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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
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 -
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| Signatures | ||||||||
| MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | ||||||||
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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 26, 2005 | By: | /s/ Doug Ball
Doug Ball Chief Financial Officer |
||
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|
210, 1167 Kensington Cr. N.W. Calgary, Alberta Canada T2N 1X7 |
FOR IMMEDIATE RELEASE
Oncolytics Biotech Inc. Announces 2005 Third Quarter Results
CALGARY,
AB, — October 26, 2005 — Oncolytics Biotech Inc. (“Oncolytics”) (TSX:ONC,
NASDAQ:ONCY) today announced its financial results and highlights for
the three and nine month
periods ending September 30, 2005.
Recent Highlights
| • | Commenced patient enrolment in a combination REOLYSIN®/radiation clinical trial in the U.K. | ||
| • | Commenced patient enrolment in a Phase I systemic administration clinical trial in the U.S. | ||
| • | Strengthened the management team with the appointment of Karl Mettinger, M.D., Ph.D. to the position of Chief Medical Officer | ||
| • | Secured a 2nd European patent entitled “Method of Producing Infectious Reovirus” | ||
| • | Secured a first Canadian patent entitled “The use of ribozymes in the detection of adventitious agents” | ||
| • | Subsequent to the quarter end, announced that Oncolytics collaborators would make two presentations at the AACR-NCI-EORTC Conference in November 2005 | ||
| • | Subsequent to the quarter end, announced that patient treatment has been concluded in its Phase I recurrent malignant gliomas trial in Canada | ||
| • | Subsequent to the quarter end, announced the issuance of two additional Canadian patents covering methods and treatment of various cancers and other cellular proliferative disorders. |
“The Company made progress in the quarter in further advancing the expanding clinical program for
REOLYSIN® and strengthening its international intellectual property portfolio,” said Dr. Brad
Thompson, President and CEO of Oncolytics. “We were also pleased to have appointed Dr. Mettinger
to our management team, who will play an important role in the further development and
implementation of a clinical trial program that best supports a registration path for REOLYSIN®.”
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. (“Oncolytics” or the “Company”) as at and for the three and
nine months ended September 30, 2005 and 2004, 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 Oncolytics’ annual report for the year ended December
31, 2004. 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 the
Company’s belief as to the potential of REOLYSIN® as a cancer therapeutic, the Company’s
expectation regarding the adequacy of its existing capital resources, and the Company’s
expectations as to the success of its research and development programs in 2005 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 the
Company’s actual results to differ materially from those in the forward-looking statements. Such
risks and uncertainties include, among others, the availability of funds and resources to pursue
research and development projects, the efficacy of REOLYSIN® as a cancer treatment, the success and
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timely completion of clinical studies and trials, the Company’s ability to successfully
commercialize REOLYSIN®, uncertainties related to the research and development of pharmaceuticals,
uncertainties related to competition, changes in technology, the regulatory process and general
changes to the economic environment. Investors should consult the
Company’s 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. The Company does not
undertake to update these forward-looking statements except as required by law.
OVERVIEW
Oncolytics Biotech Inc. is a Development Stage Company
Since its inception in April of 1998, Oncolytics has been a development stage company and has
focused its research and development efforts on the development of REOLYSIN®, its potential cancer
therapeutic. The Company has not been profitable since its inception and expects to continue to
incur substantial losses from its research and development. The Company does not expect to
generate significant revenues until, if and when, its 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 the Company 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 product for approval, the Company will rely upon its employees, contractors,
consultants and collaborators and other third party relationships, including the 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 the Company.
Highlights
During the third quarter of 2005, the Company’s net loss was $3,509,503 compared to $3,096,042
for the third quarter of 2004. In the third quarter of 2005, the Company experienced increases in
its clinical trial and manufacturing and related process development expenses. In the third
quarter, the Company commenced patient enrollment in its U.S. systemic (intravenous) and U.K.
combination radiation therapy clinical trials. The Company has five active clinical trial studies
of which four are enrolling patients. In anticipation of these additional trials and the need to
supply ongoing enrollment and research efforts, the Company has continued to manufacture REOLYSIN®
entering into multiple production supply contracts. Finally, the Company received two additional
patents (one Canadian and one European) for a total of 13 U.S., two European, and one Canadian
patents.
