MethylGene Reports First Quarter 2009 Financial Results

MONTREAL, QUEBEC--(Marketwire - May 08, 2009) - MethylGene Inc. (TSX: MYG) today announced financial results for the first quarter ended March 31, 2009.

Financial Results Reported in Canadian Dollars

Total revenues for the first quarter ended March 31, 2009 were $1.7 million compared to $4.2 million for the same period last year. This reduction in revenue was primarily due to the termination of our collaboration agreement with Celgene Corporation surrounding MGCD0103 and sirtuin inhibitors for cancer; this was partially offset by revenues received from our collaboration with Otsuka Pharmaceutical.

Total expenditures for the first quarter ended March 31, 2009 were $7.7 million compared to $9.4 million for the same period in 2008, of which net research and development expenditures decreased to $7.1 million in the first quarter of 2009 from $8.5 million in the first quarter of 2008. This decrease reflects lower expenses for MGCD0103 and discovery research which was partially offset by higher clinical trial expenditures for MGCD265.

General and administrative expenses of $1.3 million in the first quarter of 2009 were $401,000 lower compared to the same period last year due to reduction in salaries, professional fees and office expenses. First quarter 2009 costs included interest income of $131,000 versus $549,000 in the first quarter of 2008, due to lower investments coupled with lower interest rates. In addition, MethylGene recorded a currency exchange gain of $644,000 in the first quarter of 2009 versus a gain of $169,000 in the first quarter of 2008 as the U.S. dollar strengthened against the Canadian dollar. Net loss for the first quarter ended March 31, 2009 was $6.1 million or ($0.17) per share compared to a net loss of $5.2 million or ($0.14) per share for the corresponding period last year.

At March 31, 2009 the Company had cash, cash equivalents and short-term investments totaling $31.6 million. The Company believes that its current cash and investments, plus expected tax credits, interest income and projected revenues from our ongoing collaborations will be sufficient to carry out our currently planned research and development activities into the third quarter of 2010.

