SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
Form 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the month of October 2007
Commission File Number 000-31062
Oncolytics Biotech Inc.
(Translation of registrant’s name into
English)
Suite 210, 1167 Kensington Crescent NW
Calgary, Alberta, Canada T2N 1X7
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
| Form 20-F o | Form 40-F þ |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
| Yes o | No þ |
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Oncolytics
Biotech Inc. (Registrant) |
||||
| Date: October 31, 2007 | By: | /s/ Doug Ball
Doug Ball Chief Financial Officer |
||
Third Quarter Report
September 30, 2007
September 30, 2007
Oncolytics Biotech Inc.
TSX: ONC
NASDAQ: ONCY
TSX: ONC
NASDAQ: ONCY
Third Quarter Report
For the quarter ended September 30, 2007
For the quarter ended September 30, 2007
Letter to Shareholders
Clinical trial results announced in the third quarter and the commencement of enrolment in a third
combination clinical trial highlighted an exciting and busy quarter for the Company. We reported
positive interim clinical results from our Phase Ia/Ib combination REOLYSIN® and
radiation trial and also announced the start of enrolment in a combination REOLYSIN® and
docetaxel trial. In October, we received permission to begin a unique clinical trial in the U.K.
that will examine REOLYSIN® in combination with cyclophosphamide, an immune system
modulator. In the quarter, the Company also secured two additional U.S. patents and made
presentations regarding preclinical and manufacturing processes at several international meetings.
Clinical Trial Progress
Oncolytics is currently enrolling patients in seven clinical trials in the U.S. and the U.K., and
has permission to begin a combination REOLYSIN®/cyclophosphamide trial in the U.K.
Positive Interim Combination REOLYSIN® and radiation results
Our Phase Ia/Ib trial using REOLYSIN® in combination with radiation continues to report
encouraging results. In September, we announced positive interim results from our clinical trial
examining the combination of REOLYSIN® and radiation for patients with advanced or
metastatic cancers. A total of 22 patients were treated, with 15 completing the study. Five
patients withdrew from the study and two patients are still on study. Of 11 patients treated in the
1a portion of the study, three patients experienced significant partial responses in the target
tumour, as well as stable disease in non-treated tumours. Of 6 patients who completed the 1b
portion of the study, three patients experienced tumour regression in the target tumour, as well as
stable disease in non-treated treated tumours. The Ib trial is still enrolling patients and we
are continuing to evaluate the data.
The interim results were presented at the National Cancer Research Institute (NCRI) conference in
Birmingham, UK on October 2, 2007, as well as at the AACR-NCI-EORTC International Conference on
Molecular Targets and Cancer Therapeutics in San Francisco on October 24, 2007.
Additional REOLYSIN® and chemotherapy trials move forward
In July, we commenced patient enrolment in our third trial using REOLYSIN® in
combination with standard chemotherapeutic agents in the U.K. This trial will evaluate the systemic
administration of REOLYSIN® in combination with docetaxel (Taxotere®) in
patients with advanced cancers including bladder prostate, lung and upper gastro-
intestinal. Preclinical studies have demonstrated that this combination is synergistic against a
variety of cancer cell lines.
A fourth clinical trial which will examine the systemic administration of REOLYSIN® in
combination with cyclophosphamide, an immune modulator and chemotherapeutic agent, was approved by
the U.K. health authorities in October. This is a unique trial that will deliver a standard dose of
REOLYSIN® with escalating doses of cyclophosphamide to patients who have been diagnosed
with advanced or metastatic solid tumours including pancreatic, lung and ovarian cancers that have
not responded to standard therapy or for which no curative standard therapy exists. The primary
objectives of the trial include determining the minimum effective immunomodulatory dose of
cyclophosphamide to obtain successful immune modulation. Secondary objectives include the safety
profile of the combination and gathering evidence of anti-tumour activity.
Intellectual Property Advances
To date, Oncolytics has secured more than 150 issued patents worldwide including two U.S. patents
issued in the third quarter. The two new U.S. patents cover the use of modified herpes simplex
viruses to treat cancer, as well as the use of REOLYSIN® with chemotherapy to prevent
the development of drug resistance to chemotherapeutic agents.
Preclinical Developments
Preclinical work completed by our collaborators at the CR-UK Clinical Centre, Leeds, U.K.
demonstrated for the first time how reovirus-infected melanoma cells stimulate dendritic cells to
prime the immune system against cancer cells. The work was presented in September at the National
Cancer Research Institute Conference in Birmingham. U.K.
With the expansion of our clinical trial program, particularly into Phase II trials, we expect the
remainder of 2007 and 2008 to be an exciting period of significant progress for the Company. As
always, thank you for your continued support and encouragement.
Brad Thompson, PhD
President and CEO
October 29, 2007
President and CEO
October 29, 2007
October 29, 2007
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis should be read in conjunction with the unaudited financial statements
of Oncolytics Biotech Inc. as at and for the three and nine months ended September 30, 2007 and
2006, and should also be read in conjunction with the audited financial statements and Management’s
Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contained in our
annual report for the year ended December 31, 2006. The financial statements have been prepared in
accordance with Canadian generally accepted accounting principles (“GAAP”).
FORWARD-LOOKING STATEMENTS
The following discussion contains forward-looking statements, within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended. Forward-looking statements, including our belief
as to the potential of REOLYSIN® as a cancer therapeutic and our expectations as to the
success of our research and development and manufacturing programs in 2007 and beyond, future
financial position, business strategy and plans for future operations, and statements that are not
historical facts, involve known and unknown risks and uncertainties, which could cause our actual
results to differ materially from those in the forward-looking statements. Such risks and
uncertainties include, among others, the need for and availability of funds and resources to pursue
research and development projects, the efficacy of REOLYSIN® as a cancer treatment, the
success and timely completion of clinical studies and trials, our ability to successfully
commercialize REOLYSIN®, uncertainties related to the research, development and
manufacturing of pharmaceuticals, uncertainties related to competition, changes in technology, the
regulatory process and general changes to the economic environment. Investors should consult our
quarterly and annual filings with the Canadian and U.S. securities commissions for additional
information on risks and uncertainties relating to the forward-looking statements. Forward-looking
statements are based on assumptions, projections, estimates and expectations of management at the
time such forward-looking statements are made, and such assumptions, projections, estimates and/or
expectations could change or prove to be incorrect or inaccurate. Investors are cautioned against
placing undue reliance on forward-looking statements. We do not undertake to update these
forward-looking statements.
OVERVIEW
Oncolytics Biotech Inc. is a Development Stage Company
Since our inception in April of 1998, Oncolytics Biotech Inc. has been a development stage company
and we have focused our research and development efforts on the development of
REOLYSIN®, our potential cancer therapeutic. We have not been profitable since our
inception and expect to continue to incur substantial losses as we continue research and
development efforts. We do not expect to generate significant revenues until, if and when, our
cancer product becomes commercially viable.
General Risk Factors
Prospects for biotechnology companies in the research and development stage should generally be
regarded as speculative. It is not possible to predict, based upon studies in animals, or early
studies in humans, whether a new therapeutic will ultimately prove to be safe and effective in
humans, or whether necessary and sufficient data can be developed through the clinical trial
process to support a successful product application and approval.
If a product is approved for sale, product manufacturing at a commercial scale and significant
sales to end users at a commercially reasonable price may not be successful. There can be no
assurance that we will generate adequate funds to continue development, or will ever achieve
significant revenues or profitable
operations. Many factors (e.g. competition, patent protection, appropriate regulatory approvals)
can influence the revenue and product profitability potential.
In developing a pharmaceutical product, we rely upon our employees, contractors, consultants and
collaborators and other third party relationships, including our ability to obtain appropriate
product liability insurance. There can be no assurance that these reliances and relationships will
continue as required.
