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MethylGene Reports First Quarter 2013 Financial Results

MONTREAL, CANADA--(Marketwired - May 13, 2013) - MethylGene Inc. ("MethylGene" or the "Company") (MYG.TO) today reported financial results for the first quarter ended March 31, 2013.

Corporate Highlights

  • On May 9, 2013 we announced that subject to court approval and approval by our shareholders at our Annual and Special General Meeting, we have proposed to change the company's jurisdiction of incorporation of Canada to the State of Delaware in the United States under the name Mirati Therapeutics, Inc. through a court-approved Plan of Arrangement (the "Arrangement"), and to list on the NASDAQ stock exchange.
  • In the first quarter, we made several management changes including the appointment of Mark J. Gergen as Executive Vice President and Chief Operations Officer; the appointment of Jamie A. Donadio as Vice President Finance in our San Diego office; as well as the departures of several executives in our Montreal offices.
  • As a company we are now primarily focused on targeted oncology drug development. Our lead oncology program, the multi-targeted kinase inhibitor MGCD265 continues to enroll in both monotherapy and combination therapy trials. We are also actively exploring development plans for our selective HDAC inhibitor, mocetinostat and our differentiated kinase inhibitor, MGCD516.
  • The Phase 2 study of MGCD290 in vulvovaginal candidiasis did not demonstrate a benefit of the combination with fluconazole compared to fluconazole alone. However, we continue to believe that MGCD290 may be useful for the treatment of certain fungal indications and we will explore partnering opportunities for the program.

Management has determined that based on an analysis of revenue and expenses that the functional currency for the company will be the U.S. dollar effective January 1, 2013. Furthermore the Company has used the U.S. dollar as its presentation currency.

First Quarter 2013 Financial Results Reported in United States Dollars

The Company's financial statements for the period ended March 31, 2013 have been prepared in accordance with IAS 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (IASB).

Net research and development expenditures for the first quarter of 2013 were $5.5 million, $3.3 million higher than the first quarter of 2012. This increase was primarily due to costs relating to the departure of the company's Chief Scientific Officer, costs relating to the manufacture of and formulation work relating to MGCD265 and costs associated with the recently completed Phase 2 clinical trial for MGCD290.

General and administrative expenses in the first quarter of 2013 were $2.5 million, $1.3 million higher than in the first quarter of 2012 due primarily to costs related to the management changes discussed above as well as the costs incurred in connection with the Arrangement and NASDAQ listing.

Financial income of $74,000, relating primarily to interest income, in the first quarter of 2013 was $6,000 higher compared to the first quarter of 2012 due to higher average cash balances. We recorded a foreign exchange loss of $644,000 in the first quarter of 2013 versus no exchange difference in the first quarter of 2012. The loss in 2013 relates primarily to the transition to the U.S. dollar as our functional currency effective January 1, 2013.

The net loss and comprehensive loss for the first quarter ended March 31, 2013 was $8.6 million, or ($0.02) per share, compared to a net loss and comprehensive loss of $3.4 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 and was partially offset by the higher number of outstanding shares at the end of the first quarter 2013 versus the same period last year.

Cash, cash equivalents, marketable securities and restricted cash totaled $29.9 million as at March 31, 2013 compared to $37.4 million on December 31, 2012. The Company believes it has sufficient financial resources to carry forward its current clinical development and operating plans into the second quarter of 2014.

About MethylGene

MethylGene is a publicly-traded biopharmaceutical company engaged in the development and commercialization of novel therapeutics for the treatment of cancer. Our compounds result from internal chemistry efforts targeting the active sites of enzymes that are key drivers of tumor growth. Our clinical development programs are focussed on treating selected tumor types that express high levels of these targets in order to most effectively address unmet patient needs. Our lead program in clinical development is MGCD265, a multi-targeted small molecule kinase inhibitor for treatment of oncology patients with solid tumors. We are also evaluating development opportunities in oncology for pipeline programs mocetinostat, a spectrum-selective HDAC inhibitor and MGCD516, a kinase inhibitor with a distinct target profile.

Notice to Investors

This news release is for informational purposes only and is not an offer to buy or the solicitation of an offer to sell any securities.

Forward Looking Statements

Certain statements contained in this news release, other than statements of fact that are independently verifiable at the date hereof, may constitute forward-looking information and forward-looking statements (collectively "forward-looking statements" within the meaning of applicable securities laws), including statements relating to the completion of the transactions contemplated by the proposed Arrangement and MethylGene's plans to primarily focus on novel oncology programs. Such statements, based as they are on the current expectations of management of MethylGene and upon what management believes to be reasonable assumptions based on information currently available to it, inherently involve numerous risks and uncertainties, known and unknown, many of which are beyond MethylGene's control. Such statements can usually be identified by the use of words such as "may", "would", "believe", "intend", "plan", "anticipate", "estimate" and other similar terminology, or state that certain actions, events or results "may" or "would" be taken, occur or be achieved. Any such forward-looking statements are based on information currently available to us, and are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors that MethylGene believes are appropriate in the circumstances.

