CALGARY, July 27 /PRNewswire-FirstCall/ – Oncolytics Biotech Inc.
(“Oncolytics”) (TSX:ONC, NASDAQ:ONCY) today announced its financial results
and highlights for the three and six-month periods ended June 30, 2007.
Second Quarter Highlights
- Announced positive results from a U.S. Phase I systemic
administration trial for patients with advanced cancers;
- Commenced patient enrolment in a multi-centre, U.S. Phase II sarcoma
trial;
- Commenced patient enrolment in two, multi-centre combination
REOLYSIN(R) and chemotherapy trials in the U.K.;
- Announced that the U.S. National Cancer Institute had filed a
protocol with the U.S. Food and Drug Administration (FDA) for a Phase
II clinical trial for patients with metastatic melanoma;
- Successfully completed initial scale up of the REOLYSIN(R)
manufacturing process to 40-litre batch size;
- Secured two additional U.S. patents and an additional Canadian
patent;
- Presented encouraging preclinical work at the American Association
for Cancer Research Annual Meeting showing both in vitro and in vivo
synergy using the combination of REOLYSIN(R) and gemcitabine; and
- In July, commenced patient enrolment in a multi-centre combination
REOLYSIN(R) and docetaxel trial in the U.K.
“We have entered an exciting phase of development for the Company this
year, and particularly in the second quarter,” said Dr. Brad Thompson,
President and CEO of Oncolytics. “We are now conducting multi-centre Phase II
trials in both the U.S. and the U.K., and are executing our clinical trial
strategy for REOLYSIN(R) by expanding the scope and pace of development. We
look forward to reporting the results of these and other ongoing trials in the
quarters ahead.”
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL 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 six months ended June 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(R) 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(R) as a
cancer treatment, the success and timely completion of clinical studies and
trials, our ability to successfully commercialize REOLYSIN(R), 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(R), 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(R) Development Update for the Second Quarter of 2007
We continue to develop our lead product REOLYSIN(R) as a potential cancer
therapy. Our goal each year is to advance REOLYSIN(R) 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 supply, and our intellectual property.
Clinical Trial Program
In the second quarter of 2007, we announced positive clinical data from
our U.S. Phase I REOLYSIN(R) systemic administration clinical trial. As well,
we expanded our clinical trial program to include eight clinical trials of
which seven are being conducted by us and one is being sponsored by the U.S.
National Cancer Institute (“NCI”).
Clinical Trial Results
In the second quarter of 2007, we announced positive results from our U.S.
Phase I clinical trial examining the systemic administration of REOLYSIN(R) in
patients with advanced cancers. The results indicated that REOLYSIN(R) can be
delivered systemically to patients with advanced and metastatic cancers and
cause anti-tumour activity.
A total of 18 patients were treated in the escalating dosage trial to a
maximum daily dose of 3×10(10) TCID(50) in a one-hour infusion. Of the 18
patients treated, eight demonstrated stable disease or better, as measured by
RECIST (“Response Evaluation Criteria in Solid Tumours”) including a patient
with progressive breast cancer who experienced a 34% shrinkage in tumour
volume.
The trial was originally designed to demonstrate the safety of a single,
one-hour infusion of REOLYSIN(R). During the treatment of the 4th cohort of
patients, we applied for and were granted approval to allow subsequent
patients to receive repeat monthly treatments of REOLYSIN(R). Of the patients
eligible for retreatment, three patients received a range of two to seven
one-hour infusions of REOLYSIN(R). Toxicities possibly related to REOLYSIN(R)
treatment in this trial were generally mild (grade 1 or 2) and included
chills, fever and fatigue.
The primary objective of this trial was to determine the Maximum Tolerated
Dose (“MTD”), Dose-Limiting Toxicity (“DLT”), and safety profile of
REOLYSIN(R) when administered systemically to patients. A secondary objective
was to examine any evidence of anti-tumour activity. Eligible patients
included those who had been diagnosed with 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
During the second quarter of 2007, we continued to enroll patients in our
Phase II and Phase Ib combination REOLYSIN(R)/radiation clinical trials in the
U.K. and in our Phase I/II recurrent malignant glioma clinical trial in the
U.S. As well, we commenced enrollment in the following studies:
U.S. Phase II Sarcoma Clinical Trial
During the second quarter of 2007, we received approval to commence and
initiated patient enrollment in our U.S. Phase II trial to evaluate the
intravenous administration of REOLYSIN(R) in patients with various sarcomas
that have metastasized to the lung. Patients are being enrolled at the
Montefiore Medical Center/Albert Einstein College of Medicine in the Bronx,
New York, the University of Michigan Comprehensive Cancer Center in Ann Arbor,
and the Cancer Therapy and Research Center, Institute for Drug Development in
San Antonio, Texas.