About MethylGene

MethylGene Inc. (TSX: MYG) is a publicly-traded, clinical stage, biopharmaceutical company focused on the discovery, development and commercialization of novel therapeutics for cancer. The Company’s product candidates include: MGCD265, an oral, multi-targeted kinase inhibitor targeting the c-Met, VEGF, Tie-2 and Ron receptor tyrosine kinases that is in Phase I clinical trials for solid tumor cancers; MGCD290, a fungal Hos2 (HDAC) inhibitor being developed for use in combination with fluconazole for serious fungal infections that is also in Phase I clinical studies; and MGCD0103, an oral, isoform-selective HDAC inhibitor which has been in multiple clinical trials for solid tumors and hematological malignancies and is licensed to Taiho Pharmaceutical Co. Ltd. A fourth compound discovered using MethylGene’s HDAC platform, EVP-0334 - a potential cognition enhancing agent, is in a Phase I study 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 MGCD0103, MGCD265 or MGCD290; the ability to scale up, formulate and manufacture sufficient GMP, clinical or commercialization quantities of MGCD0103, MGCD265 or MGCD290, 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, 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, which you are urged to read, as described in MethylGene’s Annual Information Form for the fiscal year ending December 31, 2008, under the heading ‘risk factors 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 UNAUDITED INTERIM BALANCE SHEETS (In thousands of Canadian dollars) March 31, December 31, 2009 2008 $ $ --------------------------------------------------------------------- (Restated) ASSETS Current Cash and cash equivalents 19,653 5,947 Marketable securities 11,919 32,659 Research and development tax credits receivable 1,769 1,473 Unbilled revenue 4,220 4,435 Interest receivable 118 326 Other current assets 1,523 1,034 --------------------------------------------------------------------- Total current assets 39,202 45,874 Security deposits 325 325 Property, plant and equipment 1,859 2,131 --------------------------------------------------------------------- 41,386 48,330 --------------------------------------------------------------------- --------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS’ EQUITY Current Accounts payable and accrued liabilities 8,691 9,192 Current portion of unearned revenue 549 549 Current portion of lease abandonment cost 191 192 --------------------------------------------------------------------- Total current liabilities 9,431 9,933 Unearned revenue 2,722 2,859 Lease abandonment cost 352 399 --------------------------------------------------------------------- Total liabilities 12,505 13,191 --------------------------------------------------------------------- Shareholders’ equity Capital stock 118,095 118,095 Contributed surplus 8,925 8,855 Deficit (98,233) (92,122) Accumulated other comprehensive (loss) income 94 311 --------------------------------------------------------------------- Total shareholders’ equity 28,881 35,139 --------------------------------------------------------------------- 41,386 48,330 --------------------------------------------------------------------- --------------------------------------------------------------------- MethylGene Inc. UNAUDITED INTERIM STATEMENTS OF OPERATIONS AND DEFICIT (In thousands of Canadian dollars, except for share and per share amounts) Three-month periods ended March 31, 2009 2008 $ $ -------------------------------------------------------------------------- (Restated) REVENUES Research collaborations and contract revenues 1,527 3,199 License and up-front fees 138 1,029 -------------------------------------------------------------------------- 1,665 4,228 -------------------------------------------------------------------------- EXPENSES Research and development 7,406 8,815 Government assistance (296) (363) -------------------------------------------------------------------------- Net current research and development 7,110 8,452 General and administrative 1,280 1,681 Interest income (131) (594) Amortization and write-off of property, plant and equipment 6 4 Loss on sale of property, plant and equipment 4 - Corporate and other transaction costs 47 - Bank charges and interest 8 10 Foreign exchange gain (645) (169) -------------------------------------------------------------------------- 7,679 9,384 -------------------------------------------------------------------------- Loss for the period before income tax (6,014) (5,156) Future income tax expense 97 - -------------------------------------------------------------------------- Net loss for the period (6,111) (5,156) -------------------------------------------------------------------------- Deficit, beginning of period, as previously reported (90,175) (81,196) Change in accounting policy (1,947) (2,007) -------------------------------------------------------------------------- Deficit, beginning of period, as adjusted (92,122) (83,203) -------------------------------------------------------------------------- Deficit, end of period (98,233) (88,359) -------------------------------------------------------------------------- -------------------------------------------------------------------------- Basic and diluted loss per share (0.17) (0.14) Weighted average number of common shares 36,682,398 36,682,398 -------------------------------------------------------------------------- -------------------------------------------------------------------------- MethylGene Inc. UNAUDITED INTERIM STATEMENTS OF COMPREHENSIVE LOSS (In thousands of Canadian dollars) Three-month periods ended March 31, 2009 2008 $ $ -------------------------------------------------------------------------- (Restated) Net loss for the period (6,111) (5,156) -------------------------------------------------------------------------- Other comprehensive loss Change in unrealized gains on cash equivalents and marketable securities, net of income tax expense of $28 (2008-nil) 64 131 Reclassification adjustment to net loss of realized (gains) losses on cash equivalents and marketable securities, net of income tax recovery of $125 (2008-nil) (281) 64 -------------------------------------------------------------------------- (217) 195 -------------------------------------------------------------------------- Comprehensive loss for the period (6,328) (4,961) -------------------------------------------------------------------------- -------------------------------------------------------------------------- MethylGene Inc. UNAUDITED INTERIM STATEMENTS OF CASH FLOWS (In thousands of Canadian dollars) Three-month periods ended March 31, 2009 2008 $ $ -------------------------------------------------------------------------- (Restated) OPERATING ACTIVITIES Net loss for the period (6,111) (5,156) Items not affecting cash: Amortization of property, plant and equipment 265 314 Write-off of property, plant and equipment 2 - Loss on sale of property, plant and equipment 4 - Future income tax expense 97 - Stock-based compensation expense 70 162 -------------------------------------------------------------------------- (5,673) (4,680) Net change in non-cash working capital balances related to operations (911) (2,347) Change in long-term portion of unearned revenue (137) 773 -------------------------------------------------------------------------- Cash flows related to operating activities (6,721) (6,254) -------------------------------------------------------------------------- INVESTING ACTIVITIES Acquisitions of property, plant and equipment - (155) Purchases of marketable securities (10,539) (26,002) Proceeds from maturities of marketable securities 30,855 52,014 Proceeds from disposition of property, plant and equipment 1 - -------------------------------------------------------------------------- Cash flows related to investing activities 20,317 25,857 -------------------------------------------------------------------------- Foreign exchange on cash equivalents held in foreign currency 110 141 -------------------------------------------------------------------------- Increase in cash and cash equivalents 13,706 19,744 Cash and cash equivalents, beginning of period 5,947 3,208 -------------------------------------------------------------------------- Cash and cash equivalents, end of period 19,653 22,952 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Cash and cash equivalents consist of: Cash 3,390 1,239 Cash equivalents 16,263 21,713 -------------------------------------------------------------------------- 19,653 22,952 -------------------------------------------------------------------------- --------------------------------------------------------------------------