MethylGene Inc.
TSX : MYG

MethylGene Inc.

March 30, 2011 07:30 ET

MethylGene Reports Fourth Quarter and Full Year 2010 Financial Results

MONTREAL, QUEBEC--(Marketwire - March 30, 2011) - MethylGene Inc. (TSX:MYG) today reported financial results for the fourth quarter and full year ended December 31, 2010. The Company announced on March 24, 2011 its intent to complete a private placement which is expected to provide gross proceeds of $34.5 million. Upon closing of the private placement, the Company's cash runway would extend into 2014. In order to continue as a going concern, the Company must receive proceeds of a financing by the end of the second quarter of 2011.

Fourth Quarter 2010 Financial Results Reported in Canadian Dollars

MethylGene reported total revenues of $816,000 for the quarter ended December 31, 2010, an increase of $334,000 compared to the fourth quarter 2009, related to higher license and up-front fees as well as higher research collaborations and contract revenues from Otsuka Pharmaceutical Co. Ltd.

Total expenditures of $2.8 million in the fourth quarter of 2010 were $2.9 million, or 50.6 percent, lower than in the fourth quarter of 2009 due to lower costs associated with MGCD265, MGCD290 and the impact of cost reduction efforts. General and administration costs of $898,000 in the fourth quarter of 2010 were $229,000, or 20.3 percent, lower than in the fourth quarter of 2009, due primarily to lower compensation costs and lower professional fees. The fourth quarter of 2010 also included interest income of $22,000 versus $23,000 in 2009 and a currency exchange loss of $18,000 versus $129,000 in 2009. As a result of the reduced expenses, the loss per share of $0.04 in the fourth quarter of 2010 was significantly improved over the loss per share of $0.12 in the fourth quarter of 2009.

Full Year 2010 Financial Results in Canadian Dollars

MethylGene reported total revenues of $2.4 million in 2010, a decrease of $631,000 compared to 2009. The decrease was primarily due to the termination of the agreement with Celgene Corporation in January 2009. This decline was partially offset by higher license and up-front fees as well as higher research collaborations and contract revenues from Otsuka Pharmaceutical Co. Ltd.

Total expenditures of $17.1 million in 2010 were $9.4 million, or 35.5 percent, lower than in 2009. Net research and development expenses decreased by 48.1 percent to $10.9 million for the full year 2010 compared to 2009,  with savings achieved in each of our clinical programs as we focused on the development of MGCD265 and the impact of cost reduction efforts including a reduction in workforce. General and administrative expenses of $6.2 million were $1.4 million higher than in 2009 due to the one-time expense of $1.5 million related to the departure of the previous President and Chief Executive Officer. Interest income in 2010 of $55,000 was $136,000 lower than in 2009 due to lower average cash balances while a foreign exchange loss of $58,000 in 2010 was $340,000 lower than in 2009 due to lower average exposure to U.S. dollars. As a result of the reduced expenses in 2010, the loss per share of $0.36 was significantly improved versus the loss per share of $0.63 in 2009.

At December 31, 2010, the Company had cash, cash equivalents and restricted cash of $8.6 million compared to $18.1 million at December 31, 2009. The Company has recently taken several important steps to significantly conserve cash and cash equivalents by reducing costs including a further reduction in workforce; the sale of de-commissioned lab equipment; and a resiliation agreement whereby the landlord released the Company from all remaining obligations on its remaining lease. The impact of this resiliation agreement will improve the cash flow by approximately $575,000 for the combined years of 2011 and 2012.

About MethylGene

MethylGene Inc. (TSX:MYG) is a clinical-stage biopharmaceutical company that develops novel therapeutics for cancer and infectious disease. The Company's lead product candidates include: MGCD265, an oral Met/VEGF receptor kinase inhibitor that is in Phase 1/2 clinical trials for solid tumor cancers and MGCD290, a fungal Hos2 inhibitor, for use in combination with fluconazole for fungal infections, which has completed Phase 1 clinical studies. The Company's partners include Otsuka Pharmaceutical Co. Ltd., Taiho Pharmaceutical Co. Ltd., and EnVivo Pharmaceuticals, Inc.