This trial is a Phase II, open-label, single agent study whose primary
objective is to measure tumour responses and duration of response, and to
describe any evidence of antitumour activity of intravenous, multiple dose
REOLYSIN(R) in patients with bone and soft tissue sarcomas metastatic to the
lung. REOLYSIN(R) will be given intravenously to patients at a dose of
3×10(10) TCID(50) for five consecutive days. Patients may receive additional
five-day cycles of therapy every four weeks for a maximum of eight cycles.
Up to 52 patients will be enrolled in the study. Eligible patients must
have a bone or soft tissue sarcoma metastatic to the lung deemed by their
physician to be unresponsive to or untreatable by standard therapies.
U.K. Combination REOLYSIN(R) Paclitaxel and Carboplatin Clinical Trial
In the second quarter of 2007, we commenced patient enrolment in our U.K.
clinical trial to evaluate the anti-tumour effects of systemic administration
of REOLYSIN(R) in combination with paclitaxel and carboplatin in patients with
advanced cancers including head and neck, melanoma, lung and ovarian.
This trial has two components. The first is an open-label,
dose-escalating, non-randomized study of REOLYSIN(R) given intravenously with
paclitaxel and carboplatin every three weeks. Standard dosages of paclitaxel
and carboplatin will be delivered with escalating dosages of REOLYSIN(R)
intravenously. A maximum of three cohorts will be enrolled in the REOLYSIN(R)
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(R) in combination with a standard dosage of paclitaxel and
carboplatin.
Eligible patients include those who have been diagnosed with advanced or
metastatic solid tumours such as head and neck, melanoma, lung and ovarian
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(R) when administered in combination with paclitaxel and carboplatin.
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.
U.K. Combination REOLYSIN(R) Gemcitabine Clinical Trial
In the second quarter of 2007, we commenced patient enrolment in our U.K.
clinical trial to evaluate the anti-tumour effects of systemic administration
of REOLYSIN(R) in combination with gemcitabine (Gemzar(R)) in patients with
advanced cancers including pancreatic, lung and ovarian. The combination of
reovirus and gemcitabine has been shown in preclinical studies to be more
effective than gemcitabine or reovirus alone at killing certain cancer cell
lines.
This trial has two components. The first is an open-label,
dose-escalating, non-randomized study of REOLYSIN(R) given intravenously with
gemcitabine every three weeks. A standard dosage of gemcitabine will be
delivered with escalating dosages of REOLYSIN(R) intravenously. A maximum of
three cohorts will be enrolled in the REOLYSIN(R) 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(R) in
combination with a standard dosage of gemcitabine.
Eligible patients include those who have been diagnosed with advanced or
metastatic solid tumours such as pancreatic, lung and ovarian 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(R) when
administered in combination with gemcitabine. 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.
U.S. National Cancer Institute Phase II Melanoma Clinical Trial
In the second quarter of 2007, the NCI filed a protocol with the U.S. Food
and Drug Administration for a Phase II clinical trial for patients with
metastatic melanoma using systemic administration of REOLYSIN(R). The NCI is
sponsoring the trial under our Clinical Trials Agreement that requires us to
provide clinical supplies of REOLYSIN(R). The trial is expected to enroll up
to 47 patients with metastatic melanoma.
Pre-Clinical Trial and Collaborative Program
During the second quarter of 2007, we announced that a poster by Dr.
Maureen E. Lane et al. of Cornell University, New York, entitled “In Vivo
Synergy between Oncolytic Reovirus and Gemcitabine in Ras-Mutated Human HCT116
Xenografts” was presented at the American Association for Cancer Research
Annual Meeting in Los Angeles, CA.