In addition to developmental and operational considerations, market prices for securities of
biotechnology companies generally are volatile, and may or may not move in a manner consistent with
the progress being made by Oncolytics.
See also “RISK FACTORS AFFECTING FUTURE PERFORMANCE” in our 2006 MD&A.
REOLYSIN® Development Update for the Third Quarter of 2007
We continue to develop our lead product REOLYSIN® as a possible cancer therapy. Our goal
each year is to advance REOLYSIN® through the various steps and stages of development
required for potential pharmaceutical products. In order to achieve this goal, we actively manage
the development of our clinical trial program, our pre-clinical and collaborative programs, our
manufacturing process and REOLYSIN® supply, and our intellectual property.
Clinical Trial Program
Our clinical trial program includes eight clinical trials of which seven are being conducted by us
and one is being sponsored by the U.S. National Cancer Institute (“NCI”). In the third quarter of
2007, we announced positive interim results from our U.K. phase Ia/Ib combination
REOLYSIN® and radiation clinical trial. As well, we commenced patient enrollment in our
U.K. combination REOLYSIN®/docetaxel clinical trial, increasing our actively enrolling
clinical trials to seven.
Clinical Trial Results
In the third quarter of 2007, we announced positive interim results from our U.K. Phase Ia/Ib
combination REOLYSIN® and radiation clinical trial for patients with advanced or
metastatic cancers. As of September 28, 2007, 22 patients had been treated with 15 having completed
the study. Five patients withdrew from the study, and two patients are still on study.
A total of 11 patients in the Ia portion of the trial have received two intratumoural treatments of REOLYSIN® at dosages of 1x108, 1x109, or 1x1010
TCID50 with a constant localized radiation dose of 20 Gy given in five fractions. Of these 11 patients, three patients (oesophageal, squamous skin
carcinoma and squamous cell scalp) experienced significant partial responses.
One month following treatment, the oesophageal patient experienced a 28.5% reduction in the target
tumour, with stable disease noted in four, non-treated tumours. At two and three months, the target
tumour had shrunk 64%, with stable disease continuing in the four non-treated tumours, including a
15% volume reduction in non-treated mediastinal disease that was maintained for more than six
months. The squamous skin cancer patient experienced a 50% reduction in the target tumour, as well
as stable disease in two, non-treated tumours at one, two and three months post treatment. The
squamous cell scalp patient experienced stable disease in the target tumour for two months which
then became a partial response at three months. This patient also experienced stable disease in one
non-treated tumour measured at three months post-treatment.
Patients in the Ib portion received either two, four or six intratumoural doses of
REOLYSIN® at 1x1010 TCID50 with a constant localized radiation
dose of 36 Gy given in 12 fractions. Of the six patients who have completed the study to date,
three patients (colorectal, melanoma and lung cancer) experienced tumour regression in the target
tumour, as well as stable disease in non-treated tumours.
The colorectal patient experienced a partial response with a more than 50% regression in the target
tumour as well as stable disease in four, non-treated tumours measured at one month following
treatment. A melanoma patient experienced minor regression in the target tumour as well as stable
disease in two, non-treated tumours at one and two months following treatment. A lung cancer
patient experienced minor regression in the target tumour, as well as stable disease in three,
non-treated tumours at two months following treatment.
The treatment has been well tolerated, with mostly Grade 1 or 2 toxicities noted including fatigue,
lymphopenia, fever, and neutropenia. Grade 3 toxicities including cellulitis, dysphasia and
diarrhoea were related to disease progression and not to the combination treatment. Viral
replication was unaffected by cellular irradiation.
The primary objective of the Phase Ia/Ib trial was to determine the maximum tolerated dose (“MTD”),
dose limiting toxicity (“DLT”), and safety profile of REOLYSIN® when administered
intratumourally to patients receiving radiation treatment. A secondary objective is to examine any
evidence of anti-tumour activity. Eligible patients include those who have been diagnosed with late
stage advanced or metastatic solid tumours that are refractory (“have not responded”) to standard
therapy or for which no curative standard therapy exists.
Clinical Trials – Actively Enrolling
At the end of the third quarter of 2007, we were actively enrolling in seven clinical trials. In
the third quarter of 2007, we commenced enrollment in the following study:
U.K. Combination REOLYSIN® Docetaxel Clinical Trial
We commenced patient enrolment in our U.K. clinical trial to evaluate the anti-tumour effects of
systemic administration of REOLYSIN® in combination with docetaxel
(Taxotere®) in patients with advanced cancers including bladder, prostate, lung and
upper gastro-intestinal. In preclinical studies, the combination of REOLYSIN® and
various taxanes including docetaxel has been shown to be synergistic against a variety of cancer
cell lines.
The trial has two components. The first is an open-label, dose-escalating, non-randomized study of
REOLYSIN® given intravenously with docetaxel every three weeks. A standard dosage of
docetaxel will be delivered with escalating dosages of REOLYSIN® intravenously. A
maximum of three cohorts will be enrolled in the REOLYSIN® dose escalation portion. The
second component of the trial will immediately follow and will include the enrolment of a further
12 patients at the maximum dosage of REOLYSIN® in combination with a standard dosage of
docetaxel.
Eligible patients include those who have been diagnosed with advanced or metastatic solid tumours
such as bladder, prostate, lung or upper gastro-intestinal cancers that are refractory to standard
therapy or for which no curative standard therapy exists. The primary objective of the trial is to
determine the MTD, DLT, recommended dose and dosing schedule and safety profile of
REOLYSIN® when administered in combination with docetaxel. Secondary objectives include
the evaluation of immune response to the drug combination, the body’s response to the drug
combination compared to chemotherapy alone and any evidence of anti-tumour activity.
Pre-Clinical Trial and Collaborative Program
In the third quarter of 2007, we announced that a poster presentation entitled “Reovirus Infection
of Human Melanoma Cells Supports Priming of Anti-Tumour Cytotoxic T Cell Immunity” was presented by
Dr. Robin Prestwich of CR-UK Clinical Centre, Leeds Institute of Molecular Medicine, University of
Leeds, U.K. at the National Cancer Research Institute Cancer Conference in Birmingham, U.K.
In this study, the investigators infected melanoma cell lines with reovirus. The reovirus-infected
cell lines stimulated the maturation of dendritic cells, which in turn educated cancer-killing T
cells to attack and kill the melanoma cells.
Manufacturing and Process Development
We continued to have REOLYSIN® manufactured in order to supply our current and future
clinical trial program. In the third quarter of 2007, our manufacturing activity was focused on the
completion of the vial filling and packaging of the production runs that were completed earlier in
2007. Also in the third quarter of 2007, we continued process development that examined the scale
up of our manufacturing process increasing the batch size from our present GMP scale of 20-litres
to 40-litres and then to 100-litres.
Intellectual Property
In the third quarter of 2007, two U.S. patents were issued. At the end of the third quarter of
2007, we had been issued over 150 patents including 23 U.S. and six Canadian patents as well as
issuances in other jurisdictions. We also have over 180 patent applications filed in the U.S.,
Canada and other jurisdictions.
Financial Impact
We estimated at the beginning of 2007 that our monthly cash usage would be approximately $1,400,000
for 2007. Our cash usage for the nine months ending September 30, 2007 was $10,849,863 from
operating activities and $635,815 for the purchases of intellectual property and capital assets
which is in line with our estimate. Our net loss for the nine month period ending September 30,
2007 was $11,556,714.
Cash Resources
We exited the third quarter of 2007 with cash resources totaling $28,191,464 (see “Liquidity and
Capital Resources”).