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 MGCD265, MGCD290 or mocetinostat (MGCD0103); the ability to scale up, formulate and manufacture sufficient GMP, clinical or commercialization quantities of MGCD265, MGCD290 or mocetinostat, 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 MGCD265, MGCD290 or mocetinostat. 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, as described in MethylGene's Annual Information Form for the fiscal year ending December 31, 2009, under the heading "Risk Factors" which you are urged to read 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 Canada Business Corporation Act         

BALANCE SHEETS        

   
As at December 31,        
[In thousands of Canadian dollars]        
   
  2010   2009  
  $   $  
   
ASSETS        
Current        
Cash and cash equivalents 7,361   14,210  
Marketable securities   3,249  
Restricted cash 597    
Research and development tax credits receivable 624   992  
Unbilled revenue 405   328  
Other current assets 724   1,050  
Total current assets 9,711   19,829  
Security deposits 115   385  
Restricted cash 655   614  
Property, plant and equipment 430   1,173  
  10,911   22,001  
   
LIABILITIES AND SHAREHOLDERS' EQUITY        
Current        
Accounts payable and accrued liabilities 4,161   5,811  
Current portion of unearned revenue 527   584  
Current portion of lease abandonment cost 392   196  
Total current liabilities 5,080   6,591  
Unearned revenue 1,771   2,529  
Lease abandonment cost   380  
Total liabilities 6,851   9,500  
   
Shareholders' equity        
Capital stock 119,189   119,189  
Contributed surplus 15,274   9,014  
Deficit (130,403 ) (115,712 )
Accumulated other comprehensive income   10  
Total shareholders' equity 4,060   12,501  
  10,911   22,001  

MethylGene Inc.

STATEMENTS OF OPERATIONS AND DEFICIT

For the years ended December 31,

[In thousands of Canadian dollars, except for share and per share amounts]

  2010   2009  
  $   $  
   
REVENUES        
Research collaborations and contract revenues 1,574   2,457  
License and up-front fees 815   563  
  2,389   3,020  
   
EXPENSES        
Research and development 11,778   22,119  
Government assistance (904 ) (1,162 )
Net research and development 10,874   20,957  
General and administrative 6,187   4,752  
Interest income (55 ) (191 )
Gain on disposal of property, plant and equipment (39 ) (20 )
Lease abandonment cost 20   183  
Corporate and other transaction costs   376  
Bank charges and interest 31   21  
Foreign exchange loss 58   398  
  17,076   26,476  
Loss before income tax (14,687 ) (23,456 )
Future income tax expense (4 ) (134 )
Net loss for the year (14,691 ) (23,590 )
   
Deficit, beginning of year (115,712 ) (92,122 )
Deficit, end of year (130,403 ) (115,712 )
   
Basic and diluted loss per share (0.36 ) (0.63 )
Weighted average number of common shares 40,418,580   37,492,143  

MethylGene Inc.

STATEMENTS OF COMPREHENSIVE LOSS

For the years ended December 31,

[In thousands of Canadian dollars]

  2010   2009  
  $   $  
   
Net loss for the year (14,691 ) (23,590 )
   
Other comprehensive loss        
Unrealized gains (losses) on cash equivalents, marketable securities, net of tax recovery of $15 [2009 - tax expense of $86] (34 ) 138  
   
Reclassification to net loss of realized gains (losses) on cash equivalents and marketable securities, net of income tax expense of $11 [2009 – tax recovery of $220] 24   (439 )
  (10 ) (301 )
Comprehensive loss for the year (14,701 ) (23,891 )

MethylGene Inc.         

STATEMENTS OF CASH FLOWS     

For the years ended December 31,       

[In thousands of Canadian dollars]       

   
  2010   2009  
  $   $  
OPERATING ACTIVITIES        
Net loss for the year (14,691 ) (23,590 )
Items not affecting cash        
  Amortization of property, plant and equipment 703   996  
  Lease abandonment cost 20   183  
  Write-off of property, plant and equipment   2  
  Gain on disposal of property, plant and equipment (39 ) (20 )
  Stock-based compensation expense 70   165  
  Future income tax expense 4   134  
  (13,933 ) (22,130 )
Net change in non-cash working capital balances related to operations (1,782 ) 710  
Cash flows related to operating activities (15,715 ) (21,420 )
   
INVESTING ACTIVITIES        
Acquisitions of property, plant and equipment (8 ) (49 )
Purchases of marketable securities (1,099 ) (26,714 )
Restricted cash (638 ) 59  
Proceeds from maturities of marketable securities 4,348   54,894  
Proceeds from disposal of property, plant and equipment 87   29  
Cash flows related to investing activities 2,690   28,219  
   
FINANCING ACTIVITIES        
Proceeds from reorganization 7,216    
Costs of reorganization (1,026 )  
Issuance of common shares   1,583  
Share issue costs   (233 )
Cash flows related to financing activities 6,190   1,350  
   
Foreign exchange gain (loss) on cash equivalents held in foreign currency (14 ) 114  
   
Increase (decrease) in cash and cash equivalents (6,849 ) 8,263  
Cash and cash equivalents, beginning of year 14,210   5,947  
Cash and cash equivalents, end of year 7,361   14,210  
   
Cash and cash equivalents consist of:        
Cash 915   1,760  
Cash equivalents 6,446   12,450  
  7,361   14,210  

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