The researchers found that treatment of human colon cancer cell lines with
the combination of REOLYSIN(R) and gemcitabine resulted in both in vitro and
in vivo synergy. There was no toxicity associated with the combined treatment.
Tumours treated with the combination were significantly smaller (by area and
weight) than tumours in control groups or tumours treated with either agent
alone. The researchers concluded that the synergistic combination of
REOLYSIN(R) and gemcitabine is a promising therapeutic regimen for study in
clinical trials.
Manufacturing and Process Development
We continued to have REOLYSIN(R) manufactured in order to supply our
current and future clinical trial program. In the second quarter of 2007, we
successfully completed initial scale up of our manufacturing process for
REOLYSIN(R). The process improvements and scale up to 40-litre batch size has
resulted in increased total yields which are a result of advancements in the
media formulation used in the primary production of REOLYSIN(R) and in the
downstream processing steps required to generate finished product.
Intellectual Property
In the second quarter of 2007, two U.S. and one Canadian patents were
issued. At the end of the second quarter of 2007, we had been issued a total
of 21 U.S., six Canadian and three European patents as well as issuances in
other jurisdictions. We also have other patent applications filed in the U.S.,
Europe and 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 first half of 2007
was $7,618,488 from operating activities and $525,363 for the purchases of
intellectual property and capital assets which is in line with our estimate.
Our net loss for the first six month of 2007 was $7,792,813.
Cash Resources
We exited the second quarter of 2007 with cash resources totaling
$31,533,291 (see “Liquidity and Capital Resources”).
Expected REOLYSIN(R) Development for the Remainder of 2007
We believe that we will commence enrollment in our third co-therapy
clinical trial with docetaxel (see “Recent 2007 Progress”) and continue to
enroll patients in all seven of our clinical trials in 2007. We also 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 and Phase II combination REOLYSIN(R)/radiation clinical trials by the
end of 2007 and complete enrollment in our chemotherapy co-therapy studies in
2008. We expect to produce REOLYSIN(R) in 2007 to supply our clinical trial
program.
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 July 23, 2007, we commenced patient enrolment in our U.K. clinical
trial to evaluate the anti-tumour effects of systemic administration of
REOLYSIN(R) in combination with docetaxel (Taxotere(R)) in patients with
advanced cancers including bladder, prostate, lung and upper
gastro-intestinal.
The trial has two components. The first is an open-label, dose-escalating,
non-randomized study of REOLYSIN(R) given intravenously with docetaxel every
three weeks. A standard dosage of docetaxel will be delivered with escalating
dosages of REOLYSIN(R) intravenously. A maximum of three cohorts will be
enrolled in the REOLYSIN(R) 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(R) 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(R) 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.
SECOND QUARTER RESULTS OF OPERATIONS
(for the three months ended June 30, 2007 and 2006)
Net loss for the three month period ending June 30, 2007 was $3,679,582
compared to $2,987,714 for the three month period ending June 30, 2006.
Research and Development Expenses ("R&D")
2007 2006
$ $
-------------------------------------------------------------------------
Manufacturing and related process
development expenses 828,602 648,351
Clinical trial expenses 983,896 685,265
Pre-clinical trial and research
collaboration expenses 331,379 235,302
Other R&D expenses 562,498 391,701
-------------------------------------------------------------------------
Research and development expenses 2,706,375 1,960,619
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For the second quarter of 2007, R&D increased to $2,706,375 compared to
$1,960,619 for the second quarter of 2006. The increase in R&D was due to the
following:
Manufacturing & Related Process Development ("M&P")
2007 2006
$ $
-------------------------------------------------------------------------
Product manufacturing expenses 774,883 124,110
Technology transfer expenses - 273,214
Process development expenses 53,719 251,027
-------------------------------------------------------------------------
Manufacturing and related process
development expenses 828,602 648,351
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Our M&P expenses for the second quarter of 2007 increased to $828,602
compared to $648,351 for the second quarter of 2006.
In the second quarter of 2007, our production activity increased compared
to the second quarter of 2006 as we completed the production runs scheduled
earlier in 2007. In the second quarter of 2006, our production activity was
lower as we were focused on completing manufacturing process improvements and
transferring changes in our production process to our cGMP manufacturer prior
to commencing new production runs. Our process development activity in the
second quarter of 2007 focused on completing our 40-litre scale up studies.
