partners, to initiate two Phase I clinical trials with MGCD265, and to file an investigational new drug application with the FDA for MGCD290."

Highlights

- Reported data from Trials 005, 008 and 010 at the American Society of Clinical Oncology (ASCO) Annual Meeting in June 2007 and at the American Society of Hematology (ASH) Annual Meeting held in December 2007. Of particular note was encouraging data from the Phase I/II combination trial with Vidaza® (Trial 005), where the overall response rate for patients at all dose levels was 36 percent (n equals 52 evaluable patients). For patients treated with the recommended Phase II dose of 90mg, the response rate increased to 53 percent (n equals 19 evaluable patients). The 90mg dose will be used for our upcoming Phase II trial in acute myelogenous leukemia and myelodysplastic syndrome patients (Trial 013). We also reported data from our Phase II MGCD0103 trial in relapsed or refractory Hodgkin lymphoma (Trial 010). Of 21 evaluable patients who received a starting dose of 110mg, 38 percent responded and 86 percent of patients who were evaluated by CT scan experienced tumor shrinkage.

- Reported data from Trial 006 at the 2008 ASCO Gastrointestinal Cancers Symposium held January 2008. Of the 14 evaluable patients, in this Phase I/II MGCD0103 combination trial with Gemzar® in solid tumors, there were two partial responses, two unconfirmed partial responses and six stable disease. In a subset of six evaluable pancreatic cancer patients, there were two partial responses and three stable disease. The Phase II portion of this trial is ongoing in pancreatic cancer patients.

- Announced a research collaboration with Pharmion Corporation for the development of novel, small molecule sirtuin inhibitors for oncology. This agreement expands the January 2006 license and collaboration agreement between MethylGene and Pharmion and provides up to U.S. $5 million in additional research support over 18 months.

- Initiated three additional clinical trials with MGCD0103: a Phase II single-agent trial in chronic lymphocytic leukemia (Trial 009); a Phase I combination trial with Taxotere® in solid tumors (Trial 011); and a Phase II combination trial with Vidaza® in patients with relapsed or refractory lymphomas (Trial 012).

- MGCD0103 was granted orphan drug status for the treatment of Hodgkin lymphoma and acute myelogenous leukemia (AML) by the U.S. Food and Drug Administration (FDA) and by the European Medicines Agency (EMEA).

- Improved our manufacturing process for MGCD0103 active pharmaceutical ingredient (API) which will be tested in pharmacokinetic and bioequivalency studies as part of Trial 012.

- Filed an Investigational New Drug (IND) application which was accepted by the FDA for MGCD265, our multi-targeted (c-Met) kinase inhibitor.

- Selected MGCD290 as the clinical candidate for our histone deacetylase antifungal program.

- Strengthened our balance sheet with a financing for gross proceeds of CDN $20.1 million. This financing added approximately 15 new U.S. and Canadian institutional investors to the Company.

Financial Results Reported in Canadian Dollars

Total revenues, consisting of contract revenues and license fees, for the year ended December 31, 2007 were $15.5 million compared to $16.0 million for the year ended December 31, 2006. We obtained higher clinical trial and research support revenues from Pharmion as well as research support from CHDI in 2007 versus 2006. However, 2006 included $6.1 million in milestone payments from Pharmion and Taiho which were not repeated in 2007.

Total expenditures in 2007 were $37.5 million versus $23.4 million in 2006, excluding the recovery of non-refundable tax credits of $6.0 million in 2006. Net research and development expenses were $32.8 million in 2007 versus $20.7 million in 2006. This increase relates primarily to the increased investment in clinical trials for MGCD0103 (eight different clinical trials ongoing during 2007); IND-enabling studies and application to the FDA for MGCD265; and process development and scale-up to support future IND-enabling studies for MGCD290.

General and administrative expenses in 2007 were $4.9 million which were lower by 1.4% versus 2006. In addition, we incurred a $1.8 million foreign exchange loss in 2007 versus a $0.3 gain in 2006 due to the strengthened Canadian dollar, and a $0.6 million write-off of intangible assets which were partially offset by net higher interest revenues of $0.7 million in 2007 versus 2006. As a result, the net loss for the year ended December 31, 2007 was $22.0 million or ($0.62) per share compared with a net loss of $7.5 million or ($0.26) per share for the year ended December 31, 2006. These increases were expected due to the anticipated progress of our lead product candidates.

Total revenues for the fourth quarter ended December 31, 2007 were $4.7 million compared to $3.5 million for the same period last year due primarily to higher clinical trial cost recovery and research support payments from Pharmion as well as research support from CHDI.

Total expenditures for the fourth quarter ended December 31, 2007 were $11.7 million compared to $5.8 million for the same period in 2006. Net research and development expenditures totaled $9.4 million in the fourth quarter of 2007, up 60.9% from the period a year earlier reflecting additional investments in MGCD0103, MGCD265 and MGCD290. General and administrative expenses were flat at $1.3 million in the fourth quarter of 2007 and 2006. Fourth quarter 2007 costs included a currency exchange loss of $0.7 million versus a gain of $0.6 million in 2006. Net loss for the fourth quarter ended December 31, 2007 was $7.0 million or ($0.20) per share compared to a net loss of $2.3 million or ($0.04) per share for the corresponding period last year.

