MethylGene Inc.
TSX : MYG

MethylGene Inc.

August 11, 2011 16:30 ET

MethylGene Reports Second Quarter 2011 Financial Results and Provides Clinical Update

MONTREAL, QUEBEC--(Marketwire - Aug. 11, 2011) - MethylGene Inc. (TSX:MYG) today reported financial results for the second quarter ended June 30, 2011. In addition, the Company provided a clinical update for its product candidates MGCD265 and MGCD290.

Financial Results Reported in Canadian Dollars

The Company's financial statements for the period ended June 30, 2011 have been prepared in accordance with IAS 34, Interim Financial Reporting, for International Financial Reporting Standards (IFRS). The financial impact of adopting IFRS was minimal with no material impact in the restatement of the second quarter of 2010 and no material impact for the 2011 second quarter results.

The Company closed its private placement on April 4, 2011 raising $34.5 million including the convertible debentures which converted at closing.

Total revenues for the second quarter ended June 30, 2011 were $1.3 million compared to $512,000 for the same period last year due to the conclusion of the research component of the research and license collaboration agreement with Otsuka Pharmaceutical Co. Ltd. ("Otsuka") on June 30, 2011, which resulted in the accelerated amortization of deferred revenues as the Company's substantive obligations to Otsuka ended.

Gross research and development expenditures in the second quarter of 2011 were $1.9 million, a decrease of 34.3 percent compared to $2.9 million in the second quarter of 2010. This decrease is due to lower compensation costs, lower facility costs and lower clinical development expenses for MGCD265 and MGCD290. General and administrative expenses in the second quarter of 2011 were $1.1 million, a decrease of 12.8 percent compared to the second quarter of 2010, reflecting lower compensation and lease costs and lower professional fees. MethylGene incurred a foreign exchange gain of $27,000 in the second quarter of 2011 versus a gain of $116,000 in the second quarter of 2010 due primarily to lower net U.S. dollar denominated assets in the second quarter of 2011. The net loss and comprehensive loss for the second quarter ended June 30, 2011 was $1.5 million or ($0.005) per share compared to a net loss and comprehensive loss of $3.3 million or ($0.08) per share for the corresponding period last year due to the higher average number of shares outstanding, higher revenues and lower operating expenses in the second quarter of 2011.

As of June 30, 2011, the Company had $36.0 million of cash, cash equivalents, marketable securities and restricted cash. The Company believes it has sufficient financial resources to carry forward its current clinical development and operating plans into 2014.

MGCD265 Clinical Development – Met / VEGF Inhibitor for Cancer

MethylGene continues to pursue the evaluation of MGCD265 in three cancer indications: non-small cell lung (NSCLC), gastric and prostate. The amended protocols for trials 265-101 and 265-103, which include expansion cohorts and an optimized formulation, have been approved at most sites and patient enrollment has begun.

In the Phase ½ docetaxel-arm of Trial 265-103 (MGCD265 in combination with full-dose docetaxel), which will focus on patients with NSCLC and prostate cancer, eight patients with NSCLC were enrolled. Six of the NSCLC patients were on study for more than three months. Two of the eight patients experienced partial responses (PRs) and six patients experienced prolonged stable disease for durations ranging from four to thirteen months. All of these patients are now off study. Six out of the eight patients with NSCLC were previously exposed to a prior line of therapy containing a taxane. One prostate patient with bone metastasis who had failed prior docetaxel therapy experienced a PR after four months of treatment. The most frequent treatment-related toxicities grade 2 and above in this combination arm include neutropenia, elevated lipase, infusion reaction, nausea, anorexia, diarrhea and fatigue.

In the erlotinib-arm of Trial 265-103 (MGCD265 in combination with full-dose erlotinib), three patients with gastric cancer have been enrolled, two of which were on study for six and eleven months, respectively, and one who experienced complete resolution of ascites and a decrease in gastric wall thickness has been on study for 16 months. Molecular profiling of the archived tumor biopsy from this patient showed high levels of Met and phospho-Met protein expression in the absence of MET and EGFR gene amplification or detectable mutations. The most frequent treatment-related toxicities grade 2 and above in this combination arm include diarrhea, rash and fatigue.

"We are pleased to advance the development of MGCD265 and look forward to learning more about the activity of the compound in its intended population of gastric, non-small cell lung and prostate cancer patients," said Charles Grubsztajn, President and Chief Executive Officer of MethylGene. "We remain on track to report data from these trials in 2012."

MGCD290 Clinical Development– Hos2 Inhibitor for Fungal Infections

The Company has completed four Phase 1 clinical trials in healthy adult volunteers evaluating MGCD290 as a single-agent and in combination with fluconazole. MethylGene is planning to initiate a Phase 2 clinical trial with MGCD290 in combination with fluconazole in acute vulvovaginal candidiasis (VVC) in the fourth quarter of this year. This trial will begin following the filing of a U.S. investigational new drug (IND) application and will be conducted in the U.S. MethylGene is also planning a Phase 2 clinical trial in recurrent vulvovaginal candidiasis (RVCC) and details of this trial will be released at a later time.

