MethylGene Inc.
TSX : MYG

MethylGene Inc.

November 12, 2010 17:33 ET

MethylGene Reports Third Quarter 2010 Financial Results and Provides Clinical Update for MGCD265

MONTREAL, QUEBEC--(Marketwire - Nov. 12, 2010) - MethylGene Inc. (TSX: MYG) today announced financial results for the third quarter ended September 30, 2010. In addition, the Company provided a clinical trial update for its multi-targeted (Met) kinase oncology inhibitor, MGCD265.

Financial Results Reported in Canadian Dollars

Total revenues for the third quarter ended September 30, 2010 were $587,000 compared to $485,000 for the same period last year due to increased collaboration revenue from Otsuka.

Gross research and development expenditures in the third quarter of 2010 were $3.0 million, down 34 percent, compared to $4.6 million in the third quarter of 2009. This decrease is due to lower research and development expenses for MGCD265 and MGCD290. General and administrative expenses in the third quarter of 2010 were $2.7 million, an increase of $1.5 million compared to the third quarter of 2009 as we recorded a $1.5 million expense in relation to the departure of the previous President and Chief Executive Officer. MethylGene incurred a foreign exchange loss of $26,000 in the third quarter of 2010 versus a loss of $188,000 in the third quarter of 2009. The lower loss is the result of lower average U.S. denominated assets and a higher average exchange rate for the Canadian dollar versus the U.S. dollar. The net loss for the third quarter ended September 30, 2010 was $4.8 million or ($0.12) per share compared to a net loss of $5.4 million or ($0.15) per share for the corresponding period last year, reflecting lower operating expenses due to continued cost control efforts.

As of September 30, 2010, the Company had $10.6 million of cash, cash equivalents, and restricted cash. Based on current assumptions, the Company believes that its current cash, cash equivalents, interest income, projected revenues from current collaborations, projected timing of clinical trials and refundable investment tax credits should be sufficient to carry out its planned research and development plans and operations to the end of the first quarter of 2011. Management is actively pursuing various alternatives.

MGCD265 Update

Over 120 patients have been enrolled in three ongoing MGCD265 Phase 1 and Phase 1/2 clinical trials. The compound has been well tolerated and has demonstrated preliminary clinical activity as a single agent and in combination with docetaxel and erlotinib.

In the Phase 1/2 docetaxel-arm of Trial 265-103 (MGCD265 in combination with full-dose docetaxel), the maximum-tolerated dose (MTD) has been reached and the Company is defining the recommended Phase 2 dose. Five patients have been on the study for more than four months. Of these, four non-small cell lung cancer (NSCLC) patients have experienced stable disease for durations ranging from 8 to 13 months. One NSCLC patient achieved a confirmed partial response and the other three patients all had tumor shrinkage accompanying their stable disease. These results exceed the expectation for docetaxel alone. In the erlotinib-arm of Trial 265-103 (MGCD265 in combination with full-dose erlotinib), dose escalation continues and MethylGene believes that it is close to reaching the MTD. Twelve patients have been on study for more than four months. Of these, there is one gastric cancer patient who is currently experiencing stable disease for 11 months. The most frequent MGCD265-related toxicities in both arms of Trial 265-103 are fatigue and diarrhea, consistent with Trials 265-101 and 265-102.

In monotherapy Trial 265-101, seven patients have been on study for more than four cycles. Dose escalation is continuing in order to determine the MTD. In monotherapy Trial 265-102, the MTD has been reached and the recommended Phase 2 dose is being confirmed. Ten patients have been on study for more than four cycles, including a papillary renal cell carcinoma patient and sarcomatoid bladder cancer patient with extended stable disease durations of approximately one year. In both Trials 265-101 and 265-102, MGCD265 is well tolerated with fatigue, diarrhea and elevated lipase the most common toxicities.