At December 31, 2007 the Company had cash, cash equivalents and short-term investments totaling $60.7 million compared to $65.8 million at December 31, 2006. The Company believes that its current financial resources will be sufficient to carry out its current research and development plans into the second quarter of 2009.

Milestones Anticipated for the Next 12 Months

- 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).

- Identify, with our partners, a potential registrational pathway for MGCD0103.

- Expect to report clinical data for MGCD0103 at key international oncology conferences.

- Commence two Phase I clinical trials for MGCDC265.

- Plan to file an IND application with the FDA for MGCD290.

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 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's preclinical programs include: MGCD290 an HDAC inhibitor in combination with azoles for fungal infections and a sirtuins program for cancer. 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.

Summary financial statements follow.

MethylGene Inc.

Incorporated under the Quebec Companies Act



BALANCE SHEETS

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

2007 2006
$ $
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ASSETS
Current
Cash and cash equivalents 3,208 680
Available-for-sale marketable securities
(short-term investments in 2006) 57,525 65,100
Research and development tax credits receivable 465 718
Unbilled revenue 4,196 2,505
Interest receivable 612 767
Other current assets 886 802
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Total current assets 66,892 70,572
Security deposits 325 325
Property, plant and equipment - net 3,089 3,665
Intangible assets - net 2,007 2,101
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72,313 76,663
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 7,680 5,074
Current portion of unearned revenue 4,117 4,331
Current portion of lease abandonment cost 186 173
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Total current liabilities 11,983 9,578
Unearned revenue 14,558 18,675
Lease abandonment cost 524 381
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Total liabilities 27,065 28,634
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Shareholders' equity
Capital stock 118,095 99,294
Contributed surplus 8,445 7,909
Deficit (81,196) (59,174)
Accumulated other comprehensive loss (96) -
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Total shareholders' equity 45,248 48,029
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72,313 76,663
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STATEMENTS OF OPERATIONS AND DEFICIT

For the years ended December 31 Unaudited
(In thousands of Canadian dollars,
except for share and per share amounts)

2007 2006
$ $
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REVENUES
Research collaborations and contract revenues 11,381 12,217
License and up-front fees 4,120 3,809
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15,501 16,026
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EXPENSES
Research and development 34,505 22,332
Government assistance (1,699) (1,623)
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Net current research and development 32,806 20,709
Government assistance - recovery of
non-refundable tax credits - (5,975)
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32,806 14,734
General and administrative 4,908 4,977
Interest income (3,104) (2,439)
Amortization of property, plant and equipment 17 18
Write-off of property, plant & equipment 36 7
Write-off of intangible assets 642 52
Lease abandonment cost 345 348
Bank charges and interest 33 31
Foreign exchange loss (gain) 1,840 (338)
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37,523 17,390
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Loss before income taxes (22,022) (1,364)
Income tax expense - 6,148
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Net loss for the year (22,022) (7,512)

Deficit, beginning of year (59,174) (51,662)
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Deficit, end of year (81,196) (59,174)
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Basic and diluted loss per share (0.62) (0.26)
Weighted average number of common shares 35,740,880 28,357,388
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STATEMENT OF COMPREHENSIVE LOSS

For the year ended December 31 Unaudited
(In thousands of Canadian dollars)

2007
$
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Net loss for the year (22,022)
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Other comprehensive loss
Change in unrealized losses on available-for-sale
cash equivalents and marketable securities (945)
Reclassification adjustment to net loss of realized losses
on available-for-sale cash equivalents and marketable securities 921
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(24)
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Comprehensive loss for the year (22,046)
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STATEMENTS OF CASH FLOWS

For the years ended December 31 Unaudited
(In thousands of Canadian dollars)

2007 2006
$ $
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OPERATING ACTIVITIES
Net loss for the year (22,022) (7,512)
Items not affecting cash:
Amortization of property, plant and equipment 1,307 1,349
Amortization of intangible assets 155 145
Unrealized foreign exchange gain
on marketable securities - (448)
Lease abandonment cost 345 348
Write-off of property, plant and equipment 36 7
Write-off of intangible assets 642 52
Warrants related to license fees 5 5
Stock-based compensation expense 547 671
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(18,985) (5,383)
Net change in non-cash working capital
balances related to operations 842 2,288
Changes in available-for-sale cash equivalents (5) -
Change in long-term portion of unearned revenue (4,128) 16,500
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Cash flows related to operating activities (22,276) 13,405
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INVESTING ACTIVITIES
Acquisitions of property, plant and equipment (767) (825)
Acquisitions of intangible assets (703) (291)
Purchases of available-for-sale
marketable securities (134,820) (108,331)
Proceeds from maturities of available-for-sale
marketable securities 142,304 69,373
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Cash flows related to investing activities 6,014 (40,074)
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FINANCING ACTIVITIES
Issuance of common shares 20,193 27,428
Share issue costs (1,403) (610)
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Cash flows related to financing activities 18,790 26,818
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Increase in cash and cash equivalents 2,528 149
Cash and cash equivalents, beginning of year 680 531
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Cash and cash equivalents, end of year 3,208 680
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Cash and cash equivalents consist of:
Cash 622 680
Cash equivalents 2,586 -
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3,208 680
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