MethylGene Inc.
TSX : MYG

MethylGene Inc.

March 08, 2007 07:30 ET

MethylGene Reports Year-End 2006 Financial Results

MONTREAL, QUEBEC--(CCNMatthews - March 8, 2007) - MethylGene Inc. (TSX:MYG) a biopharmaceutical company, today announced operational and financial results for the year and fourth quarter ended December 31, 2006.

"2006 was a year of continued progress as we increased our focus and investment in clinical development," said Donald F. Corcoran, President and CEO of MethylGene. "We continue to focus on advancing our lead product candidate, MGCD0103, and in parallel, move our second cancer compound, MGCD265, towards the clinic. Our financial position will allow us to pursue the development of these programs as well as to progress our HDAC antifungal and HDAC Huntington's programs."

Highlights of 2006

- Signed a research, development and commercialization agreement with Pharmion Corporation, a deal worth potentially up to U.S. $272 million, for MethylGene's MGCD0103 and oncology HDAC inhibitors for North America, Europe and other territories;

- Commenced Phase II clinical trials with MGCD0103 in Hodgkin's lymphoma (Trial 010), B-cell lymphomas (Trial 008), and in myelodysplastic syndromes (MDS) and acute myelogenous leukemia (AML) (Trial 007). The start of Phase II trials resulted in total milestone payments of US $5.5 million from our partners Pharmion Corporation and Taiho Pharmaceutical. A Phase I/II trial (Trial 006) with MGCD0103 in combination with Gemzar® in pancreatic cancer patients was also initiated;

- Reported positive Phase I interim results for MGCD0103 single-agent trials in two oral presentations at the American Society of Clinical Oncology (ASCO) annual meeting and reported positive interim data at the American Society of Hematology (ASH) annual meeting for the Phase I/II trial of MGCD0103 in combination with Vidaza® (Trial 005) in patients with MDS or AML. In the Phase I portion of the trial, we reported seven of 23 (30%) evaluable patients achieved responses. Based on these results, we initiated the Phase II portion of this trial. We also announced that sufficient activity was demonstrated in the Hodgkin's lymphoma trial (Trial 010) to expand enrollment;

- Selected MGCD265 as our first multi-targeted (c-Met) kinase clinical candidate for oncology. This compound inhibits a novel spectrum of receptor tyrosine kinases: c-Met, Tie-2, Ron and the three VEGFRs;


- Presented preclinical data for MG3290 and the HDAC antifungal program. The data demonstrated MethylGene's oral, small molecule could successfully combat fungal infections in vitro and in vivo when administered in combination with azoles;

- Entered into a collaborative agreement with CHDI, Inc., a non-profit organization that is pursuing biotechnology approaches to discover and develop treatments for Huntington's disease, a fatal genetic disorder with no current therapy. CHDI will provide MethylGene with up to US $1.5 million in initial funding for the identification, design and synthesis of HDAC inhibitors for potential use in treating Huntington's disease, as well as support for other preclinical pharmacology testing;

- Completed two capital raises during the past 12 months. In May 2006, we closed a private placement of U.S. $19.9 million with key U.S. biotech investors. Mr. Jay Moorin, General Partner of ProQuest Investments, was appointed to MethylGene's Board of Directors. In March 2007, we completed a bought deal financing with a syndicate of underwriters led by Canaccord Capital Corporation for gross proceeds of CDN $20.3 million;

- Announced that MethylGene would not pursue additional clinical trials for MG98 and would continue to focus its clinical development investment in more commercially attractive alternatives such as MGCD0103 and MGCD265 as well as continue to concentrate its efforts in other histone deacetylase (HDAC) programs.

Objectives for the Next 12 Months

- Continue enrollment in the five ongoing MGCD0103 Phase II and Phase I/II clinical trials. The Company currently plans to commence a Phase II single-agent trial in hematology (Trial 009) and a combination trial in solid tumors (Trial 011).

- MethylGene intends to report interim data for MGCD0103.

- We expect to continue improving, updating and optimizing scale-up and manufacturing as well as formulation for MGCD0103 and MGCD265, as well as plan other preclinical studies and / or clinical studies that may be required to support investigational new drug (IND) filings, pivotal trials and longer term commercialization as appropriate for MGCD0103 and MGCD265.

- We intend to file an IND for MGCD265.

- We expect to continue preclinical studies for the HDAC antifungal program and the Huntington's disease program with the goal of identifying clinical candidates.