Expected REOLYSIN® Development for the Remainder of 2007
We plan to continue to enroll patients in our seven clinical trials and expect to add an additional
clinical co-therapy trial. We believe that the NCI sponsored melanoma clinical trial will receive
approval to commence in 2007. We believe we will complete enrollment in our U.K. Phase Ia/Ib
clinical trial by the end of 2007 and complete enrollment in our Phase II combination
REOLYSIN®/radiation and chemotherapy co-therapy studies in 2008. Also, our process
development activity will focus on scale up studies and the examination of a lyophilization process
for REOLYSIN®.
Based on our expected activity in 2007, we continue to estimate our average monthly cash usage to
be $1,400,000 per month (see “Liquidity and Capital Resources”).
Recent 2007 Progress
On October 23, 2007, we announced receipt of a letter of approval to commence our clinical trial
using intravenous administration of REOLYSIN® in combination with cyclophosphamide, a
chemotherapeutic agent as well as immune modulator, in patients with advanced cancers.
The trial is an open-label, dose-escalating, non-randomized trial of REOLYSIN® given
intravenously with escalating doses of cyclophosphamide. A standard dose of REOLYSIN®
is administered intravenously over five consecutive days, while an intravenous dose of
cyclophosphamide is administered three days before REOLYSIN® treatment and continues
through the course of the treatment cycle. The total number of patients studied will depend on the
number of dose levels tested, but it is anticipated to be approximately 30 patients.
Eligible patients include those who have been diagnosed with advanced or metastatic solid tumours
including pancreatic, lung and ovarian cancers that are refractory to standard therapy or for which
no curative standard therapy exists. The primary objectives of the trial include determining the
Minimum Effective Immunomodulatory Dose of cyclophosphamide to obtain successful immune modulation.
Secondary objectives include the safety profile of the combination and gathering any evidence of
anti-tumour activity.
THIRD QUARTER RESULTS OF OPERATIONS
(for the three months ended September 30, 2007 and 2006)
Net loss for the three month period ending September 30, 2007 was $3,763,901 compared to $3,425,169
for the three month period ending September 30, 2006.
Research and Development Expenses (“R&D”)
| 2007 | 2006 | |||||||
| $ | $ | |||||||
Manufacturing and related process development expenses |
879,937 | 1,259,716 | ||||||
Clinical trial expenses |
1,278,175 | 688,435 | ||||||
Pre-clinical trial and research collaboration expenses |
293,785 | 301,165 | ||||||
Other R&D expenses |
438,747 | 456,430 | ||||||
Research and development expenses |
2,890,644 | 2,705,746 | ||||||
For the third quarter of 2007, R&D increased to $2,890,644 compared to $2,705,746 for the third
quarter of 2006. The increase in R&D was due to the following:
Manufacturing & Related Process Development (“M&P”)
| 2007 | 2006 | |||||||
| $ | $ | |||||||
Product manufacturing expenses |
610,842 | 896,776 | ||||||
Technology transfer expenses |
— | 184,761 | ||||||
Process development expenses |
269,095 | 178,179 | ||||||
Manufacturing and related process development expenses |
879,937 | 1,259,716 | ||||||
During the third quarter of 2007, our M&P expenses decreased to $879,937 compared to $1,259,716 for
the third quarter of 2006. In the third quarter of 2007, we continued to fill, test, and package
the REOLYSIN® that was produced earlier in the year. During the third quarter of 2006,
we commenced a number of cGMP production runs using our improved manufacturing process. The
technology transfer of our improved process was successfully completed at the beginning of the
third quarter of 2006.
Our process development studies in the third quarter of 2007 focused on increasing the scale of our
production runs from batch sizes of 20 litres to 40 and then 100 litres. In the third quarter of
2006, we completed process development studies that were successful in improving virus yields.
Clinical Trial Program
| 2007 | 2006 | |||||||
| $ | $ | |||||||
Direct clinical trial expenses |
1,201,557 | 639,719 | ||||||
Other clinical trial expenses |
76,618 | 48,716 | ||||||
Clinical trial expenses |
1,278,175 | 688,435 | ||||||
During the third quarter of 2007, our direct clinical trial expenses increased to $1,201,557
compared to $639,719 for the third quarter of 2006. In the third quarter of 2007, we incurred
direct clinical trial expenses in our seven actively enrolling trials compared to only four
enrolling trials in the third quarter of 2006.
Pre-Clinical Trial Expenses and Research Collaborations
| 2007 | 2006 | |||||||
| $ | $ | |||||||
Research collaboration expenses |
293,785 | 252,460 | ||||||
Pre-clinical trial expenses |
— | 48,705 | ||||||
Pre-clinical trial expenses and research collaborations |
293,785 | 301,165 | ||||||
During the third quarter of 2007, our research collaboration expenses were $293,785 compared to
$252,460 for the third quarter of 2006. Our research collaboration activity continues to focus on
the interaction of the immune system and the reovirus, the use of the reovirus as a co-therapy with
existing chemotherapeutics, and to investigate new uses of the reovirus as a therapeutic.
Other Research and Development Expenses
| 2007 | 2006 | |||||||
| $ | $ | |||||||
R&D consulting fees |
38,152 | 70,323 | ||||||
R&D salaries and benefits |
342,155 | 299,224 | ||||||
Other R&D expenses |
58,440 | 86,883 | ||||||
Other research and development expenses |
438,747 | 456,430 | ||||||
Our R&D salaries and benefits costs were $342,155 in the third quarter of 2007 compared to $299,224
in the third quarter of 2006. The increase is a result of increases in salary and staff levels
along with the addition of our Vice President of Intellectual Property in 2007.
Operating Expenses
| 2007 | 2006 | |||||||
| $ | $ | |||||||
Public company related expenses |
635,076 | 507,828 | ||||||
Office expenses |
245,082 | 258,790 | ||||||
Operating expenses |
880,158 | 766,618 | ||||||
During the third quarter of 2007, our public company related expenses were $635,076 compared to
$507,828 for the third quarter of 2006. In the third quarter of 2007, we increased our professional
fees and investor relations activity in the United States and Europe compared to the third quarter
of 2006.
Stock Based Compensation
| 2007 | 2006 | |||||||
| $ | $ | |||||||
Stock based compensation |
38,909 | 34,671 | ||||||
Stock based compensation for the third quarter of 2007 was $38,909 compared to $34,671 for the
third quarter of 2006. In the third quarters of 2007 and 2006, we incurred stock based compensation
associated with the vesting of previously granted options.
YEAR TO DATE RESULTS OF OPERATIONS
(for the nine months ended September 30, 2007 and 2006)
(for the nine months ended September 30, 2007 and 2006)
Net loss for the nine month period ending September 30, 2007 was $11,556,714 compared to $9,407,419
for the nine month period ending September 30, 2006.
Research and Development Expenses (“R&D”)
| 2007 | 2006 | |||||||
| $ | $ | |||||||
Manufacturing and related process development expenses |
3,546,732 | 2,751,207 | ||||||
Clinical trial expenses |
2,983,688 | 1,920,467 | ||||||
Pre-clinical trial and research collaboration expenses |
731,445 | 691,553 | ||||||
Other R&D expenses |
1,553,390 | 1,219,460 | ||||||
Research and development expenses |
8,815,255 | 6,582,687 | ||||||
For the nine month period ending September 30, 2007, R&D increased to $8,815,255 compared to
$6,582,687 for 2006. The increase in R&D was due to the following:
Manufacturing & Related Process Development (“M&P”)
| 2007 | 2006 | |||||||
| $ | $ | |||||||
Product manufacturing expenses |
3,134,143 | 1,664,308 | ||||||
Technology transfer expenses |
— | 457,975 | ||||||
Process development expenses |
412,589 | 628,924 | ||||||
Manufacturing and related process development expenses |
3,546,732 | 2,751,207 | ||||||
Our M&P expenses for the nine month period ending September 30, 2007 increased to $3,546,732
compared to $2,751,207 in 2006. For the nine month period ending September 30, 2007, our production
and vial filling activity increased compared to 2006. During this period of 2007, we completed
production runs that commenced in 2006 and initiated additional production runs to manufacture
REOLYSIN® at the beginning of 2007. Also, as a result of the increased viral yields from
the process development activity in 2006, we have incurred additional vial filling and packaging
costs compared to 2006.