However, whether actual results and developments will conform with our expectations and predictions is subject to a number of risks, assumptions and uncertainties, many of which are beyond our control, and the effects of which can be difficult to predict including without limitation: risks, assumptions and uncertainties related to: the consummation of the Arrangement, including, shareholder approval, court approval, the satisfaction or waiver of the other conditions to complete the transactions contemplated by the Arrangement, and the termination of the arrangement agreement; the market value and trading price of the common shares; and other factors set out in this news release, in the management information circular to be disseminated in connection with the Arrangement, and the registration statement on Form 10 filed with the Securities and Exchange Commission in the United States, and subsequent filings with applicable securities commissions such as whether: MethylGene will achieve, sustain or increase profitability and whether it will be able to fund its operations with existing capital and/or it will be able to raise additional capital to fund operations; the proposed Arrangement and NASDAQ listing will lead to increased marketability and improved liquidity of the Mirati Shares, MethylGene will be able to attract and retain key personnel; MethylGene will be able to acquire any necessary technology or businesses and effectively integrate such acquisitions; MethylGene will be successful in developing and clinically testing products under development; MethylGene will be successful in obtaining all necessary approval for commercialization of its products from regulatory authorities; the results of continuing and future safety and efficacy studies by industry and government agencies relating to MethylGene's products will be favourable; MethylGene's products will not be adversely impacted by competitive products and pricing; raw materials and finished products necessary for MethylGene's products will continue to be available; MethylGene will be able to maintain and enforce the protection afforded by any patents or other intellectual property rights; MethylGene's products will be successfully licensed to third parties to market and distribute such products on favourable terms; MethylGene's key strategic alliances, out licensing and partnering arrangements, now and in the future, will remain in place and in force; the general regulatory environment will not change in a manner adverse to the business of MethylGene and MethylGene will not become subject to any material legal proceedings.

In evaluating any forward-looking statements in this news release, MethylGene cautions readers not to place undue reliance on any forward-looking statements. Readers should specifically consider the various factors which could cause actual events or results to differ materially from those indicated by our forward-looking statements. Unless otherwise required by applicable securities laws, MethylGene does not intend, nor does it undertake any obligation, to update or revise any forward-looking statements contained in this news release to reflect subsequent information, events, results or circumstances or otherwise.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)

         
[In thousands of U.S. dollars]
As at
 
  March 31,
2013
  December 31, 2012  
ASSETS        
Current        
Cash and cash equivalents 10,993   18,403  
Marketable securities 18,504   18,580  
Restricted cash equivalents and marketable securities 295   302  
Interest and other receivables 166   507  
Other current assets 1,563   1,537  
Total current assets 31,521   39,329  
         
Security deposits 121   67  
Restricted marketable securities 81   72  
Property, plant and equipment, net 401   333  
Total assets 32,124   39,801  
LIABILITIES AND SHAREHOLDERS' EQUITY        
Current        
Trade payables and accrued liabilities 5,739   5,272  
Current portion of other liability 68   68  
Total current liabilities 5,807   5,340  
Other liability 27   45  
Total liabilities 5,834   5,385  
Shareholders' equity        
Share capital 138,004   138,004  
Warrants 11,153   11,153  
Contributed surplus 16,692   16,230  
Accumulated other comprehensive income 9,520   9,520  
Deficit (149,079 ) (140,491 )
Total shareholders' equity 26,290   34,416  
Total liabilities and shareholders' equity 32,124   39,801  

CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS (Unaudited)

   
[In thousands of U.S. dollars except for share and per share amounts]  
     
  March 31,  
  2013   2012  
         
Expenses        
Research and development, net 5,475   2,204  
General and administrative 2,524   1,220  
Foreign exchange loss 644   -  
Financial income (74 ) (68 )
  Total expenses 8,569   3,356  
Loss before income taxes (8,569 ) (3,356 )
Income tax expense 19   -  
Net loss and comprehensive loss for the period (8,588 ) (3,356 )
Basic and diluted loss per share (0.02 ) (0.01 )
Weighted average number of common shares 497,886,956   317,913,336  
         

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)

                   
[In thousands of U.S. dollars]       
                   
  Share capital Warrants Contributed surplus  
Accumulated other comprehensive income
Deficit   Total shareholders' equity  
Balance as at January 1, 2012 118,082 6,247 14,236   8,945 (120,205 ) 27,305  
Net loss and comprehensive loss for the period - - -   - (3,356 ) (3,356 )
Stock option compensation expense - - 390   - -   390  
Costs of reorganization - - (3 ) - -   (3 )
Foreign currency translation - - -   523 -   523  
Balance as at March 31, 2012 118,082 6,247 14,623   9,468 (123,561 ) 24,859  
Balance as at January 1, 2013 138,004 11,153 16,230   9,520 (140,491 ) 34,416  
Net loss and comprehensive loss for the period - - -   - (8,588 ) (8,588 )
Stock option compensation expense - - 462   - -   462  
Balance as at March 31, 2013 138,004 11,153 16,692   9,520 (149,079 ) 26,290  

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

         
[In thousands of U.S. dollars]  
         
  Three months ended
March 31,
 
  2013   2012  
Operating activities        
Net loss (8,588 ) (3,356 )
Non-cash adjustments reconciling net loss to operating cash flows        
  Depreciation of property, plant and equipment 22   33  
  Stock option compensation expense 462   390  
  Interest income (84 ) (74 )
  Lease incentive (18 ) 21  
  (8,206 ) (2,986 )
Net changes in non-cash working capital balances relating to operations 759   (1,510 )
Interest received 107   35  
Cash flows related to operating activities (7,340 ) (4,461 )
Investing activities        
Purchase of property, plant and equipment (90 ) (2 )
Purchases of marketable securities (16,021 ) (3,592 )
Security deposit (54 ) -  
Restricted cash (2 ) -  
Disposal and maturities of marketable securities 16,097   3,495  
Cash flows related to investing activities (70 ) (99 )
         
Financing activities        
  Costs of reorganization (3 )    
Cash flows provided by financing activities (3 )    
         
Decrease in cash and cash equivalents (7,410 ) (4,563 )
Effect of exchange rate changes on cash and cash equivalents -   176  
Cash and cash equivalents, beginning of period 18,403   9,882  
Cash and cash equivalents, end of period 10,993   5,495