The Company exited the third quarter of 2005 with cash and cash equivalents (including short-term
investments) of $28,206,326 compared to $33,919,223 as at December 31, 2004.
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THIRD QUARTER RESULTS OF OPERATIONS
(for the three months ended September 30, 2005 and 2004)
(for the three months ended September 30, 2005 and 2004)
Net loss for the three month period ended September 30, 2005 was $3,509,503 compared to $3,096,042
for 2004. The increase in the Company’s net loss in the third quarter of 2005 was due to increases
in the Company’s operating activities as follows:
Research and Development Expenses (“R&D”)
| 2005 | 2004 | |||||||
| $ | $ | |||||||
Manufacturing and related process development expenses |
1,767,524 | 1,160,983 | ||||||
Clinical trial expenses |
372,825 | 184,347 | ||||||
Pre-clinical trial expenses and research collaborations |
64,611 | 181,397 | ||||||
Other R&D expenses |
613,103 | 705,654 | ||||||
Research and development expenses |
2,818,063 | 2,232,381 | ||||||
For the third quarter of 2005, R&D increased to $2,818,063 compared to $2,232,381 for the third
quarter of 2004. The increase in R&D was due to the following:
Manufacturing & Related Process Development Expenses (“M&P”)
| 2005 | 2004 | |||||||
| $ | $ | |||||||
Product manufacturing expenses |
1,655,390 | 640,630 | ||||||
Technology transfer expenses |
¾ | 78,602 | ||||||
Process development expenses |
112,134 | 441,751 | ||||||
Manufacturing and related process development expenses |
1,767,524 | 1,160,983 | ||||||
During the third quarter of 2005, the Company’s product manufacturing expenses increased to
$1,655,390 compared to $640,630 in the third quarter of 2004. The Company uses Cobra
Biomanufacturing Plc (“Cobra”) to manufacture clinical material in order to supply its U.S.
clinical trials and to ensure supply for future clinical trial activity. In the third quarter of
2005, in addition to the existing multiple production run supply contract, the Company entered into
additional production run supply contracts. The Company presently anticipates that this
manufacturing activity will continue into 2006.
In 2004, the Company entered into an agreement with Cobra to commence the manufacturing of
REOLYSIN® and therefore incurred expenses associated with the transfer of the Company’s
manufacturing technology. This transfer was completed in 2004; consequently the Company did not
incur technology transfer expenses in the third quarter of 2005.
During the third quarter of 2005, the Company incurred process development expenses of $112,134
compared to $441,751 in the third quarter of 2004. In the third quarter of 2005, the Company
incurred process development costs associated with improving the process yields. Process
development activity in 2004 was a result of the technology transfer to Cobra.
Clinical Trial Programs
| 2005 | 2004 | |||||||
| $ | $ | |||||||
Direct clinical trial expenses |
372,825 | 184,347 | ||||||
During the third quarter of 2005, the Company’s direct clinical trial expenses increased to
$372,825 compared to $184,347 in the third quarter of 2004. The Company has five ongoing clinical
trials in 2005 compared to two clinical trials in 2004. Therefore, in the third quarter of 2005,
the increase in direct clinical trial expenses reflects patient enrollment in the U.K. systemic
(intravenous) and combination radiation therapy studies as well as other direct clinical trial
costs associated with its two U.S. and Canadian studies.
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Pre-Clinical Trial Expenses and Research Collaborations
| 2005 | 2004 | |||||||
| $ | $ | |||||||
Research collaboration expenses |
64,611 | 122,816 | ||||||
Pre-clinical trial expenses |
— | 58,581 | ||||||
Pre-clinical trial expenses and research collaborations |
64,611 | 181,397 | ||||||
During the third quarter of 2005, the Company’s research collaboration expenses were $64,611
compared to $122,816 for the third quarter of 2004. The Company incurs research collaboration
expenses as it continues to investigate various characteristics and potential applications of the
reovirus, such as the interaction of the immune system and the reovirus, the use of the reovirus as
a co-therapy with existing chemotherapeutics and radiation and the possibility of new uses for the
reovirus in therapy. These expenses will fluctuate from period to period depending on the progress
of these collaborations.
