MethylGene Inc.
TSX : MYG

MethylGene Inc.

November 03, 2011 08:30 ET

MethylGene Reports Third Quarter 2011 Financial Results and Provides Clinical Update

MONTREAL, QUEBEC--(Marketwire - Nov. 3, 2011) - MethylGene Inc. (TSX:MYG) today reported financial results for the third quarter ended September 30, 2011. In addition, the Company provided a clinical update for its product candidates MGCD265 and MGCD290.

Highlights

  • On October 18th, 2011 we received approval from the FDA for our IND to begin randomized, placebo-controlled, Phase 2 trials with MGCD290 in patients with moderate to severe acute Vulvovaginal Candidiasis (AVVC).
  • On October 6th, 2011 we strengthened our management team with the appointment of Joseph Walewicz as Vice President, Business and Corporate Development.
  • During the quarter the MGCD265 trials continued to enroll patients.
  • We finished the quarter with over $33 million in cash and equivalents to fund our development programs.

"The receipt of FDA approval to begin our first randomized, placebo-controlled, Phase 2 trial with MGCD290 is an important milestone for the company," said Charles Grubsztajn, President and CEO of MethylGene. "We expect this study to start shortly, and we expect to announce results from this study in the second half of 2012. Additionally, we remain on track to report data from the expansion cohorts of our MGCD265 trials in 2012."

Third Quarter Financial Results Reported in Canadian Dollars

The Company's financial statements for the period ended September 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 third quarter of 2010 and no material impact for the 2011 third quarter results.

Revenues for the third quarter ended September 30, 2011 were $67,000 compared to $587,000 for the third quarter of 2010. The reduction is primarily due to the conclusion, in the second quarter of 2011, of the research component of the research and license collaboration agreement with Otsuka Pharmaceutical Co. Ltd.

Research and development expenditures, net of investment tax credits, for the third quarter of 2011 were $2.1 million compared to $2.6 million for the third quarter of 2010. This decrease is mainly due to lower facility costs as the Company now leases approximately 10,000 square feet compared to approximately 46,000 square feet in the same period last year, as well as lower depreciation costs. In addition, lower salary costs of $147,000 relating to previous restructuring helped to partially offset higher non-cash stock option expenses of $194,000 in the third quarter of 2011 as compared to the same period in 2010.

General and administrative expenses in the third quarter of 2011 were $1.2 million compared to $2.7 million in the third quarter of 2010. This decrease relates to the recording of a $1.5 million expense in relation to the departure of the previous President and CEO in the third quarter of 2010. In addition, the continuing efforts to reduce administration expenses resulted in lower salary costs and professional fees of $443,000 which offset higher non-cash stock option expenses of $424,000 in the third quarter of 2011 as compared to the same period in 2010.

Financial income of $89,000, relating primarily to interest income, in the third quarter of 2011 was $79,000 higher compared to the third quarter of 2010 due to increased cash balances versus the prior year. The Company recorded a foreign exchange gain of $35,000 in the third quarter of 2011 compared to a loss of $74,000 in the third quarter of 2010. The gain in the third quarter of 2011 relates to the effect of an increase in the value of the U.S. dollar versus the Canadian dollar on net U.S. dollar assets.

The net loss and comprehensive loss for the third quarter ended September 30, 2011 was $3.1 million, or ($0.01) per share, compared to a net loss and comprehensive loss of $4.8 million, or ($0.12) per share, for the same period last year. The improved loss per share relates to the higher average number of shares outstanding and lower net loss in the third quarter of 2011 as compared to the same period in 2010.

Cash, cash equivalents, marketable securities and restricted cash totaled $33.1 million as at September 30, 2011 compared to $8.6 million on December 31, 2010. 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.

To date, over 170 patients have been enrolled in three clinical trials using MGCD265. Enrollment is continuing in the MGCD265 program in both the monotherapy Trial 265-101 and the combination Trial 265-103. The compound has been well tolerated and has demonstrated preliminary clinical activity.

In the docetaxel-arm of our Phase 1/2 Trial 265-103 (MGCD265 in combination with full-dose docetaxel), preliminary signs of clinical activity have been seen in non-small cell lung cancer and prostate cancer. The most frequent toxicities (grade 2 and above) related to MGCD265 in this combination arm include elevated lipase, nausea, anorexia, diarrhea and fatigue.

In the erlotinib-arm of Trial 265-103 (MGCD265 in combination with full-dose erlotinib), preliminary signs of clinical activity have been seen in gastric and esophageal cancers. The most frequent toxicities (grade 2 and above) related to MGCD265 in this combination arm include diarrhea and fatigue.

In monotherapy Trial 265-101 and Trial 265-102, preliminary signs of clinical activity have been seen in sarcomatoid bladder, papillary renal and colon cancer. Monotherapy Trial 265-102 has been closed. In both Trials 265-101 and 265-102, MGCD265 was well tolerated with fatigue, diarrhea and nausea being the most common toxicities.