Clinical Trial Program
2007 2006
$ $
-------------------------------------------------------------------------
Direct clinical trial expenses 913,360 643,786
Other clinical trial expenses 70,536 41,479
-------------------------------------------------------------------------
Clinical trial expenses 983,896 685,265
-------------------------------------------------------------------------
-------------------------------------------------------------------------
During the second quarter of 2007, our direct clinical trial expenses
increased to $913,360 compared to $643,786 in the second quarter of 2006. In
the second quarter of 2007, we incurred direct patient costs in our six
actively enrolling clinical trials compared to only three enrolling clinical
trial studies in the second quarter of 2006. As well in the second quarter of
2007, we incurred clinical site start up costs associated with our U.K.
co-therapy and U.S. sarcoma clinical trials compared to incurring clinical
site start up costs for our U.S. glioma study in the second quarter of 2006.
Pre-Clinical Trial Expenses and Research Collaborations
2007 2006
$ $
-------------------------------------------------------------------------
Research collaboration expenses 331,379 235,302
Pre-clinical trial expenses - -
-------------------------------------------------------------------------
Pre-clinical trial expenses and
research collaborations 331,379 235,302
-------------------------------------------------------------------------
-------------------------------------------------------------------------
During the second quarter of 2007, our research collaboration expenses
were $331,379 compared to $235,302 for the second 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, the use of new RAS active viruses as potential
therapeutics, and to investigate new uses of the reovirus as a therapeutic.
Other Research and Development Expenses
2007 2006
$ $
-------------------------------------------------------------------------
R&D consulting fees 50,114 31,371
R&D salaries and benefits 395,166 286,767
Other R&D expenses 117,218 73,563
-------------------------------------------------------------------------
Other research and development expenses 562,498 391,701
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Our R&D salaries and benefits costs were $395,166 in the second quarter of
2007 compared to $286,767 in the second 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 753,949 664,917
Office expenses 257,806 240,176
-------------------------------------------------------------------------
Operating expenses 1,011,755 905,093
-------------------------------------------------------------------------
-------------------------------------------------------------------------
During the second quarter of 2007, our public company related expenses
increased to $753,949 compared to $664,917 for the second quarter of 2006. In
the second quarter of 2007, we increased our investor relations activity in
the United States and Europe compared to the second quarter of 2006.
Stock Based Compensation
2007 2006
$ $
-------------------------------------------------------------------------
Stock based compensation 82,573 222,376
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Stock based compensation for the second quarter of 2007 was $82,573
compared to $222,376 in the second quarter of 2006. In the second quarter of
2007, we incurred stock based compensation associated with the vesting of
previously granted stock options. In the second quarter of 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.
YEAR TO DATE RESULTS OF OPERATIONS
(for the six months ended June 30, 2007 and 2006)
Net loss for the six month period ending June 30, 2007 was $7,792,813
compared to $5,982,250 for the six month period ending June 30, 2006.
Research and Development Expenses ("R&D")
2007 2006
$ $
-------------------------------------------------------------------------
Manufacturing and related process
development expenses 2,666,795 1,491,490
Clinical trial expenses 1,705,513 1,232,033
Pre-clinical trial and research
collaboration expenses 437,660 390,388
Other R&D expenses 1,114,643 763,030
-------------------------------------------------------------------------
Research and development expenses 5,924,611 3,876,941
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For the six month period ending June 30, 2007, R&D increased to $5,924,611
compared to $3,876,941 for the six month period ending June 30, 2006. The
increase in R&D was due to the following:
Manufacturing & Related Process Development ("M&P")
2007 2006
$ $
-------------------------------------------------------------------------
Product manufacturing expenses 2,523,301 767,532
Technology transfer expenses - 273,214
Process development expenses 143,494 450,744
-------------------------------------------------------------------------
Manufacturing and related process
development expenses 2,666,795 1,491,490
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For the six month period ending June 30, 2007, our production and vial
filling activity increased compared to 2006. During the first half of 2007, we
completed production runs that commenced in 2006 and initiated additional
production runs to manufacture REOLYSIN(R) at the beginning of 2007. As well,
we incurred costs associated with vial filling and packaging of these
production runs.