During the third quarter of 2005, the Company did not incur any preclinical trial expenses compared
to $58,581 in the third quarter of 2004. The frequency of the Company’s pre-clinical studies
change from period to period as the Company moves through its clinical trial program. As well,
depending on the results of the Company’s research collaborations, the Company may increase its
pre-clinical trial activity.
Other R&D
| 2005 | 2004 | |||||||
| $ | $ | |||||||
Cancellation of contingent payment obligation |
— | 400,000 | ||||||
Other R&D |
613,103 | 305,654 | ||||||
Other R&D |
613,103 | 705,654 | ||||||
During the third quarter of 2004, the Company reduced its future contingent payment obligation by
entering into an agreement that cancelled a portion of its future contingent obligation to one of
its non-management founding shareholders for consideration of $400,000 (cash and shares). In the
third quarter of 2005, there was no such activity.
Other R&D expenses include compensation expenses for employees (excluding stock based compensation)
consulting fees, travel and other miscellaneous R&D expenses. In the third quarter of 2005, other
R&D expenses were $613,103 compared to $305,654 for the third quarter of 2004. The increase in
other R&D expenses mainly reflects an increase in consulting activity and related costs, costs
associated with the activities of the scientific advisory board and employee compensation levels.
Operating Expenses
| 2005 | 2004 | |||||||
| $ | $ | |||||||
Public company related expenses |
390,473 | 360,763 | ||||||
Office expenses |
195,127 | 204,703 | ||||||
Operating expenses |
585,600 | 565,466 | ||||||
For the third quarter of 2005, the Company’s operating expenses were $585,600 compared to $565,466
for the third quarter of 2004. The Company’s operating activities have remained consistent and
therefore the related operating costs have remained stable.
Foreign Exchange Loss
| 2005 | 2004 | |||||||
| $ | $ | |||||||
Foreign exchange loss |
97,997 | 239,881 | ||||||
The Company acquires investments in foreign currency to pay for anticipated expenses that are to be
incurred in the United States (“U.S.”) and the United Kingdom (“U.K.”). As a result of recent
movements in the U.S. and U.K. exchange rates the
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Company recorded a foreign exchange loss of $97,997 for the third quarter of 2005 compared to
$239,881 for the third quarter of 2004.
YEAR TO DATE RESULTS OF OPERATIONS
(for the nine months ended September 30, 2005 and 2004)
(for the nine months ended September 30, 2005 and 2004)
Net loss for the nine month period ended September 30, 2005 was $8,841,272 compared to $8,964,166
for 2004. The decrease in the Company’s net loss was due to the following:
Research and Development Expenses (“R&D”)
| 2005 | 2004 | |||||||
| $ | $ | |||||||
Manufacturing and related process development expenses |
3,584,430 | 3,361,014 | ||||||
Clinical trial expenses |
1,154,677 | 433,139 | ||||||
Pre-clinical trial expenses and research collaborations |
524,472 | 735,463 | ||||||
Other R&D expenses |
1,235,455 | 1,153,096 | ||||||
Research and development expenses |
6,499,034 | 5,682,712 | ||||||
For the nine month period ending September 30, 2005, R&D increased to $6,499,034 compared to
$5,682,712 for 2004. The increase in R&D was due to the following:
Manufacturing & Related Process Development (“M&P”)
| 2005 | 2004 | |||||||
| $ | $ | |||||||
Product manufacturing expenses |
3,406,588 | 2,215,007 | ||||||
Technology transfer expenses |
¾ | 535,800 | ||||||
Process development expenses |
177,842 | 610,207 | ||||||
Manufacturing and related process development expenses |
3,584,430 | 3,361,014 | ||||||
Production manufacturing expenses were $3,406,588 for the nine month period ending September 30,
2005 compared to $2,215,007 for the nine month period ending September 30, 2004. The Company has
continued to focus on the production of REOLYSIN® in order to supply its expanding clinical trial
program along with other research activity. In the first part of 2005, the Company entered into a
multiple cGMP (“good manufacturing practices”) production run supply contract with Cobra. In the
third quarter of 2005, the Company continued to expand its cGMP production contracts by adding
additional manufacturing runs. As well, the Company contracted Cobra to supply non-cGMP product to
be used in non-human research and collaborative studies.