About MethylGene

MethylGene Inc. (TSX:MYG) is a publicly-traded, clinical stage biopharmaceutical company focused on the development and commercialization of novel therapeutics with a focus on cancer. The Company's product candidates include: MGCD265, an oral, multi-targeted kinase inhibitor targeting the Met, VEGF, Ron and Tie-2 receptor tyrosine kinases that is in multiple clinical trials for cancer; MGCD290, a fungal Hos2 inhibitor for use in combination with fluconazole for fungal infections which has completed Phase 1 clinical studies; and mocetinostat (MGCD0103), an oral, isoform-selective HDAC inhibitor for cancer which has been in multiple Phase 2 clinical trials and is currently in a Phase 2 trial in refractory or relapsed follicular lymphoma. Mocetinostat is licensed to Taiho Pharmaceutical Co. Ltd in certain Asian countries. A fourth compound discovered using MethylGene's HDAC platform, EVP-0334 - a potential cognition enhancing agent for neurodegenerative diseases has successfully completed Phase 1 trials 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 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      
         
UNAUDITED INTERIM  
BALANCE SHEETS  
   
   
         
[In thousands of Canadian dollars]        
         
  September 30,   December 31,  
  2010   2009  
  $   $  
         
ASSETS        
Current        
Cash and cash equivalents 9,629   14,210  
Marketable securities   3,863  
Restricted cash 200    
Research and development tax credits receivable 1,525   992  
Unbilled revenue 422   328  
Interest receivable 17   17  
Other current assets 917   1,033  
Assets held for sale 57    
Total current assets 12,767   20,443  
Security deposits 210   385  
Restricted cash 800    
Property, plant and equipment 554   1,173  
  14,331   22,001  
         
LIABILITIES AND SHAREHOLDERS' EQUITY        
Current        
Accounts payable and accrued liabilities 5,147   5,811  
Current portion of unearned revenue 584   584  
Current portion of lease abandonment cost 192   196  
Total current liabilities 5,923   6,591  
Unearned revenue 2,091   2,529  
Lease abandonment cost 236   380  
Total liabilities 8,250   9,500  
         
Shareholders' equity        
Capital stock 119,189   119,189  
Contributed surplus 15,336   9,014  
Deficit (128,443 ) (115,712 )
Accumulated other comprehensive income (1 ) 10  
Total shareholders' equity 6,081   12,501  
  14,331   22,001  
                 
                 
                 
                 
MethylGene Inc.                
                 
                 
UNAUDITED INTERIM  
STATEMENTS OF OPERATIONS AND DEFICIT  
   
                 
                 
                 
[In thousands of Canadian dollars,                
except for share and per share amounts]                
                 
                 
  Three-month period
ended
September 30,
  Nine-month period
ended
September 30,
 
  2010   2009   2010   2009  
  $   $   $   $  
                 
REVENUES                
Research collaborations and contract revenues 441   347   1,134   2,125  
License and up-front fees 146   138   439   413  
  587   485   1,573   2,538  
                 
EXPENSES                
Research and development 3,036   4,579   9,801   17,741  
Government assistance (424 ) (238 ) (814 ) (803 )
Net research and development 2,612   4,341   8,987   16,938  
General and administrative 2,739   1,283   5,280   3,621  
Interest income (17 ) (13 ) (33 ) (169 )
Amortization and write-off of property, plant and equipment 3   3   9   13  
Gain on disposal of property, plant and equipment (2 )   (7 ) (6 )
Corporate and other transaction costs   42     160  
Bank charges and interest 7   6   24   21  
Foreign exchange loss 26   188   40   269  
  5,368   5,850   14,300   20,847  
Loss before income tax (4,781 ) (5,365 ) (12,727 ) (18,309 )
Future income tax expense (14 ) (55 ) (4 ) (139 )
Net loss for the period (4,795 ) (5,420 ) (12,731 ) (18,448 )
                 
