MethylGene Inc.
TSX : MYG

MethylGene Inc.

March 30, 2009 08:30 ET

MethylGene Reports Fourth Quarter and Full Year 2008 Financial Results

MONTREAL, QUEBEC--(Marketwire - March 30, 2009) - MethylGene Inc. (TSX:MYG) today announced financial results for the fourth quarter and full year ended December 31, 2008, and provided a summary of the Company's objectives for 2009.

Financial Results Reported in Canadian Dollars

Total revenues, consisting of contract revenues and license fees, for the year ended December 31, 2008 were $29.5 million compared to $15.5 million for the year ended December 31, 2007. The increase in revenues was due primarily to the recording of $14.2 million of license and upfront fees into income from unearned revenue as a result of converting the agreement with Celgene Corporation that was announced in September.

Total expenditures in 2008 were $38.6 million versus $37.5 million in 2007, of which net research and development expenses were $35.7 million in 2008 versus $32.8 million in 2007. This increase relates to increased spending on MGCD265 and MGCD290, which was partially offset by reduced spending on MGCD0103 and discovery research. The reduced spending on MGCD0103 was the result of not enrolling new patients into clinical trials during the second half of 2008, while the decision to discontinue discovery research for non-funded programs reduced the overall cost of discovery research.

General and administrative expenses in 2008 were $5.5 million compared to $4.9 million in 2007, with the increase primarily due to higher legal and professional fees related to completing the collaboration with Otsuka Pharmaceutical Co. Ltd. and converting our collaborations with both EnVivo Pharmaceuticals Inc. and Celgene Corporation. In addition, the Company incurred corporate and other transaction costs of $725,000 in 2008 (no such costs were incurred in 2007), which related to business and strategic consulting costs and to the write-off of previously capitalized financing costs. MethylGene earned $1.7 million of interest income versus $3.1 million in 2007 due to lower average investments of cash equivalents and marketable securities and lower average interest rates. A foreign exchange gain of $2.0 million was incurred in 2008 versus a loss of $1.8 million in 2007 as the U.S. dollar strengthened against the Canadian dollar in 2008 effectively reversing the exchange loss in 2007 when the Canadian dollar increased against the U.S. dollar. As a result, the net loss for the year ended December 31, 2008 was $9.0 million or ($0.24) per share compared with a net loss of $22 million or ($0.62) per share for the year ended December 31, 2007.

Total revenues for the fourth quarter ended December 31, 2008 were $15.2 million compared to $4.7 million for the same period last year primarily due to the recording of $12.1 million of license and upfront fees into income from unearned revenue as a result of converting the agreement with Celgene Corporation.

Total expenditures for the fourth quarter ended December 31, 2008 were $8.3 million compared to $11.7 million for the same period in 2007, of which net research and development expenditures totaled $8.7 million in the fourth quarter of 2008, down from $9.4 million in the fourth quarter of 2007, reflecting lower expenses for MGCD0103 and discovery research, partially offset by higher expenditures for MGCD265 and MGCD290.

General and administrative expenses of $1.2 million in the fourth quarter of 2008 were marginally lower compared to $1.3 million for the same period last year. Fourth quarter 2008 costs included interest income of $309,000 versus $742,000 in 2007 and a currency exchange gain of $1.5 million versus a loss of $693,000 in 2007. Net income for the fourth quarter ended December 31, 2008 was $7.0 million or $0.19 per share compared to a net loss of $7.0 million or ($0.20) per share for the corresponding period last year.

At December 31, 2008 the Company had cash, cash equivalents and short-term investments totaling $38.6 million compared to $60.7 million at December 31, 2007. The Company believes that based on its focus on its clinical programs and the phased discontinuation of discovery research that its current financial resources will be sufficient to carry out its current research and development plans into the third quarter of 2010.

Objectives for 2009

- Report preliminary Phase I data for MGCD265 and initiate a Phase I/II or a Phase II clinical trial in the third quarter of this year;

- Complete and evaluate MGCD290 Phase I studies. The compound is being administered as a single agent and in combination with fluconazole in healthy patient volunteers;

- Lift the partial clinical hold placed on MGCD0103 by the FDA;

- Upon successful release of the FDA's partial clinical hold, to evaluate the status, funding requirements and potential partnering opportunities for MGCD0103

Conference Call

The conference call and audio webcast will take place on Tuesday, April 7, 2009 at 11:00 a.m. ET. Interested parties may participate by dialing 416-644-3419 or 1-800-732-0232. The webcast will be available on the Company's website at www.methylgene.com. A question and answer session will follow formal remarks, at which time the operator will direct participants as to the correct procedures for submitting questions. A telephone replay of the conference call will be available from April 7th through April 14th, 2009. To access the replay, dial 416-640-1917 or 1-877-289-8525 and enter the reservation number 21302445#.

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 product candidates include: MGCD265, an oral, multi-targeted kinase inhibitor targeting the c-Met, VEGF, Tie-2 and Ron receptor tyrosine kinases that is in Phase I clinical trials for solid tumor cancers; MGCD290, a fungal Hos2 (HDAC) inhibitor being developed for use in combination with fluconazole for serious fungal infections that is also in Phase I clinical studies; and MGCD0103, an oral, isoform-selective HDAC inhibitor which has been in multiple clinical trials for solid tumors and hematological malignancies and is licensed to Taiho Pharmaceutical Co. Ltd. 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, 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.