For the six month period ending June 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 in the second quarter of 2006.
Our process development expenses for the six month period ending June 30,
2007 were $143,494 compared to $450,744 for the six month period ending June
30, 2006. During the six month period ending June 30, 2007, our main process
development focus was on our scale up to 40-litre studies which were completed
in the second quarter of 2007. During the six month period ending June 30,
2006, our process development activity included scale up studies and the
validation of the fill process used in our manufacturing process.
We now expect that our overall manufacturing and related process
development expenses for 2007 will be in line with 2006. We expect to complete
the vial filling of our planned 2007 production runs in the third quarter of
2007. We also expect that our process development activity will begin to
examine the commercial formulation of REOLYSIN(R).
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(R) 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 1,596,467 1,143,420
Other clinical trial expenses 109,046 88,613
-------------------------------------------------------------------------
Clinical trial expenses 1,705,513 1,232,033
-------------------------------------------------------------------------
-------------------------------------------------------------------------
During the six month period ending June 30, 2007, our direct clinical
trial expenses were $1,705,513 compared to $1,145,420 for the six month period
ending June 30, 2006. In the first half of 2007, we incurred direct patient
costs in our six 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. which were recently approved to commence.
In the first half of 2006, we incurred direct patient costs in three ongoing
clinical trials along with clinical site start up costs associated with our
U.S. recurrent malignant glioma trial.
We expect our clinical trial expenses will continue to increase for the
remainder of 2007 compared to 2006. We expect that our third U.K. co-therapy
clinical trial will commence enrollment in the third quarter of 2007
increasing the number of ongoing clinical trials to seven.
Pre-Clinical Trial Expenses and Research Collaborations
2007 2006
$ $
-------------------------------------------------------------------------
Research collaboration expenses 400,530 381,738
Pre-clinical trial expenses 37,130 8,650
-------------------------------------------------------------------------
Pre-clinical trial expenses and
research collaborations 437,660 390,388
-------------------------------------------------------------------------
-------------------------------------------------------------------------
During the six month period ending June 30, 2007, our research
collaboration expenses were $400,530 compared to $381,738 for the six month
period ending June 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.
During the six month period ending June 30, 2007, our pre-clinical trial
expenses were $37,130 compared to $8,650 for the six month period ending June
30, 2006. The frequency of our pre-clinical trial expenses change from period
to period as we move through our clinical trial program. As well, we may
increase our pre-clinical activity depending on the results of our research
collaborations.
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 141,891 64,326
R&D salaries and benefits 767,553 607,892
Quebec scientific research and
experimental development refund (15,927) (52,344)
Other R&D expenses 221,126 143,156
-------------------------------------------------------------------------
Other research and development expenses 1,114,643 763,030
-------------------------------------------------------------------------
-------------------------------------------------------------------------
During the six month period ending June 30, 2007, our R&D consulting fees
were $141,891 compared to $64,326 for the six month period ending 2006. In the
first half of 2007, we incurred consulting activity associated with our
ongoing clinical trials and assistance with our clinical trial applications.
In the first half of 2006, our consulting activity related to our ongoing
clinical trials.
Our R&D salaries and benefits costs were $767,553 for the first half of
2007 compared to $607,892 for the first half 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.
We now 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 1,335,826 1,499,636
Office expenses 582,646 523,393
-------------------------------------------------------------------------
Operating expenses 1,918,472 2,023,029
-------------------------------------------------------------------------
-------------------------------------------------------------------------
During the six month period ending June 30, 2007, our public company
related expenses were $1,335,826 compared to $1,499,636 for the six month
period ending June 30, 2006. In the first half of 2007, our financial advisory
expenses decreased compared to the first half of 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 six month
period ending June 30, 2007 compared to 2006.
In the first half of 2007, our office expenses were $582,646 compared to
$523,393 in the first half of 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 103,969 259,209
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Stock based compensation for the six month period ending June 30, 2007 was
$103,969 compared to $259,209 for the six month period ending June 30, 2006.
In the first half of 2007, we incurred stock based compensation associated
with the vesting of options granted previously. In the first half of 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 June 30, 2007, we are committed to payments totaling $1,021,000
during 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
-------------------------------------------------------------------------
June March Dec. Sept. June March Dec. Sept.