Financial Results Reported in Canadian Dollars

Total revenues, consisting of contract revenues, milestones and license fees, for the year ended December 31, 2006 were $16.0 million compared with $6.7 million for the year ended December 31, 2005. This increase is primarily due to the $6.1 million of milestone payments received from Pharmion and Taiho Pharmaceutical, full-time equivalent (FTE) research support revenues from Pharmion, as well as higher clinical cost recovery and license fees in 2006.

Total expenditures excluding the recovery of non-refundable tax credits were $23.4 million in 2006 versus $22.0 million in 2005. Net research and development expenses were $20.8 million for 2006, an increase of $3.5 million or 20.3% versus 2005. This increase is due primarily to increased clinical trial expenditures for MGCD0103 and late preclinical research for MGCD265. General and Administrative expenses for 2006 were $5.0 million, up $0.1 million or 2.2% from 2005 as lower stock option expenses partially offset increased professional fee expenses associated with higher compliance costs and higher legal costs related to the Pharmion collaboration and the CHDI agreement. In addition, income tax expense resulting from the Pharmion upfront fee and milestone payments were offset by the use of previously unrecorded non-refundable tax credits.

Net loss for the year ended December 31st, 2006 was $7.5 million or ($0.26) per share compared with a net loss of $15.3 million or ($0.70) per share for the year ended December 31st, 2005. The net loss decrease in 2006 versus 2005 was primarily driven by the significant increase in revenue from the Pharmion collaboration which offset increased research and development expenditures. The net loss projected for 2007 is expected to increase over 2006 based on currently planned development expenses for MGCD0103 and MGCD265.

Total revenues for the fourth quarter ended December 31st, 2006 were $3.5 million compared to $1.1 million for the same period last year due primarily to the amortization of the Pharmion upfront fee and higher clinical trial cost recovery and FTE support payments from Pharmion.

Total expenditures for the fourth quarter ended December 31st, 2006 were $5.8 million compared to $6.0 million for the same period in 2005. Fourth quarter 2006 costs included a currency exchange gain of $0.6 million and higher interest income of $0.5 million. Net research and development expenditures totaled $5.9 million in the fourth quarter of 2006, up 22.2% from the period a year earlier reflecting additional investments in MGCD0103 and MGCD265. General and administrative expenses were flat at $1.3 million versus the same period last year. Net loss for the fourth quarter ended December 31st, 2006 was $2.3 million or ($0.04) per share compared to a net loss of $4.9 million or ($0.22) per share for the corresponding period last year.

As at December 31st, 2006 the Company had cash, cash equivalents and short-term investments totaling $65.8 million compared to $26.2 million at December 31, 2005. The Company completed a bought deal equity issue for net proceeds of approximately $18.7 million on March 2, 2007, after underwriters' commission and estimated expenses. Including, the proceeds from this financing, the Company's cash, cash equivalents and short-term investments are approximately $79 million. The Company believes that its current financial resources will be sufficient to carry out its current research and development plans through the first quarter of 2009.

About MethylGene

MethylGene Inc. (TSX:MYG) is a publicly-traded biopharmaceutical company focused on the discovery, development and commercialization of novel therapeutics for cancer. The Company focuses on some of the most promising areas of oncology such as histone deacetylase (HDAC) and kinase inhibitors. The Company's lead product is MGCD0103, an oral isotype-selective HDAC inhibitor presently in multiple clinical trials for solid tumors and hematological malignancies, including Phase II monotherapy and Phase I/II combination trials with Vidaza® and Gemzar®. MGCD265 is an oral kinase inhibitor targeting the c-Met, Tie-2, Ron and VEGF receptor tyrosine kinases. In addition, MethylGene has several preclinical HDAC programs in non-oncology indications such as fungal infections (in combination with azoles to overcome resistance), Huntington's disease and a beta-lactamase program to overcome antibiotic resistance. MethylGene's development and commercialization partners include Pharmion Corporation, Taiho Pharmaceutical, Merck and EnVivo Pharmaceuticals. 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 MGCD0103 or MGCD265; the ability to scale up, formulate and manufacture sufficient GMP, clinical or commercialization quantities of MGCD0103 or MGCD265, 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 MGCD0103 or MGCD265. 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, which you are urged to read, as described in MethylGene's Annual Information Form for the fiscal year ending December 31 2005, under the heading 'risk factors,' the final prospectus filed on February 23, 2007, 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 Quebec Companies Act