For the nine month period ending September 30, 2006, we completed the production runs that were
ongoing at the end of 2005 for our Phase I trials. At the same time, our process development
activity helped improve the virus yields from our manufacturing process. These improvements were
then transferred to our cGMP manufacturer with additional production runs initiated in the third
quarter of 2006.
Our process development expenses for the nine month period ending September 30, 2007 were $412,589
compared to $628,924 for the nine month period ending September 30, 2006. During this period of
2007, our main process development focus has been on the scale up of our production process, which
has included scale up studies at 40 and 100 litres. During the nine month period ending September
30, 2006, our process development activity included viral yield and scale up studies along with the
validation of our fill process.
We still expect that our overall manufacturing and related process development expenses for 2007
will be in line with 2006. In the fourth quarter of 2007, we plan to initiate a 40-litre technology
transfer, complete our 100-litre scale up studies and investigate the lyophilization of
REOLYSIN®. We are also examining ways to reduce our economic dependence resulting from
having only a single cGMP manufacturer. This might include building up a level of inventory,
increasing the scale of each production run, engaging another cGMP manufacturer or manufacturing
REOLYSIN® ourselves. Depending on how we mitigate our risk of economic dependence our
expectation of our 2007 M&P expenses may change.
Clinical Trial Program
| 2007 | 2006 | |||||||
| $ | $ | |||||||
Direct clinical trial expenses |
2,798,024 | 1,783,138 | ||||||
Other clinical trial expenses |
185,664 | 137,329 | ||||||
Clinical trial expenses |
2,983,688 | 1,920,467 | ||||||
During the nine month period ending September 30, 2007, our direct clinical trial expenses were
$2,798,024 compared to $1,783,138 for the nine month period ending September 30, 2006. In this
period of 2007, we incurred direct patient costs in our seven ongoing clinical trials. As well, we
incurred clinical site start up costs for our three co-therapy trials in the U.K. and our Phase II
sarcoma clinical trial in the U.S. During the nine month period ending September 30, 2006, we
incurred direct patient costs in four ongoing clinical trials along with clinical site start up
costs associated with our U.S. recurrent malignant glioma and U.K. Phase Ia combination
REOLYSIN® /radiation therapy trials.
We expect our clinical trial expenses will continue to increase for the remainder of 2007 compared
to 2006 as we continue patient enrollment and expand our clinical trial program to include other
trial sites and other studies.
Pre-Clinical Trial Expenses and Research Collaborations
| 2007 | 2006 | |||||||
| $ | $ | |||||||
Research collaboration expenses |
694,315 | 634,199 | ||||||
Pre-clinical trial expenses |
37,130 | 57,354 | ||||||
Pre-clinical trial expenses and research collaborations |
731,445 | 691,553 | ||||||
During the nine month period ending September 30, 2007, our research collaboration expenses were
$694,315 compared to $634,199 for the nine month period ending September 30, 2006. Our research
collaboration activity continues to focus on the interaction of the immune system and the reovirus,
the use of the reovirus as a co-therapy with existing chemotherapeutics, the use of new RAS active
viruses as potential therapeutics, and to investigate new uses of the reovirus as a therapeutic.
For the remainder of 2007, we still expect that pre-clinical trial expenses and research
collaborations will decline compared to 2006. We expect to continue with our various
collaborations in order to provide support for our expanding clinical trial program. As well, we
may expand our collaborative activities to include other viruses.
Other Research and Development Expenses
| 2007 | 2006 | |||||||
| $ | $ | |||||||
R&D consulting fees |
180,043 | 134,650 | ||||||
R&D salaries and benefits |
1,109,709 | 907,115 | ||||||
Quebec scientific research and experimental development refund |
(15,927 | ) | (52,344 | ) | ||||
Other R&D expenses |
279,565 | 230,039 | ||||||
Other research and development expenses |
1,553,390 | 1,219,460 | ||||||
During the nine month period ending September 30, 2007, our R&D consulting fees were $180,043
compared to $134,650 for the nine month period ending September 30, 2007. During this period of
2007, we incurred consulting activity associated with our ongoing clinical trials and assistance
with our clinical trial applications. During this period of 2006, our consulting activity related
to our ongoing clinical trials.
Our R&D salaries and benefits costs were $1,109,709 for the nine month period ending September 30,
2007 compared to $907,115 for the nine month period ending September 30, 2006. The increase is a
result of increases in salary and staff levels along with the addition of our Vice President of
Intellectual Property in 2007.
We still expect that our Other Research and Development expenses for the remainder of 2007 will
increase compared to 2006. We expect that salaries and benefits will increase to reflect increased
compensation levels and the salary and benefit costs for our Vice President of Intellectual
Property. Our R&D consulting fees are expected to remain consistent with 2006. However, we may
choose to engage additional consultants to assist us in the development of protocols and regulatory
filings for our additional combination therapy and phase II clinical trial studies, possibly
causing our R&D consulting expenses to increase.
Operating Expenses
| 2007 | 2006 | |||||||
| $ | $ | |||||||
Public company related expenses |
1,970,903 | 2,007,464 | ||||||
Office expenses |
827,727 | 782,183 | ||||||
Operating expenses |
2,798,630 | 2,789,647 | ||||||
During the nine month period ending September 30, 2007, our public company related expenses were
$1,970,903 compared to $2,007,464 for the nine month period ending September 30, 2006. In this
period of 2007, our financial advisory expenses decreased compared to 2006. This decrease was
offset by an increase in expenses associated with our investor relations activity in the U.S. and
Europe and professional fees during the nine month period ending September 30, 2007 compared to
2006.
During the nine month period ending September 30, 2007, our office expenses were $827,727 compared
to $782,183 for the nine month period ending September 30, 2006. Our office expense activity has
remained consistent in 2007 to date compared to 2006 with increases mainly due to increased
compensation levels and a general increase in office costs.
Stock Based Compensation
| 2007 | 2006 | |||||||
| $ | $ | |||||||
Stock based compensation |
142,878 | 293,880 | ||||||
Stock based compensation for the nine month period ending September 30, 2007 was $142,878 compared
to $293,880 for the nine month period ending September 30, 2006. During this period of 2007, we
incurred
stock based compensation associated with the vesting of options previously granted. In 2006, we
incurred stock based compensation associated with the issue and immediate vesting of stock options
to our two newly appointed directors and the vesting of previously granted options.
Commitments
As at September 30, 2007, we are committed to payments totaling $1,162,000 for the remainder of
2007 for activities related to clinical trial activity and collaborations. All of these committed
payments are considered to be part of our normal course of business.