Deficit, beginning of period (123,648 ) (105,150 ) (115,712 ) (92,122 )
Deficit, end of period (128,443 ) (110,570 ) (128,443 ) (110,570 )
                 
Basic and diluted loss per share (0.12 ) (0.15 ) (0.32 ) (0.50 )
Weighted average number of common shares 40,418,580   36,682,398   40,418,580   36,682,398  
   
   
   
   
UNAUDITED INTERIM  
STATEMENTS OF COMPREHENSIVE LOSS  
   
                 
                 
[In thousands of Canadian dollars]                
                 
                 
                 
  Three-month period
ended
September 30,
  Nine-month period
ended
September 30,
 
  2010   2009   2010   2009  
  $   $   $   $  
                 
Net loss for the period (4,795 ) (5,420 ) (12,731 ) (18,448 )
                 
Other comprehensive loss                
Unrealized gains (losses) on cash equivalents and marketable securities, net of income tax expense of nil for the three-month period ended September 30, 2010 [2009 - nil] and $11 for the nine-month period ended September 30, 2010 [2009 – $81] (1 ) (54 ) 24   127  
                 
Reclassification to net loss of realized gains on cash equivalents and marketable securities, net of income tax recovery of $14 for the three-month period ended September 30, 2010 [2009 – $55] and a tax recovery of $15 for the nine-month period ended September 30, 2010 [2009 – $220] (33 ) (122 ) (35 ) (491 )
  (34 ) (176 ) (11 ) (364 )
Comprehensive loss for the period (4,829 ) (5,596 ) (12,742 ) (18,812 )
                 
                 
                 
                 
MethylGene Inc.                
                 
UNAUDITED INTERIM  
STATEMENTS OF CASH FLOWS  
   
                 
[In thousands of Canadian dollars]                
                 
  Three-month period
ended
September 30,
  Nine-month period
ended
September 30,
 
  2010   2009   2010   2009  
  $   $   $   $  
                 
OPERATING ACTIVITIES                
Net loss for the period (4,795 )  (5,420 (12,731 )  (18,448
Items not affecting cash                
  Amortization of property, plant and equipment 160   241   568   758  
  Write-off of property, plant and equipment       2  
  Gain on disposal of property, plant and equipment (2 )   (7 ) (6 )
  Stock-based compensation expense 9   21   56   131  
  Future income tax expense 14   55   4   139  
  (4,614 )  (6,110 (12,110 )  (17,424!)  
Net change in non-cash working capital balances related to operations 525   (869 ) (1,148 ) (666 )
Change in long-term portion of unearned revenue (145 ) (138 ) (438 ) (412 )
Cash flows related to operating activities (4,234 )  (6,110 (13,696 )  (18,502
                 
INVESTING ACTIVITIES                
Acquisitions of property, plant and equipment (3 ) (7 ) (8 ) (16 )
Purchases of marketable securities   (1,500 ) (2,751 ) (25,578 )
Restricted cash     (1,000 )    
Proceeds from maturities of marketable securities 1,652   13,177   6,614   53,119  
Proceeds from disposal of property, plant and equipment 3     9   11  
Cash flows related to investing activities 1,652   11,670   2,864   27,536  
                 
FINANCING ACTIVITIES                
Proceeds from reorganization 31     7,216    
Costs of reorganization (50 )   (950 )  
Cash flows related to financing activities (19 )   6,266    
                 
Foreign exchange gain (loss) on cash equivalents held in foreign currency (48 ) (138 ) (15 ) 46  
                 
Increase (decrease) in cash and cash equivalents (2,649 )  5,422   (4,581 )  9,080  
Cash and cash equivalents, beginning of period 12,278   9,605   14,210   5,947  
Cash and cash equivalents, end of period 9,629   15,027   9,629   15,027  
                 
Cash and cash equivalents consist of:                
Cash 1,162   3,549   1,162   3,549  
Cash equivalents 8,467   11,478   8,467   11,478  
  9,629   15,027   9,629   15,027  

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