BALANCE SHEETS

As at December 31 Unaudited

2006 2005
$ $
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ASSETS
Current
Cash and cash equivalents 679,507 530,262
Short-term investments 65,099,740 25,694,518
Research and development tax credits
receivable 718,103 635,161
Unbilled revenue 2,505,476 547,613
Other current assets 1,894,233 1,373,100
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Total current assets 70,897,059 28,780,654
Property, plant and equipment - net 3,664,656 4,195,464
Intangible assets - net 2,101,338 2,007,147
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76,663,053 34,983,265
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 5,073,880 3,864,335
Current portion of unearned revenue 4,331,236 511,824
Current portion of lease abandonment cost 172,294 149,205
Obligations under capital leases - 6,527
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Total current liabilities 9,577,410 4,531,891
Unearned revenue 18,675,118 2,164,532
Lease abandonment cost 381,280 235,383
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Total liabilities 28,633,808 6,931,806
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Shareholders' equity
Capital stock 99,294,086 74,370,551
Contributed surplus 7,909,156 5,343,134
Deficit (59,173,997) (51,662,226)
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Total shareholders' equity 48,029,245 28,051,459
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76,663,053 34,983,265
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STATEMENTS OF OPERATIONS AND DEFICIT

For the years ended December 31 Unaudited

2006 2005
$ $
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REVENUES
Research collaborations and contract
revenues 12,216,877 4,911,163
License and up-front fees 3,809,104 1,776,496
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16,025,981 6,687,659
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EXPENSES
Research and development 22,383,660 18,736,971
Government assistance (1,623,072) (1,452,894)
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Net research and development 20,760,588 17,284,077
Government assistance - recovery of
non-refundable tax credits (5,975,000) -
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Net research and development 14,785,588 17,284,077
General and administrative 4,983,500 4,877,826
Interest income (2,439,320) (906,069)
Depreciation of property, plant and
equipment 18,135 48,292
Lease abandonment cost 348,481 475,601
Bank charges and interest 30,641 19,625
Foreign exchange (gain) loss (337,523) 178,631
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17,389,502 21,977,983
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Loss before income taxes (1,363,521) (15,290,324)
Income tax expense 6,148,250 -
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Net loss for the year (7,511,771) (15,290,324)

Deficit, beginning of year (51,662,226) (36,371,902)
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Deficit, end of year (59,173,997) (51,662,226)
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Basic and diluted loss per share (0.26) (0.70)
Weighted average number of common shares 28,357,388 21,734,985
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STATEMENTS OF CASH FLOWS

For the years ended December 31 Unaudited

2006 2005
$ $
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OPERATING ACTIVITIES
Net loss for the year (7,511,771) (15,290,324)
Items not affecting cash:
Depreciation of property, plant and
equipment 1,349,267 1,151,395
Amortization of intangible assets 144,558 123,058
Unrealized foreign exchange gain on
short-term and long-term investments (447,652) (4,400)
Lease abandonment cost 168,986 384,588
Write-down of patents 52,123 -
Loss (gain) and write-off on disposal of
property, plant and equipment 6,626 (709)
Warrants related to license fees 5,355 3,903
Non-cash compensation expense 671,273 759,585
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(5,561,235) (12,872,904)
Net changes in non-cash working capital
balances related to operations 2,465,847 (229,016)
Change in long-term portion of unearned
revenues 16,499,876 44,992
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Cash flows related to operating
activities 13,404,488 (13,056,928)
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INVESTING ACTIVITIES
Acquisitions of property, plant and
equipment (825,085) (1,638,828)
Acquisitions of intangible assets (290,872) (243,096)
Purchases of short-term investments (108,331,051) (53,889,045)
Proceeds from maturities of short-term
investments 69,373,481 69,615,644
Proceeds from disposition and write-off
of property, plant and equipment - 3,070
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Cash flows related to investing
activities (40,073,527) 13,847,745
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FINANCING ACTIVITIES
Issuance of common shares and units 27,427,562 16,016
Share issue costs (609,278) (20,229)
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Cash flows related to financing
activities 26,818,284 (4,213)
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Increase in cash and cash equivalents 149,245 786,604
Cash and cash equivalents, beginning of
year 530,262 (256,342)
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Cash and cash equivalents, end of year 679,507 530,262
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Cash and cash equivalents consist of:
Cash 679,507 384,968
Cash equivalents - 145,294
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679,507 530,262
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Supplemental information
Interest paid 2,202 1,276
Income taxes paid 173,250 -
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Contact Information