MethylGene Inc.

TSX : MYG


MethylGene Inc.

November 14, 2012 08:25 ET

MethylGene Reports Third Quarter 2012 Financial Results and Provides Corporate Update

MONTREAL, CANADA--(Marketwire - Nov. 14, 2012) - MethylGene Inc. (TSX:MYG) today reported financial results for the third quarter ended September 30, 2012 and provided a corporate update.

Highlights

  • On November 12, 2012 we announced the appointment of Dr. Charles Baum M.D., Ph.D. as the President and Chief Executive Officer of the Company and that Dr. Baum joined the Board of Directors. On the same date, we announced that Mr. Louis Lacasse and Mr. Colin Mallet had resigned from the Board of Directors.
  • On November 12, 2012 the Company announced the intent to complete a private placement for gross proceeds of $26.1 million. Under the terms of the private placement the Company will issue 179,690,970 units at a price of $0.145 per unit, each unit comprising of one common share and thirty one-hundreths (30/100) of a common share purchase warrant. The closing of the private placement is subject to regulatory and shareholder approvals as well as customary closing conditions.
  • At the end of the quarter the Company had $18 million of cash and cash equivalents. Including the proceeds from the proposed private placement the cash runway is expected to extend into the second half of 2014.
  • Over 180 patients have now been recruited in the Phase II trial of the antifungal agent MGCD290. Topline results from this trial are anticipated in Q1 2013.
  • The Met/VEGFR kinase inhibitor MGCD265 continues to exhibit a favorable safety profile and encouraging indications of activity in ongoing dose escalation trials.
  • Data on the two lead programs were presented at major scientific and medical conferences: ICAAC, IDWeek™, ESMO and EORTC-NCI-AACR.

MGCD290 Clinical Program Update

The Phase II randomized, placebo-controlled, double-blind multicenter trial in vulvovaginal candidiasis (VVC) (290-005) is active at nineteen sites in North America. Over 180 patients have now been recruited and this trial is anticipated to complete accrual in 2012. The trial is designed to evaluate MGCD290 plus fluconazole versus fluconazole alone in patients with moderate-to-severe VVC. Topline data from this trial is expected in Q1 2013 and to date there have been no serious adverse events reported in this blinded study.

MGCD265 Clinical Program Update

Enrollment is ongoing in the Phase I/II trials MGCD265-101 (monotherapy) and MGCD265-103 (combination therapy with docetaxel or erlotinib). In monotherapy studies, MGCD265 has been well tolerated with no grade 4 adverse events. Treatment-related grade 3-4 adverse events were infrequent. Long term stable disease (over 12 months in duration) has been observed in patients with bladder, renal cell and neuroendocrine cancer. One patient with squamous cell cancer achieved a partial response (PR), as determined by RECIST criteria, after ten cycles of monotherapy with MGCD265. The PR was based on one target axillary lesion, but the non-target bone lesions remained stable.

MGCD265 in combination with docetaxel continues to be well tolerated. Non-hematologic grade 3-4 adverse events occurring in more than one patient were infrequent and hematologic toxicities of grade 3-4 were as expected with docetaxel therapy. Objective responses have been observed in NSCLC, prostate cancer and endometrial cancer patients. Of twelve evaluable NSCLC patients, two achieved partial remission and eleven achieved disease control (partial remission or stable disease) at the first tumor assessment.

In the MGCD265 plus erlotinib combination studies there were no grade 4 toxicities and grade 3-4 adverse events were infrequent. Five of nine gastro-esophageal (GE) patients achieved stable disease at the first scan (disease control rate of 56%). Of these four patients remained stable for greater than 4 months and two remained stable for greater than 1 year.

Enrollment will continue in the 265-101 monotherapy and 265-103 combination trials with docetaxel or erlotinib until a maximum tolerated dose (MTD) is reached. Once the MTD is reached, we will define the optimal dose for Phase II studies and the product will advance into multiple Phase I/II expansion cohorts. Indications of interest include renal cell, gastric and hepatocellular cancer patients who are c-Met positive. Plans are also underway to initiate a study in NSCLC patients who express Axl.

Third Quarter 2012 Financial Results Reported in Canadian Dollars

The Company's financial statements for the period ended September 30, 2012 have been prepared in accordance with IAS 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (IASB).

The Company reported no revenues in the third quarter September 30, 2012, versus $67,000 for the third quarter of 2011. The decline in revenues was due to recognizing the remaining deferred revenues under the Taiho Pharmaceutical Co. Ltd. agreement in 2011.

Research and development expenditures, net of investment tax credits, for the third quarter of 2012 were $4.2 million versus $2.1 million in the third quarter of 2011. This increase was primarily due to the ongoing Phase II trial with MGCD290, the continued enrollment in MGCD265 studies, and API production for MGCD265.

General and administrative expenses in the third quarter of 2012 were $1.7 million, an increase of $526,000 versus the third quarter of 2011. The increase relates to the departure of the Company's President and CEO on September 21, 2012.

Financial income of $49,000, relating primarily to interest income, in the third quarter of 2012 was $40,000 lower compared to the third quarter of 2011 due to lower cash balances in the third quarter of 2012 versus the prior year. The Company recorded a foreign exchange loss of $15,000 in the third quarter of 2012 compared to a gain of $35,000 in the third quarter of 2011.

The net loss and comprehensive loss for the third quarter ended September 30, 2012 was $5.9 million, or ($0.02) per share, compared to a net loss and comprehensive loss of $3.1 million, or ($0.01) per share, for the same period last year. The increased loss per share relates to the higher net loss and comprehensive loss for the quarter relating to the higher operating costs.