Summary financial statements follow.



MethylGene Inc.
Incorporated under the Quebec Companies Act

BALANCE SHEETS

As at December 31, Unaudited
(In thousands of Canadian dollars)
2008 2007
$ $
------------------------
ASSETS
Current
Cash and cash equivalents 5,947 3,208
Marketable securities 32,659 57,525
Research and development tax credits receivable 1,473 1,292
Unbilled revenue 4,435 4,196
Interest receivable 326 612
Other current assets 1,034 886
------------------------
Total current assets 45,874 67,719
Security deposits 325 325
Property, plant and equipment 2,131 3,089
Intangible assets 1,947 2,007
------------------------
50,277 73,140
------------------------
------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 9,192 8,507
Current portion of unearned revenue 549 4,117
Current portion of lease abandonment cost 192 186
------------------------
Total current liabilities 9,933 12,810
Unearned revenue 2,859 14,558
Lease abandonment cost 399 524
------------------------
Total liabilities 13,191 27,892
------------------------
------------------------

Shareholders' equity
Capital stock 118,095 118,095
Contributed surplus 8,855 8,445
Deficit (90,175) (81,196)
Accumulated other comprehensive income (loss) 311 (96)
------------------------
Total shareholders' equity 37,086 45,248
------------------------
50,277 73,140
------------------------
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MethylGene Inc.

STATEMENTS OF OPERATIONS AND DEFICIT

For the years ended December 31, Unaudited
(In thousands of Canadian dollars,
except for share and per share amounts)
2008 2007
$ $
------------------------

REVENUES
Research collaborations and contract revenues 12,188 11,381
License and up-front fees 17,307 4,120
------------------------
29,495 15,501
------------------------

EXPENSES
Research and development 37,199 34,505
Government assistance (1,503) (1,699)
------------------------
Net current research and development 35,696 32,806
General and administrative 5,536 4,908
Interest income (1,653) (3,104)
Amortization of property, plant and equipment 17 17
Write-off of property, plant and equipment 51 36
Write-off of intangible assets 97 642
Lease abandonment cost 80 345
Corporate and other transaction costs 725 -
Bank charges and interest 16 33
Foreign exchange (gain) loss (1,952) 1,840
------------------------
38,613 37,523
------------------------
Loss before income tax (9,118) (22,022)
Future income tax recovery 139 -
------------------------
Net loss for the year (8,979) (22,022)

Deficit, beginning of year (81,196) (59,174)
------------------------
Deficit, end of year (90,175) (81,196)
------------------------
------------------------

Basic and diluted loss per share (0.24) (0.62)
Weighted average number of common shares 36,682,398 35,740,880
------------------------



MethylGene Inc.

STATEMENTS OF COMPREHENSIVE LOSS

For the years ended December 31, Unaudited
(In thousands of Canadian dollars)
2008 2007
$ $
------------------------

Net loss for the year (8,979) (22,022)
------------------------

Other comprehensive income (loss)
Change in unrealized gains (losses) on cash
equivalents and marketable securities, net
of income tax expense of $312 (2007 - nil) 699 (945)
Reclassification adjustment to net loss of
realized (gains) losses on cash equivalents
and marketable securities, net of income
tax recovery of $173 (2007 - nil) (292) 921
------------------------
407 (24)
------------------------
Comprehensive loss for the year (8,572) (22,046)
------------------------
------------------------



MethylGene Inc.

STATEMENTS OF CASH FLOWS

For the years ended December 31, Unaudited
(In thousands of Canadian dollars)
2008 2007
$ $
------------------------

OPERATING ACTIVITIES
Net loss for the year (8,979) (22,022)
Items not affecting cash:
Amortization of property, plant and equipment 1,170 1,307
Amortization of intangible assets 128 155
Lease abandonment cost 80 345
Write-off of property, plant and equipment 51 36
Write-off of intangible assets 97 642
Stock-based compensation expense 410 547
Future income tax recovery (139) -
Warrants related to license fees - 5
------------------------
(7,182) (18,985)

Net change in non-cash working capital balances
related to operations (3,364) 842
Change in long-term portion of unearned revenue (11,699) (4,128)
------------------------
Cash flows related to operating activities (22,245) (22,271)
------------------------

INVESTING ACTIVITIES
Acquisitions of property, plant and equipment (263) (767)
Acquisitions of intangible assets (165) (703)
Purchases of marketable securities (87,352) (134,820)
Proceeds from maturities of marketable securities 112,858 142,304
------------------------
Cash flows related to investing activities 25,078 6,014
------------------------

FINANCING ACTIVITIES
Issuance of common shares - 20,193
Share issue costs - (1,403)
------------------------
Cash flows related to financing activities - 18,790
------------------------

Foreign exchange loss on cash equivalents held
in foreign currency (94) (5)
------------------------

Increase in cash and cash equivalents 2,739 2,528
Cash and cash equivalents, beginning of year 3,208 680
------------------------
Cash and cash equivalents, end of year 5,947 3,208
------------------------
------------------------

Cash and cash equivalents consist of:
Cash 2,535 622
Cash equivalents 3,412 2,586
------------------------
5,947 3,208
------------------------
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