-------------------------------------------------------------------------
Revenue - - - - - - - -
-------------------------------------------------------------------------
Interest
income 359 268 286 320 335 292 160 211
-------------------------------------------------------------------------
Net
loss(3), 3,680 4,156 4,890 3,425 2,988 2,995 3,941 3,510
-------------------------------------------------------------------------
Basic and
diluted
loss per
common
share(3) $0.09 $0.11 $0.13 $0.09 $0.08 $0.08 $0.12 $0.11
-------------------------------------------------------------------------
Total
assets
(1),(4) 37,670 41,775 33,566 37,980 40,828 43,660 46,294 34,538
-------------------------------------------------------------------------
Total
cash
(2),(4) 31,533 35,681 27,614 31,495 34,501 37,687 40,406 28,206
-------------------------------------------------------------------------
Total
long-term
debt(5) - - 150 150 150 150 150 150
-------------------------------------------------------------------------
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 June 2007 and
July 2005 are quarterly stock based compensation expenses of $82,573,
$21,396, $109,670, $34,671, $222,376, $36,833, $38,152, and $4,173,
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
June 30, 2007 interim financial statements).
(6) We have not declared or paid any dividends since incorporation.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
As at June 30, 2007, we had cash and cash equivalents (including
short-term investments) and working capital positions of $31,533,291 and
$30,002,209, 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 $7,618,488
and $487,058, 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
commence patient enrollment in our third co-therapy trial and to continue to
enroll patients in our existing trials throughout 2007. We also expect to
continue 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(R) 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 $487,058 on intellectual property in the first half of 2007
compared to $365,036 in the first half of 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
second quarter of 2007, two U.S. patents and one Canadian patent were issued
bringing our total patents issued to 21 in the U.S., six in Canada and three
in Europe.
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 $24,356,007 invested under this policy and we are currently
earning interest at an effective rate of 4.14% (2006 – 3.86%).
OTHER MD&A REQUIREMENTS
We have 41,120,748 common shares outstanding at July 26, 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. Oncolytics Biotech Inc. BALANCE SHEETS (unaudited) As at, June 30, December 31, 2007 2006 $ $ ------------------------------------------------------------------------- ASSETS Current Cash and cash equivalents 6,923,889 3,491,511 Short-term investments (note 7) 24,609,402 24,122,237 Accounts receivable 46,717 84,003 Prepaid expenses 798,191 638,540 ------------------------------------------------------------------------- 32,378,199 28,336,291 Property and equipment 168,037 149,596 Intellectual property 5,153,575 5,079,805 ------------------------------------------------------------------------- 37,699,811 33,565,692 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable and accrued liabilities 2,375,990 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) 8,633,295 8,529,326 Deficit (notes 1 and 5) (72,672,879) (65,030,066) ------------------------------------------------------------------------- 35,323,821 30,799,271 ------------------------------------------------------------------------- 37,699,811 33,565,692 ------------------------------------------------------------------------- ------------------------------------------------------------------------- See accompanying notes Oncolytics Biotech Inc. STATEMENTS OF LOSS AND COMPREHENSIVE LOSS (unaudited) Cumulative from Six Month Six Month Three Month Three Month inception Period Period Period Period on April 2, Ending Ending Ending Ending 1998 to June 30, June 30, June 30, June 30, June 30, 2007 2006 2007 2006 2007 $ $ $ $ $ ------------------------------------------------------------------------- Revenue Rights revenue - - - - 310,000 ------------------------------------------------------------------------- - - - - 310,000 ------------------------------------------------------------------------- Expenses Research and development 5,924,611 3,876,941 2,706,375 1,960,619 49,145,805 Operating 1,918,472 2,023,029 1,011,755 905,093 18,689,053 Stock based compensation (note 3) 103,969 259,209 82,573 222,376 4,269,618 Foreign exchange loss/gain (16,088) (7,832) (10,855) 2,219 632,760 Amortization - intellectual property 469,588 427,119 238,596 216,679 4,506,422 Amortization - property and equipment 19,864 30,694 10,009 15,416 427,547 ------------------------------------------------------------------------- 