Cash, cash equivalents, marketable securities and restricted cash totaled $18.0 million as at September 30, 2012 compared to $29.6 million on December 31, 2011. Including the proceeds of the proposed private placement the Company believes it has sufficient financial resources to carry forward its current clinical development and operating plans into the second half of 2014.

About MethylGene

MethylGene Inc. (TSX:MYG) is a drug development company that is advancing novel therapeutics for cancer and infectious disease in human clinical trials. The Company's lead product candidates are: MGCD290, an oral antifungal agent targeting the fungal Hos2 enzyme that is in Phase II trials for vulvovaginal candidiasis, and MGCD265, an oral Met/VEGF receptor kinase inhibitor that is in Phase I/II clinical trials for patients with solid tumors. MethylGene owns all rights to its lead product candidates, and has partnerships with Otsuka Pharmaceutical Co. Ltd., Taiho Pharmaceutical Co. Ltd., and EnVivo Pharmaceuticals, Inc. for its other pipeline programs.

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 our other programs; the ability to scale up, formulate and manufacture sufficient GMP, clinical or commercialization quantities of MGCD265, MGCD290 or our other products, 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 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, as described in MethylGene's Annual Information Form 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 news release. These statements speak only as of the date they are made and MethylGene expressly disclaims any duty, obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in MethylGene's expectations with regard thereto of any change in events, conditions or circumstances on which any such statements are based except in accordance with law.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
[In thousands of Canadian dollars]
As at
September 30,
2012
December 31,
2011
ASSETS
Current
Cash and cash equivalents 5,548 10,050
Marketable securities 11,791 18,878
Restricted cash and marketable securities 300 300
Accounts and other receivables 191 174
Other current assets 1,592 1,574
Total current assets 19,422 30,976
Security deposits 67 55
Restricted cash and marketable securities 372 355
Property, plant and equipment, net 194 223
Total assets 20,055 31,609
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Trade payables and accrued liabilities 4,813 3,812
Current portion of other liability 50 -
Total current liabilities 4,863 3,812
Other liability 41 28
Total liabilities 4,904 3,840
Shareholders' equity
Share capital 145,720 145,685
Warrants 6,006 6,041
Contributed surplus 17,570 16,188
Deficit (154,145 ) (140,145 )
Total shareholders' equity 15,151 27,769
Total liabilities and shareholders' equity 20,055 31,609
CONSOLIDATED 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,
2012 2011 2012 2011
Revenue
Research collaborations and contract revenues - - 2 791
License and up-front fees - 67 - 1,833
Total revenue - 67 2 2,624
Expenses
Research and development, net 4,228 2,088 10,125 5,707
General and administrative 1,708 1,182 4,023 3,270
Foreign exchange loss (gain) 15 (35 ) 4 (51 )
Financial income (49 ) (89 ) (177 ) (180 )
Total expenses 5,902 3,146 13,975 8,746
Loss before income taxes (5,902 ) (3,079 ) (13,973 ) (6,122 )
Income tax expense 15 - 27 -
Net loss and comprehensive loss for the period (5,917 ) (3,079 ) (14,000 ) (6,122 )
Basic and diluted loss per share (0.02 ) (0.01 ) (0.04 ) (0.03 )
Weighted average number of common shares 318,054,661 317,913,336 317,960,788 223,382,155
CONSOLIDATED 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, 2011 119,189 - 15,289 (130,418 ) 4,060
Net loss and comprehensive 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
Balance as at January 1, 2012 145,685 6,041 16,188 (140,145 ) 27,769
Net loss and comprehensive loss for the period - - - (14,000 ) (14,000 )
Stock option compensation expense - - 1,398 - 1,398
Exercise of warrants 35 (35 ) - - -
Costs of reorganization - - (16 ) - (16 )
Balance as at September 30, 2012 145,720 6,006 17,570 (154,145 ) 15,151
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
[In thousands of Canadian dollars]
Nine months ended
September 30,
2012 2011
Operating activities
Net loss (14,000 ) (6,122 )
Non-cash adjustments reconciling net loss to operating cash flows
Depreciation of property, plant and equipment 98 163
Write-off of property, plant and equipment - 62
Gain on disposal of property, plant and equipment - (23 )
Reversal of provision for lease resiliation - (51 )
Stock option compensation expense 1,398 675
License and up-front fees - (1,571 )
Interest income (201 ) (202 )
Lease incentive 63 `7
(12,642 ) (7,062 )
Net changes in non-cash working capital balances relating to operations 907 (1,053 )
Interest received 260 131
Cash flows related to operating activities (11,475 ) (7,984 )
Investing activities
Purchase of property, plant and equipment (69 ) (80 )
Purchases of marketable securities (17,409 ) (37,731 )
Security deposit (12 ) -
Restricted cash (17 ) 397
Disposal and maturities of marketable securities 24,496 13,876
Proceeds from disposal of property, plant and equipment - 69
Cash flows related to investing activities 6,989 (23,469 )
Financing activitiesIssuance of common shares - 28,088
Issuance of warrants - 6,404
Share issue costs - (1,955 )
Costs of reorganization (16 ) (20 )
Cash flow related to financing activities (16 ) 32,517
Increase (decrease) in cash and cash equivalents (4,502 ) 1,064
Cash and cash equivalents, beginning of period 10,050 7,361
Cash and cash equivalents, end of period 5,548 8,425

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