SUMMARY OF QUARTERLY RESULTS
The following unaudited quarterly information is presented in thousands of dollars except for per
share amounts:
| 2007 | 2006 | 2005 | ||||||||||||||||||||||||||||||
| Sept. | June | March | Dec. | Sept. | June | March | Dec. | |||||||||||||||||||||||||
Revenue |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Interest income |
319 | 359 | 268 | 286 | 320 | 335 | 292 | 160 | ||||||||||||||||||||||||
Net loss(3), |
3,764 | 3,680 | 4,156 | 4,890 | 3,425 | 2,988 | 2,995 | 3,941 | ||||||||||||||||||||||||
Basic and diluted loss
per common share(3) |
$ | 0.09 | $ | 0.09 | $ | 0.11 | $ | 0.13 | $ | 0.09 | $ | 0.08 | $ | 0.08 | $ | 0.12 | ||||||||||||||||
Total assets(1), (4) |
33,897 | 37,670 | 41,775 | 33,566 | 37,980 | 40,828 | 43,660 | 46,294 | ||||||||||||||||||||||||
Total cash(2), (4) |
28,191 | 31,533 | 35,681 | 27,614 | 31,495 | 34,501 | 37,687 | 40,406 | ||||||||||||||||||||||||
Total long-term debt(5) |
— | — | — | 150 | 150 | 150 | 150 | 150 | ||||||||||||||||||||||||
Cash dividends
declared(6) |
Nil | Nil | Nil | Nil | Nil | Nil | Nil | Nil | ||||||||||||||||||||||||
| (1) | Subsequent to the acquisition of Oncolytics Biotech Inc. by SYNSORB in April 1999, we applied push down accounting. See note 2 to the audited financial statements for 2006. | |
| (2) | Included in total cash are cash and cash equivalents plus short-term investments. | |
| (3) | Included in net loss and loss per common share between September 2007 and October 2005 are quarterly stock based compensation expenses of $38,909, $82,573, $21,396, $109,670, $34,671, $222,376, $36,833, and $38,152, respectively. | |
| (4) | We issued 4,600,000 common shares for net cash proceeds of $12,063,394 during 2007 (2006 – 284,000 common shares for cash proceeds of $241,400; 2005 – 4,321,252 common shares for cash proceeds of $18,789,596). | |
| (5) | The long-term debt recorded represents repayable loans from the Alberta Heritage Foundation. On January 1, 2007, in conjunction with the adoption of the CICA Handbook section 3855 “Financial Instruments”, this loan was recorded at fair value (see note 1 of the September 30, 2007 interim financial statements). | |
| (6) | We have not declared or paid any dividends since incorporation. |
LIQUIDITY AND CAPITAL RESOURCES
As at September 30, 2007, we had cash and cash equivalents (including short-term investments) and
working capital positions of $28,191,464 and $26,343,848, respectively compared to $27,613,748 and
$25,719,870, respectively for December 31, 2006. The increase in 2007 reflects the cash inflow
from financing activities of $12,063,394 offset by cash usage from operating activities and
additions to our intellectual property of $10,849,863 and $586,124, respectively.
We desire to maintain adequate cash and short-term investment reserves to support our planned
activities which include our clinical trial program, product manufacturing, administrative costs,
and our intellectual property expansion and protection. For the remainder of 2007, we are
expecting to continue to enroll patients in our existing trials and we also expect to expand our
clinical trial program. As well, we expect to continue with our collaborative studies pursuing
support for our future clinical trial program. We will therefore need to ensure that we have
enough REOLYSIN® to supply our clinical trial and collaborative
programs. We continue to expect our cash usage in 2007 to be $1,400,000 per month and we believe
our existing capital resources are adequate to fund our current plans for research and development
activities well into 2009. Factors that will affect our anticipated monthly burn rate include, but
are not limited to, the number of manufacturing runs required to supply our clinical trial program
and the cost of each run, additional activities reducing our economic dependence on a single
supplier, the number of clinical trials ultimately approved, the timing of patient enrollment in
the approved clinical trials, the actual costs incurred to support each clinical trial, the number
of treatments each patient will receive, the timing of the NCI’s R&D activity, and the level of
pre-clinical activity undertaken.
In the event that we choose to seek additional capital, we will look to fund additional capital
requirements primarily through the issue of additional equity. We recognize the challenges and
uncertainty inherent in the capital markets and the potential difficulties we might face in raising
additional capital. Market prices and market demand for securities in biotechnology companies are
volatile and there are no assurances that we will have the ability to raise funds when required.
Capital Expenditures
We spent $586,124 on intellectual property during the nine month period ending September 30, 2007
compared to $552,319 during the nine month period ending September 30, 2006. The change in
intellectual property expenditures reflects the timing of filing costs associated with our expanded
patent base. As well, we have benefited from a stronger Canadian dollar as our patent costs are
typically incurred in U.S. currency. In the third quarter of 2007, two U.S. patents were issued
bringing our total patents issued to 23 in the U.S. and six in Canada.
Investing Activities
Under our Investment Policy, we are permitted to invest in short-term instruments with a rating no
less than R-1 (DBRS) with terms less than two years. We have $24,865,090 invested under this policy
and we are currently earning interest at an effective rate of 4.23% (2006 – 3.89%).
OTHER MD&A REQUIREMENTS
We have 41,120,748 common shares outstanding at October 29, 2007. If all of our warrants
(4,972,000) and options (3,497,950) were exercised we would have 49,590,698 common shares
outstanding.
Additional information relating to Oncolytics Biotech Inc. is available on SEDAR at www.sedar.com.
FINANCIAL STATEMENTS
Oncolytics Biotech Inc.
September 30, 2007
Oncolytics Biotech Inc.
BALANCE SHEETS
(unaudited)
(unaudited)
As at,
| September | December 31, | |||||||
| 30, 2007 | 2006 | |||||||
| $ | $ | |||||||
ASSETS |
||||||||
Current |
||||||||
Cash and cash equivalents |
3,326,374 | 3,491,511 | ||||||
Short-term investments [note 7] |
24,865,090 | 24,122,237 | ||||||
Accounts receivable |
36,637 | 84,003 | ||||||
Prepaid expenses |
413,811 | 638,540 | ||||||
| 28,641,912 | 28,336,291 | |||||||
Property and equipment |
169,226 | 149,596 | ||||||
Intellectual property |
5,085,755 | 5,079,805 | ||||||
| 33,896,893 | 33,565,692 | |||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
Current |
||||||||
Accounts payable and accrued liabilities |
2,298,064 | 2,616,421 | ||||||
Alberta Heritage Foundation loan [notes 1 and 8] |
— | 150,000 | ||||||
Shareholders’ equity |
||||||||
Share capital [note 2] |
||||||||
Authorized: unlimited number of common shares |
||||||||
Issued: 41,120,748 (December 31, 2006 – 36,520,748) |
92,708,665 | 83,083,271 | ||||||
Warrants [note 2] |
6,654,740 | 4,216,740 | ||||||
Contributed surplus [note 4] |
8,672,204 | 8,529,326 | ||||||
Deficit [notes 1 and 5] |
(76,436,780 | ) | (65,030,066 | ) | ||||
| 31,598,829 | 30,799,271 | |||||||
| 33,896,893 | 33,565,692 | |||||||
See accompanying notes
Oncolytics Biotech Inc.
STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(unaudited)
(unaudited)
| Cumulative | ||||||||||||||||||||
| Nine Month | Nine Month | Three Month | Three Month | from inception | ||||||||||||||||
| Period | Period | Period | Period | on April 2, | ||||||||||||||||
| Ending | Ending | Ending | Ending | 1998 to | ||||||||||||||||
| September | September | September | September | September 30, | ||||||||||||||||
| 30, 2007 | 30, 2006 | 30, 2007 | 30, 2006 | 2007 | ||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
Revenue |
||||||||||||||||||||
Rights revenue |
— | — | — | — | 310,000 | |||||||||||||||
| — | — | — | — | 310,000 | ||||||||||||||||
Expenses |
||||||||||||||||||||
Research and development |
8,815,255 | 6,582,687 | 2,890,644 | 2,705,746 | 52,036,449 | |||||||||||||||
Operating |
2,798,630 | 2,789,647 | 880,158 | 766,618 | 19,569,211 | |||||||||||||||
Stock-based compensation [note 3] |
142,878 | 293,880 | 38,909 | 34,671 | 4,308,527 | |||||||||||||||
Foreign exchange loss/(gain) |
2,829 | (2,703 | ) | 18,917 | 5,129 | 651,677 | ||||||||||||||
Amortization – intellectual property |
713,887 | 647,893 | 244,299 | 220,774 | 4,750,721 | |||||||||||||||
Amortization – property and equipment |
30,061 | 43,379 | 10,197 | 12,685 | 437,744 | |||||||||||||||
| 12,503,540 | 10,354,783 | 4,083,124 | 3,745,623 | 81,754,329 | ||||||||||||||||
Loss before the following: |
12,503,540 | 10,354,783 | 4,083,124 | 3,745,623 | 81,444,329 | |||||||||||||||
Interest income |
(946,826 | ) | (947,364 | ) | (319,223 | ) | (320,454 | ) | (5,749,831 | ) | ||||||||||
Gain on sale of BCY LifeSciences Inc. |
— | — | — | — | (299,403 | ) | ||||||||||||||
Loss on sale of Transition Therapeutics Inc. |
— | — | — | — | 2,156,685 | |||||||||||||||
Loss before taxes |
11,556,714 | 9,407,419 | 3,763,901 | 3,425,169 | 77,551,780 | |||||||||||||||
Future income tax recovery |
— | — | — | — | (1,115,000 | ) | ||||||||||||||
Net loss and comprehensive loss for the period |
11,556,714 | 9,407,419 | 3,763,901 | 3,425,169 | 76,436,780 | |||||||||||||||
Basic and diluted loss per share |
0.29 | 0.26 | 0.09 | 0.09 | ||||||||||||||||
Weighted average number of shares (basic and
diluted) |
40,181,777 | 36,317,687 | 41,120,748 | 36,368,270 | ||||||||||||||||
See accompanying notes
Oncolytics Biotech Inc.
STATEMENTS OF CASH FLOWS
(unaudited)
| Cumulative | ||||||||||||||||||||
| Three Month | Three Month | from inception | ||||||||||||||||||
| Nine Month | Nine Month | Period | Period | on April 2, | ||||||||||||||||
| Period Ending | Period Ending | Ending | Ending | 1998 to | ||||||||||||||||
| September 30, | September 30, | September | September | September 30, | ||||||||||||||||
| 2007 | 2006 | 30, 2007 | 30, 2006 | 2007 | ||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
OPERATING ACTIVITIES |
||||||||||||||||||||
Net loss for the period |
(11,556,714 | ) | (9,407,419 | ) | (3,763,901 | ) | (3,425,169 | ) | (76,436,780 | ) | ||||||||||
Add/(deduct) non-cash items |
||||||||||||||||||||
Amortization – intellectual property |
713,887 | 647,893 | 244,299 | 220,774 | 4,750,721 | |||||||||||||||
Amortization – property and equipment |
30,061 | 43,379 | 10,197 | 12,685 | 437,744 | |||||||||||||||
Stock-based compensation |
142,878 | 293,880 | 38,909 | 34,671 | 4,308,527 | |||||||||||||||
Other non-cash items [note 6] |
— | — | — | — | 1,383,537 | |||||||||||||||
Net changes in non-cash working capital [note 6] |
(179,975 | ) | (34,485 | ) | 239,121 | 261,875 | 1,724,946 | |||||||||||||
| (10,849,863 | ) | (8,456,752 | ) | (3,231,375 | ) | (2,895,164 | ) | (63,831,305 | ) | |||||||||||
INVESTING ACTIVITIES |
||||||||||||||||||||
Intellectual property |
(586,124 | ) | (552,319 | ) | (99,066 | ) | (187,283 | ) | (6,085,404 | ) | ||||||||||
Property and equipment |
(49,691 | ) | (29,342 | ) | (11,386 | ) | (8,294 | ) | (673,039 | ) | ||||||||||
Purchase of short-term investments |
(742,853 | ) | (801,358 | ) | (255,688 | ) | (261,480 | ) | (48,862,320 | ) | ||||||||||
Redemption of short-term investments |
— | 10,158,000 | — | — | 23,578,746 | |||||||||||||||
Investment in BCY LifeSciences Inc. |
— | — | — | — | 464,602 | |||||||||||||||
Investment in Transition Therapeutics Inc. |
— | — | — | — | 2,532,343 | |||||||||||||||
| (1,378,668 | ) | 8,774,981 | (366,140 | ) | (457,057 | ) | (29,045,072 | ) | ||||||||||||
FINANCING ACTIVITIES |
||||||||||||||||||||
Proceeds from exercise of warrants and stock
options |
— | 127,500 | — | 85,000 | 15,208,468 | |||||||||||||||
Proceeds from private placements |
— | — | — | — | 38,137,385 | |||||||||||||||
Proceeds from public offerings [note 2] |
12,063,394 | — | — | — | 42,856,898 | |||||||||||||||
| 12,063,394 | 127,500 | — | 85,000 | 96,202,751 | ||||||||||||||||
Increase (decrease) in cash and cash
equivalents during the period |
(165,137 | ) | 445,729 | (3,597,515 | ) | (3,267,221 | ) | 3,326,374 | ||||||||||||
Cash and cash equivalents, beginning of the
period |
3,491,511 | 3,511,357 | 6,923,889 | 7,224,307 | — | |||||||||||||||
Cash and cash equivalents, end of the period |
3,326,374 | 3,957,086 | 3,326,374 | 3,957,086 | 3,326,374 | |||||||||||||||
See accompanying notes
Oncolytics Biotech Inc.
NOTES TO FINANCIAL STATEMENTS
September 30, 2007 (unaudited)
1. ACCOUNTING POLICIES
These unaudited interim financial statements have been prepared in accordance with Canadian
generally accepted accounting principles. The notes presented in these unaudited interim financial
statements include only significant events and transactions occurring since the Company’s last
fiscal year end and are not fully inclusive of all matters required to be disclosed in the
Company’s annual audited financial statements. Accordingly, these unaudited interim financial
statements should be read in conjunction with the Company’s most recent annual financial
statements. The information as at and for the year ended December 31, 2006 has been derived from
the Company’s audited financial statements.
The accounting policies used in the preparation of these unaudited interim financial statements
conform with those used in the Company’s most recent annual financial statements except for the
following:
Adoption of New Accounting Policies
Financial Instruments
On January 1, 2007, the Company prospectively adopted, without restatement, CICA Handbook Section
3855 “Financial Instruments – Recognition and Measurement” and Section 1530 “Other Comprehensive
Income”. Pursuant to the transitional provisions of Section 3855, the Company classified its
short-term investments as held-to-maturity fixed income securities and recorded its Alberta
Heritage Foundation interest free loan at fair value. As a result, there were no adjustments made
to short-term investments or other comprehensive income and there was a decrease in the Alberta
Heritage Foundation loan of $150,000 with a corresponding decrease of $150,000 in the Company’s
deficit.
Financial Assets
Financial assets are comprised of cash and cash equivalents, accounts receivable (mainly goods and
service tax receivable), and short-term investments.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and interest bearing deposits with the Company’s
bank.
Short-term investments
The Company determines the appropriate classification of its short-term investments at the time of
purchase and reevaluates such designation as of each balance sheet date. Short-term investments can
be classified as held-for-trading, available-for-sale or held-to-maturity. Currently, the Company
has classified all of its short-term investments as held-to-maturity as it has the positive intent
and ability to hold the securities to maturity. Held-to-maturity securities are stated at original
cost, adjusted for amortization of premiums and accretion of discounts to maturity computed under
the effective interest rate method. Such amortization and interest on securities classified as
held-to-maturity are included in interest income.