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 ½ 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, 2010, 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.
STATEMENTS OF FINANCIAL POSITION (Unaudited)
[In thousands of Canadian dollars]
June 30,
2011
December 31,
2010
ASSETS
Current
Cash and cash equivalents 7,267 7,361
Marketable securities 27,931
Restricted cash and marketable securities 200 597
Accounts and other receivables 610 726
Other current assets 1,363 1,027
Total current assets 37,371 9,711
Security deposits 69 115
Restricted cash and marketable securities 628 655
Property, plant and equipment, net 193 430
Total assets 38,261 10,911
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Trade payables and accrued liabilities 4,147 4,161
Current portion of deferred revenues 266 527
Current portion of provision 392
Total current liabilities 4,413 5,080
Deferred revenues 267 1,771
Total liabilities 4,680 6,851
Shareholders' equity
Share capital 145,665 119,189
Warrants 6,036
Contributed surplus 15,341 15,289
Deficit (133,461 ) (130,418 )
Total shareholders' equity 33,581 4,060
Total liabilities and shareholders' equity 38,261 10,911
MethylGene Inc.
STATEMENTS OF LOSS AND COMPREHENSIVE LOSS (Unaudited)
[In thousands of Canadian dollars except
for share and per share amounts]
For the three month
period ended June 30,
For the six month
period ended June 30,
2011 2010 2011 2010
Research collaborations and contract revenues 391 365 791 693
License and up-front fees 883 147 1,766 293
Total revenue 1,274 512 2,557 986
Expenses
Research and development, net 1,794 2,757 3,619 6,375
General and administrative 1,063 1,219 2,088 2,517
Foreign exchange gain (27 ) (116 ) (16 ) (19 )
Financial (income) expense (84 ) 1 (91 ) 1
2,746 3,861 5,600 8,874
Net loss and comprehensive loss for the period (1,472 ) (3,349 ) (3,043 ) (7,888 )
Basic and diluted loss per share

(0.005
) (0.08 ) (0.02 ) (0.20 )
Weighted average number of common shares 308,765,157 40,418,580 175,333,158 40,418,580
MethylGene Inc.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
[In thousands of Canadian dollars]
Share
capital
Warrants Contri-
buted
surplus
Deficit Total
share-
holders'
equity
Balance as at January 1, 2010 119,189 9,076 (115,764 ) 12,501
Net loss for the period (7,888 ) (7,888 )
Stock option compensation expense 22 22
Proceeds from reorganization, net of costs 6,285 6,285
Loan receivable from 1819400 Ontario Inc. 31 31
Balance as at June 30, 2010 119,189 15,414 (123,652 ) 10,951
Balance as at January 1, 2011 119,189 15,289 (130,418 ) 4,060
Net loss for the period (3,043 ) (3,043 )
Stock option compensation expense 64 64
Costs of reorganization (12 ) (12 )
Issuance of common shares, net of costs 26,476
26,476
Issuance of warrants, net of costs 6,036 6,036
Balance as at June 30, 2011 145,665 6,036 15,341 (133,461 ) 33,581
MethylGene Inc.
STATEMENTS OF CASH FLOWS (Unaudited)
[In thousands of Canadian dollars]
Six months ended
June 30,
2011 2010
Operating activities
Net loss (3,043 ) (7,888 )
Non-cash adjustments reconciling net loss to operating cash flows
Depreciation of property, plant and equipment 135 408
Write-off of property, plant and equipment 59
Gain on disposal of property, plant and equipment (23 ) (5 )
Reversal of provision for lease resiliation (51 )
Stock option compensation expense 64 22
Unrealized foreign exchange gain (33 )
(2,859 ) (7,496 )
Net changes in non-cash working capital balances relating to operations
(748
) (1,689 )
Change in non-cash long term portion of deferred revenues (1,504 ) (293 )
Interest received (42 ) 16
Cash flows related to operating activities (5,153 ) (9,462 )
Investing activities
Purchase of property, plant and equipment (3 ) (5 )
Purchases of marketable securities (28,926 ) (2,718 )
Restricted cash 424 (1,000 )
Disposal and maturities of marketable securities 995 4,962
Proceeds from disposal of property, plant and equipment 69 6
Cash flows related to investing activities (27,441 ) 1,245
Financing activities
Issuance of common shares 28,088
Issuance of warrants 6,404
Proceeds from reorganization 7,185
Share issue costs (1,980 )
Costs of reorganization (12 ) (900 )
Cash flows related to financing activities 32,500 6,285
Decrease in cash and cash equivalents (94 ) (1,932 )
Cash and cash equivalents, beginning of period 7,361 14,210
Cash and cash equivalents, end of period 7,267 12,278

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