8,420,416 6,609,160 4,038,453 3,322,402 77,671,205 ------------------------------------------------------------------------- Loss before the following: 8,420,416 6,609,160 4,038,453 3,322,402 77,361,205 Interest income (627,603) (626,910) (358,871) (334,688) (5,430,608) Gain on sale of BCY LifeSciences Inc. - - - - (299,403) Loss on sale of Transition Therapeutics Inc. - - - - 2,156,685 ------------------------------------------------------------------------- Loss before taxes 7,792,813 5,982,250 3,679,582 2,987,714 73,787,879 Future income tax recovery - - - - (1,115,000) ------------------------------------------------------------------------- Net loss and comprehensive loss for the period 7,792,813 5,982,250 3,679,582 2,987,714 72,672,879 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted loss per share 0.20 0.16 0.09 0.08 ------------------------------------------------------------- ------------------------------------------------------------- Weighted average number of shares (basic and diluted) 39,701,859 36,250,836 41,120,748 36,264,770 ------------------------------------------------------------- ------------------------------------------------------------- See accompanying notes Oncolytics Biotech Inc. STATEMENTS OF CASH FLOWS (unaudited) Cumulative from Six Month Six Month Three Month Three Month inception Period Period Period Period on April 2, Ending Ending Ending Ending 1998 to June 30, June 30, June 30, June 30, June 30, 2007 2006 2007 2006 2007 $ $ $ $ $ ------------------------------------------------------------------------- OPERATING ACTIVITIES Net loss for the period (7,792,813) (5,982,250) (3,679,582) (2,987,714) (72,672,879) Deduct non-cash items Amortization - intell- ectual property 469,588 427,119 238,596 216,679 4,506,422 Amortization - property and equipment 19,864 30,694 10,009 15,416 427,547 Stock based compen- sation 103,969 259,209 82,573 222,376 4,269,618 Other non-cash items (note 6) - - - - 1,383,537 Net changes in non-cash working capital (note 6) (419,096) (296,360) (522,374) (567,132) 1,485,825 ------------------------------------------------------------------------- (7,618,488) (5,561,588) (3,870,778) (3,100,375) (60,599,930) ------------------------------------------------------------------------- INVESTING ACTIVITIES Intellectual property (487,058) (365,036) (268,881) (134,088) (5,986,338) Other capital assets (38,305) (21,048) (3,558) 6,333 (661,653) Purchase of short-term invest- ments (487,165) (539,878) (253,395) (290,435) (48,606,632) Redemption of short- term invest- ments - 10,158,000 - 4,258,000 23,578,746 Investment in BCY LifeSciences Inc. - - - - 464,602 Investment in Transition Therapeutics Inc. - - - - 2,532,343 ------------------------------------------------------------------------- (1,012,528) 9,232,038 (525,834) 3,839,810 (28,678,932) ------------------------------------------------------------------------- FINANCING ACTIVITIES Proceeds from exercise of warrants and stock options - 42,500 - 42,500 15,208,468 Proceeds from private placements - - - - 38,137,385 Proceeds from public offerings (note 2) 12,063,394 - (4,778) - 42,856,898 ------------------------------------------------------------------------- 12,063,394 42,500 (4,778) 42,500 96,202,751 ------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents during the period 3,432,378 3,712,950 4,401,390 781,935 6,923,889 Cash and cash equivalents, beginning of the period 3,491,511 3,511,357 11,325,279 6,442,372 - ------------------------------------------------------------------------- Cash and cash equivalents, end of the period 6,923,889 7,224,307 6,923,889 7,224,307 6,923,889 ------------------------------------------------------------------------- ------------------------------------------------------------------------- See accompanying notes Oncolytics Biotech Inc. NOTES TO FINANCIAL STATEMENTS June 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 the following: Adoption of New Accounting Policy 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. 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, June 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 in the price of the Company's shares 62.8% Dividend yield - ------------------------------------------------------------------------- There were no warrants issued during the six month period ending June 30, 2006. The following table summarizes the Company's outstanding warrants as at June 30, 2007: Weighted Average Remaining Outstanding, Granted Exercised Expired Contrac- Beginning During During During Outstanding, tual Exercise of the the the the End of Life Price Period Period Period Period Period (years) ------------------------------------------------------------------------- $3.50 - 2,300,000 - - 2,300,000 2.65 $5.65 320,000 - - - 320,000 1.50 $6.15 1,600,000 - - - 1,600,000 1.50 $8.00 752,000 - - - 752,000 0.40 ------------------------------------------------------------------------- 2,672,000 2,300,000 - - 4,972,000 1.87 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 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 Share Share Stock Price Stock 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 - - (50,000) 0.85 ---------------------------------------- ----------- Outstanding, June 30 3,637,950 4.84 3,684,550 4.69 ---------------------------------------- ----------- ---------------------------------------- ----------- Options exercisable, June 30, 2007 3,380,450 4.96 3,452,050 4.79 ---------------------------------------- ----------- ---------------------------------------- ----------- The following table summarizes information about the stock options outstanding and exercisable at June 30, 2007: Weighted Average Weighted Weighted Remaining Average Average Range of Contractual Exercise Exercise Exercise Number Life Price Number Price Prices Outstanding (years) $ Exercisable $ ------------------------------------------------------------------------- $0.75 - $1.00 348,550 2.3 0.85 348,550 0.85 $1.65 - $2.37 368,400 6.4 1.95 348,400 1.95 $2.70 - $3.50 828,750 6.9 3.15 603,750 3.13 $4.00 - $5.00 1,240,750 7.3 4.86 1,228,250 4.86 $6.77 - $9.76 708,500 4.7 8.66 708,500 8.66 $12.15 - $13.50 143,000 3.3 12.63 143,000 12.63 ------------------------------------------------------------------------- 3,637,950 6.0 4.84 3,380,450 4.96 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 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 $82,573 and $103,969 for the three and six month periods ending June 30, 2007, respectively (June 30, 2006 $222,376 and $259,209, 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 six month period ending June 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 in the price of the Company's shares 63% 64% Dividend yield Zero Zero Weighted average fair value of options $1.56 $1.86 ------------------------------------------------------------------------- 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 103,969 ------------------------------------------------------------------------- Balance, June 30, 2007 8,633,295 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 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, June 30, 2007 7,792,813 ------------------------------------------------------------------------- Balance, June 30, 2007 72,672,879 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 6. ADDITIONAL CASH FLOW DISCLOSURE Net Change In Non-Cash Working Capital For the periods ending: Cumulative from Six Month Six Month Three Month Three Month inception Period Period Period Period on April 2, Ending Ending Ending Ending 1998 to June 30, June 30, June 30, June 30, June 30, 2007 2006 2007 2006 2007 $ $ $ $ $ ------------------------------------------------------------------------- Change in: Accounts receivable 37,286 (6,757) 4,231 63,164 (46,717) Prepaid expenses (159,651) (457,410) (16,234) (470,182) (798,191) Accounts payable and accrued liabilities (240,431) 214,240 (473,371) (109,214) 2,375,990 ------------------------------------------------------------------------- Change in non-cash working capital (362,796) (249,927) (485,374) (516,232) 1,531,082 Less portion related to investing activities (56,300) (46,433) (37,000) (50,900) 45,257 ------------------------------------------------------------------------- Net change associated with operating activities (419,096) (296,360) (522,374) (567,132) 1,485,825 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Other Non-Cash Items Cumulative from Six Month Six Month Three Month Three Month inception Period Period Period Period on April 2, Ending Ending Ending Ending 1998 to June 30, June 30, June 30, June 30, June 30, 2007 2006 2007 2006 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, mainly 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 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 Interest Cost Interest Value Fair Value Rate ------------------------------------------------------------------------- June 30, 2007 Short-term investments 24,287,868 321,534 24,609,402 24,574,467 4.14% ------------------------------------------------------------------------- ------------------------------------------------------------------------- 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 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. About Oncolytics Biotech Inc.
Oncolytics is a Calgary-based biotechnology company focused on the
development of oncolytic viruses as potential cancer therapeutics. Oncolytics’
clinical program includes a variety of Phase I and Phase II human trials using
REOLYSIN(R), its proprietary formulation of the human reovirus, alone and in
combination with radiation or chemotherapy. For further information about
Oncolytics, please visit www.oncolyticsbiotech.com.
SOURCE Oncolytics Biotech Inc.
Released July 27, 2007