Financial Liabilities
Financial liabilities are comprised of trade accounts payable and accrued liabilities.
Oncolytics Biotech Inc.
NOTES TO FINANCIAL STATEMENTS
September 30, 2007 (unaudited)
2. SHARE CAPITAL
Authorized:
Unlimited number of common shares
| Issued: | Shares | Warrants | ||||||||||||||
| Amount | Amount | |||||||||||||||
| Number | $ | Number | $ | |||||||||||||
Balance, December 31, 2005 |
36,236,748 | 82,841,871 | 2,784,800 | 4,429,932 | ||||||||||||
Exercise of options |
284,000 | 241,400 | — | — | ||||||||||||
Expired warrants |
— | — | (112,800 | ) | (213,192 | ) | ||||||||||
Balance, December 31, 2006 |
36,520,748 | 83,083,271 | 2,672,000 | 4,216,740 | ||||||||||||
Issued for cash pursuant to February 22, 2007 public
offering (a) |
4,600,000 | 11,362,000 | 2,300,000 | 2,438,000 | ||||||||||||
Share issue costs |
— | (1,736,606 | ) | — | — | |||||||||||
Balance, September 30, 2007 |
41,120,748 | 92,708,665 | 4,972,000 | 6,654,740 | ||||||||||||
| (a) | Pursuant to a public offering, 4,600,000 units were issued at an issue price of $3.00 per unit for gross proceeds of $13,800,000. Each unit included one common share (ascribed value of $2.47) and one-half of one common share purchase warrant (ascribed value of $0.53) for a total of 2,300,000 warrants. The ascribed value was determined using the relative fair value method. Each whole common share purchase warrant entitles the holder to acquire one common share in the capital of the Company upon payment of $3.50 per share until February 22, 2010. Share issue costs for this offering were $1,736,606. |
The following table summarizes the weighted average assumptions used in the Black-Scholes Model
with respect to the valuation of warrants:
| 2007 | ||
Risk-free interest rate |
4.08 % | |
Expected hold period to exercise |
3 years | |
Volatility |
62.8 % | |
Dividend yield |
— | |
There were no warrants issued during the nine month period ending September 30, 2006.
Oncolytics Biotech Inc.
NOTES TO FINANCIAL STATEMENTS
September 30, 2007 (unaudited)
The following table summarizes the Company’s outstanding warrants as at September 30, 2007:
| Weighted | ||||||||||||||||||||
| Average | ||||||||||||||||||||
| Outstanding, | Granted | Exercised | Expired | Remaining | ||||||||||||||||
| Exercise | Beginning of | During the | During the | During the | Outstanding, | Contractual | ||||||||||||||
| Price | the Period | Period | Period | Period | End of Period | Life (years) | ||||||||||||||
$3.50
|
— | 2,300,000 | — | — | 2,300,000 | 2.40 | ||||||||||||||
$5.65
|
320,000 | — | — | — | 320,000 | 1.25 | ||||||||||||||
$6.15
|
1,600,000 | — | — | — | 1,600,000 | 1.25 | ||||||||||||||
$8.00
|
752,000 | — | — | — | 752,000 | 0.15 | ||||||||||||||
| 2,672,000 | 2,300,000 | — | — | 4,972,000 | 1.62 | |||||||||||||||
3. STOCK BASED COMPENSATION
Stock Option Plan
The Company has issued stock options to acquire common stock through its stock option plan of which
the following are outstanding:
| 2007 | 2006 | |||||||||||||||
| Weighted | Weighted | |||||||||||||||
| Average | Average | |||||||||||||||
| Stock | Share Price | Stock | Share Price | |||||||||||||
| Options | $ | Options | $ | |||||||||||||
Outstanding, January 1 |
3,537,950 | 4.88 | 3,634,550 | 4.66 | ||||||||||||
Granted during period |
100,000 | 3.28 | 100,000 | 3.85 | ||||||||||||
Exercised during period |
(150,000 | ) | 0.85 | |||||||||||||
Cancelled |
(140,000 | ) | 2.90 | — | — | |||||||||||
Outstanding, September 30 |
3,497,950 | 4.84 | 3,584,550 | 4.79 | ||||||||||||
Options exercisable, September 30 |
3,290,450 | 4.94 | 3,352,050 | 4.91 | ||||||||||||
Oncolytics Biotech Inc.
NOTES TO FINANCIAL STATEMENTS
September 30, 2007 (unaudited)
The following table summarizes information about the stock options outstanding and exercisable at
September 30, 2007:
| Weighted | Weighted | Weighted | ||||||||||||||||||
| Average | Average | Average | ||||||||||||||||||
| Remaining | Exercise | Exercise | ||||||||||||||||||
| Range of Exercise | Number | Contractual | Price | Number | Price | |||||||||||||||
| Prices | Outstanding | Life (years) | $ | Exercisable | $ | |||||||||||||||
$0.75 - $1.00 |
318,550 | 2.1 | 0.85 | 318,550 | 0.85 | |||||||||||||||
$1.65 - $2.37 |
358,400 | 6.1 | 1.95 | 338,400 | 1.95 | |||||||||||||||
$2.70 - $3.50 |
800,250 | 6.7 | 3.15 | 625,250 | 3.13 | |||||||||||||||
$4.00 - $5.00 |
1,208,250 | 7.0 | 4.86 | 1,195,750 | 4.86 | |||||||||||||||
$6.77 - $9.76 |
684,500 | 4.4 | 8.66 | 684,500 | 8.66 | |||||||||||||||
$12.15 - $13.50 |
128,000 | 3.1 | 12.63 | 128,000 | 12.63 | |||||||||||||||
| 3,497,950 | 5.7 | 4.84 | 3,290,450 | 4.94 | ||||||||||||||||
Options granted vest immediately or annually over one, three or four years at the discretion of the
Board. The outstanding options vest annually or after the completion of certain milestones. The
Company has reserved 4,052,075 common shares for issuance relating to outstanding stock options.
As the Company is following the fair value based method of accounting for stock options, the
Company recorded compensation expense of $38,909 and $142,878 for the three and nine month periods
ending September 30, 2007, respectively (September 30, 2006 – $34,671 and $293,880, respectively)
with respect to the granting of options in the period and vesting of options issued in prior
periods with an offsetting credit to contributed surplus.
The estimated fair value of stock options issued during the nine month period ending September 30,
2007 was determined using the Black-Scholes Model using the following weighted average assumptions
and fair value of options:
| 2007 | 2006 | |||||
Risk-free interest rate |
4.11% | 4.24 | % | |||
Expected hold period to exercise |
3.5 years | 3.5 years | ||||
Volatility |
63% | 64 | % | |||
Dividend yield |
— | — | ||||
Weighted average fair value of options |
$1.56 | $ | 1.86 | |||
Oncolytics Biotech Inc.
NOTES TO FINANCIAL STATEMENTS
September 30, 2007 (unaudited)
4. CONTRIBUTED SURPLUS
| Amount | ||||
| $ | ||||
Balance, December 31, 2005 |
7,912,584 | |||
Expired warrants |
213,192 | |||
Stock based compensation |
403,550 | |||
Exercise of stock options |
— | |||
Balance, December 31, 2006 |
8,529,326 | |||
Stock based compensation |
142,878 | |||
Balance, September 30, 2007 |
8,672,204 | |||
5. DEFICIT
| Amount | ||||
| $ | ||||
Balance, December 31, 2005 |
50,732,542 | |||
Net loss for the year |
14,297,524 | |||
Balance, December 31, 2006 |
65,030,066 | |||
Adjustment – Alberta Heritage Foundation loan [note 1] |
(150,000 | ) | ||
Net loss and comprehensive loss, September 30, 2007 |
11,556,714 | |||
Balance, September 30, 2007 |
76,436,780 | |||
Oncolytics Biotech Inc.