MGCD290 Clinical Development– Hos2 Inhibitor for Fungal Infections

We achieved an important milestone with the recent FDA approval of the IND to start the Phase 2 clinical program for MGCD290. We are now in the process of obtaining IRB approvals and expect to enroll patients in the acute vulvovaginal candidiasis (AVVC) trial (Trial 290-005) by year end. We are also in the process of preparing for a recurrent vulvovaginal candidiasis (RVVC) trial (Trial 290-006) which we expect to start in the first half of 2012. Both studies will evaluate MGCD290 in combination with fluconazole versus fluconazole alone.

We have completed four Phase 1 clinical trials in healthy adult volunteers evaluating MGCD290 as a single-agent and in combination with fluconazole. The drug has been well tolerated in all four studies. No dose-limiting toxicities were seen, and no serious adverse events were reported. Pharmacokinetics were dose-dependent and linear up to the highest dose given. No drug-drug interactions were seen between MGCD290 and fluconazole.

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 and will start randomized Phase 2 trials in the near term. 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.

STATEMENTS OF FINANCIAL POSITION (Unaudited)
[In thousands of Canadian dollars]
September 30,
2011
December 31,
2010
ASSETS
Current
Cash and cash equivalents 8,425 7,361
Marketable securities 23,855
Restricted cash and marketable securities 200 597
Accounts and other receivables 182 726
Other current assets 1,200 1,027
Total current assets 33,862 9,711
Security deposits 93 115
Restricted cash and marketable securities 655 655
Property, plant and equipment, net 239 430
Total assets 34,849 10,911
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Trade payables and accrued liabilities 3,246 4,161
Current portion of deferred revenues 266 527
Current portion of provision 392
Total current liabilities 3,512 5,080
Deferred revenues 200 1,771
Other liability 7
Total liabilities 3,719 6,851
Shareholders' equity
Share capital 145,685 119,189
Warrants 6,041
Contributed surplus 15,944 15,289
Deficit (136,540 ) (130,418 )
Total shareholders' equity 31,130 4,060
Total liabilities and shareholders' equity 34,849 10,911
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
September 30,
For the nine-month
period ended
September 30,
2011 2010 2011 2010
Research collaborations and contract revenues 441 791 1,134
License and up-front fees 67 146 1,833 439
Total revenue 67 587 2,624 1,573
Expenses
Research and development, net 2,088 2,612 5,707 8,987
General and administrative 1,182 2,725 3,270 5,242
Foreign exchange (gain) loss (35 ) 74 (51 ) 55
Financial income (89 ) (10 ) (180 ) (9 )
3,146 5,401 8,746 14,275
Net loss and comprehensive loss for the period (3,079 ) (4,814 ) (6,122 ) (12,702 )
Basic and diluted loss per share

(0.01
) (0.12 ) (0.03 ) (0.31 )
Weighted average number of common shares 317,913,336 40,418,580 223,382,155 40,418,580
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
[In thousands of Canadian dollars]
Share capital Warrants Contributed surplus Deficit Total shareholders' equity
Balance as at January 1, 2010 119,189 9,076 (115,764 ) 12,501
Net loss for the period (12,702 ) (12,702 )
Stock option compensation expense 16 16
Proceeds from reorganization, net of costs 6,266 6,266
Balance as at September 30, 2010 119,189 15,358 (128,466 ) 6,081
Balance as at January 1, 2011 119,189 15,289 (130,418 ) 4,060
Net loss for the period (6,122 ) (6,122 )
Stock option compensation expense 675 675
Costs of reorganization (20 ) (20 )
Issuance of common shares, net of costs 26, 496
26,496
Issuance of warrants, net of costs 6,041 6,041
Balance as at September 30, 2011 145,685 6,041 15,944 (136,540 ) 31,130
STATEMENTS OF CASH FLOWS (Unaudited)
[In thousands of Canadian dollars]
Nine months ended
September 30,
2011 2010
Operating activities
Net loss (6,122 ) (12,702 )
Non-cash adjustments reconciling net loss to operating cash flows
Depreciation of property, plant and equipment 163 568
Write-off of property, plant and equipment 62
Gain on disposal of property, plant and equipment (23 ) (7 )
Reversal of provision for lease resiliation (51 )
Lease incentive 7
Stock option compensation expense 675 16
Interest income (202 ) (33 )
Unrealized foreign exchange loss (gain) 15
(5,491 ) (12,143 )
Net changes in non-cash working capital balances relating to operations
(1,053
) (1,148 )
Change in non-cash long term portion of deferred revenues (1,571 ) (438 )
Interest received 131 33
Cash flows related to operating activities (7,984 ) (13,696 )
Investing activities
Purchase of property, plant and equipment (80 ) (8 )
Purchases of marketable securities (37,731 ) (2,766 )
Restricted cash 397 (1,000 )
Disposal and maturities of marketable securities 13,876 6,614
Proceeds from disposal of property, plant and equipment 69 9
Cash flows related to investing activities (23,469 ) 2,849
Financing activities
Issuance of common shares 28,088
Issuance of warrants 6,404
Proceeds from reorganization 7,216
Share issue costs (1,955 )
Costs of reorganization (20 ) (950 )
Cash flows related to financing activities 32,517 6,266
Increase (decrease) in cash and cash equivalents 1,064 (4,581 )
Cash and cash equivalents, beginning of period 7,361 14,210
Cash and cash equivalents, end of period 8,425 9,629

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