NOTES TO FINANCIAL STATEMENTS
September 30, 2007 (unaudited)
6. ADDITIONAL CASH FLOW DISCLOSURE
Net Change In Non-Cash Working Capital
| Cumulative | ||||||||||||||||||||
| Nine | Nine | Three | Three | from | ||||||||||||||||
| Month | Month | Month | Month | inception | ||||||||||||||||
| Period | Period | Period | Period | on April 2, | ||||||||||||||||
| Ending | Ending | Ending | Ending | 1998 to | ||||||||||||||||
| September | September | September | September | September | ||||||||||||||||
| 30, 2007 | 30, 2006 | 30, 2007 | 30, 2006 | 30, 2007 | ||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
Change in: |
||||||||||||||||||||
Accounts receivable |
47,366 | 9,750 | 10,080 | 16,507 | (36,637 | ) | ||||||||||||||
Prepaid expenses |
224,729 | (691,329 | ) | 384,380 | (233,919 | ) | (413,811 | ) | ||||||||||||
Accounts payable and accrued liabilities |
(318,357 | ) | 671,927 | (147,926 | ) | 457,687 | 2,298,064 | |||||||||||||
Net change in non-cash working capital |
(46,262 | ) | (9,652 | ) | 246,534 | 240,275 | 1,847,616 | |||||||||||||
Portion related to investing activities |
(133,713 | ) | (24,833 | ) | (7,413 | ) | 21,600 | (122,670 | ) | |||||||||||
Net change associated with operating activities |
(179,975 | ) | (34,485 | ) | 239,121 | 261,875 | 1,724,946 | |||||||||||||
| Cumulative | ||||||||||||
| Other Non-Cash Items | Nine | Nine | Three | Three | from | |||||||
| Month | Month | Month | Month | inception on | ||||||||
| Period | Period | Period | Period | April 2, | ||||||||
| Ending | Ending | Ending | Ending | 1998 to | ||||||||
| September | September | September | September | September | ||||||||
| 30, 2007 | 30 ,2006 | 30, 2007 | 30, 2006 | 30, 2007 | ||||||||
| $ | $ | $ | $ | $ | ||||||||
Foreign exchange loss
|
— | — | — | — | 425,186 | |||||||
Donation of medical equipment
|
— | — | — | — | 66,069 | |||||||
Loss on sale of Transition Therapeutics Inc.
|
— | — | — | — | 2,156,685 | |||||||
Gain on sale of BCY LifeSciences Inc.
|
— | — | — | — | (299,403 | ) | ||||||
Cancellation of contingent payment obligation settled in common shares
|
— | — | — | — | 150,000 | |||||||
Future income tax recovery
|
— | — | — | — | (1,115,000 | ) | ||||||
| — | — | — | — | 1,383,537 | ||||||||
7. SHORT-TERM INVESTMENTS
Short-term investments, consisting of Government of Canada treasury bills, are liquid investments
that are readily convertible to known amounts of cash and are subject to an insignificant risk of
changes in value. The objectives for holding short-term investments are to invest the Company’s
excess cash resources in investment vehicles that provide a better rate of return compared to the
Company’s interest bearing bank
Oncolytics Biotech Inc.
NOTES TO FINANCIAL STATEMENTS
September 30, 2007 (unaudited)
account with limited risk to the principal invested. The Company also intends to match the
maturities of these short-term investments with the cash requirements of the Company’s activities.
| Effective | ||||||||||||||||||||
| Original | Accrued | Carrying | Fair | Interest | ||||||||||||||||
| Cost | Interest | Value | Value | Rate | ||||||||||||||||
September 30, 2007 |
||||||||||||||||||||
Short-term investments |
24,413,733 | 451,357 | 24,865,090 | 24,868,366 | 4.23 | % | ||||||||||||||
December 31, 2006 |
||||||||||||||||||||
Short-term investments |
23,672,719 | 449,518 | 24,122,237 | 24,124,810 | 3.95 | % | ||||||||||||||
Fair value is determined by using published market prices provided by the Company’s investment
advisor.
8. ALBERTA HERITAGE FOUNDATION LOAN
The Company received an interest free loan of $150,000 from the Alberta Heritage Foundation for
Medical Research. Pursuant to the terms of the agreement, the Company is required to repay this
amount in annual installments from the date of commencement of sales in an amount equal to the
lesser of: (a) 5% of the gross sales generated by the Company; or (b) $15,000 per annum until the
entire loan has been paid in full.
9. COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform with the current period’s
presentation.
Shareholder Information
For public company filings please go to www.sedar.com or contact us at:
Oncolytics Biotech Inc.
Suite 210, 1167 Kensington Crescent NW
tel: 403.670.7377 fax: 403.283.0858
Calgary, Alberta, Canada T2N 1X7
www.oncolyticsbiotech.com
Suite 210, 1167 Kensington Crescent NW
tel: 403.670.7377 fax: 403.283.0858
Calgary, Alberta, Canada T2N 1X7
www.oncolyticsbiotech.com
Officers
Brad Thompson, PhD
Chairman, President and CEO
Doug Ball, CA
Chief Financial Officer
Matt Coffey, PhD
Chief Scientific Officer
Karl Mettinger, MD, PhD
Chief Medical Officer
George Gill, MD
Senior Vice President, Clinical and Regulatory Affairs
Mary Ann Dillahunty, JD, MBA
Vice President, Intellectual Property
Chairman, President and CEO
Doug Ball, CA
Chief Financial Officer
Matt Coffey, PhD
Chief Scientific Officer
Karl Mettinger, MD, PhD
Chief Medical Officer
George Gill, MD
Senior Vice President, Clinical and Regulatory Affairs
Mary Ann Dillahunty, JD, MBA
Vice President, Intellectual Property
Directors
Brad Thompson, PhD
Chairman, President and CEO, Oncolytics Biotech Inc.
Doug Ball, CA
CFO, Oncolytics Biotech Inc.
Ger van Amersfoort
Biotech Consultant
William. A. Cochrane, OC, AOE, MD, FRCP(C)
Biotech Consultant
Jim Dinning, BCom, MPA
Chairman, Western Financial Group
Ed Levy, PhD
Adjunct Professor, University of British Columbia
J. Mark Lievonen, CA
President, Sanofi Pasteur Limited
Bob Schultz, FCA
Corporate Director
Fred A. Stewart, QC
President, Fred Stewart and Associates Inc.
Chairman, President and CEO, Oncolytics Biotech Inc.
Doug Ball, CA
CFO, Oncolytics Biotech Inc.
Ger van Amersfoort
Biotech Consultant
William. A. Cochrane, OC, AOE, MD, FRCP(C)
Biotech Consultant
Jim Dinning, BCom, MPA
Chairman, Western Financial Group
Ed Levy, PhD
Adjunct Professor, University of British Columbia
J. Mark Lievonen, CA
President, Sanofi Pasteur Limited
Bob Schultz, FCA
Corporate Director
Fred A. Stewart, QC
President, Fred Stewart and Associates Inc.
Oncolytics Biotech Inc.
Suite 210, 1167 Kensington Crescent NW, Calgary, AB T2N 1X7
Phone: (403) 670.7377 Fax: (403) 283.0858
www.oncolyticsbiotech.com
Suite 210, 1167 Kensington Crescent NW, Calgary, AB T2N 1X7
Phone: (403) 670.7377 Fax: (403) 283.0858
www.oncolyticsbiotech.com