In 2004, the Company entered into an agreement with Cobra to commence the manufacturing of
REOLYSIN® and therefore incurred expenses associated with the transfer of the Company’s
manufacturing technology. This transfer was completed in 2004; consequently the Company did not
incur technology transfer expenses in 2005.
The Company expects that its product manufacturing expenses will continue to increase throughout
the remainder of 2005. The balance of the Company’s current supply contracts with Cobra will be
completed by the end of 2005 and it anticipates that additional production runs will be scheduled
in order to ensure a supply of REOLYSIN® for its existing and future clinical trial and
collaborative programs.
Process development expenses were $177,842 for the nine month period ending September 30, 2005
compared to $610,207 for the nine month period ending September 30, 2004. In 2005, the Company has
incurred process development costs associated with improving the process yields. Process
development activity in 2004 was a result of the technology transfer to Cobra.
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Clinical Trial Programs
| 2005 | 2004 | |||||||
| $ | $ | |||||||
Direct clinical trial expenses |
1,154,677 | 433,139 | ||||||
Direct clinical trial expenses for the nine month period ending September 30, 2005 were $1,154,677
compared to $433,139 for the nine month period ending September 30, 2004. The Company’s clinical
trial program has continued to expand in 2005 with the addition of three new clinical trial studies
in 2005. As a result, direct clinical trial expenses continue to increase as patients are enrolled
in the Company’s two systemic (intravenous) trials in the U.K. and U.S., the combination radiation
therapy trial in the U.K. and the Canadian malignant glioma clinical trial. As well, the Company
has incurred trial site initiation costs associated with the two U.S. clinical trial studies and
the combination radiation therapy study in the U.K.
The Company expects its direct clinical trial expenses to continue to increase for the remainder of
2005. In the third quarter of 2005 patient enrollment commenced in the U.K. combination radiation
therapy and the U.S. systemic (intravenous) clinical trials. As well, the Company expects that the
U.S. malignant glioma trial will commence patient enrollment before the end of 2005.
Pre-Clinical Trial and Research Collaboration Expenses
| 2005 | 2004 | |||||||
| $ | $ | |||||||
Research collaboration expenses |
427,719 | 172,546 | ||||||
Pre-clinical trial expenses |
96,753 | 562,917 | ||||||
Pre-clinical trial expenses and research collaborations |
524,472 | 735,463 | ||||||
Research collaboration expenses for the nine month period ending September 30, 2005 were $427,719
compared to $172,546 for the nine month period ending September 30, 2004. In 2005, the Company has
expanded its research collaboration program to include studies investigating various
characteristics and potential applications of the reovirus, such as the interaction of the immune
system and the reovirus, the use of the reovirus as a co-therapy with existing chemotherapeutics
and radiation and the possibility of new uses for the reovirus in therapy. These expenses will
fluctuate from period to period depending on the progress of these collaborations.
Pre-clinical trial expenses for the nine month period ending September 30, 2005 were $96,753
compared to $562,917 for the nine month period ending September 30, 2004. The frequency of the
Company’s pre-clinical studies change from period to period as the Company moves through its
clinical trial program. As well, depending on the results of the Company’s research
collaborations, the Company may increase or decrease its pre-clinical trial activity.
Other R&D
| 2005 | 2004 | |||||||
| $ | $ | |||||||
Cancellation of contingent payment obligation |
— | 400,000 | ||||||
Other R&D |
1,235,455 | 753,096 | ||||||
Other R&D |
1,235,455 | 1,153,096 | ||||||
Other R&D expenses include compensation expenses for employees (excluding stock based compensation)
consulting fees, travel and other miscellaneous R&D expenses. For the nine month period ending
September 30, 2005, other R&D expenses were $1,235,455 compared to $753,906 for the nine month
period ending September 30, 2004. The increase in other R&D expenses mainly reflects an increase
in consulting activity and related costs, costs associated with the activities of the scientific
advisory board and employee compensation levels.
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Operating Expenses
| 2005 | 2004 | |||||||
| $ | $ | |||||||
Public company related expenses |
1,484,605 | 1,472,261 | ||||||
Office expenses |
626,822 | 640,622 | ||||||
Operating expenses |
2,111,427 | 2,112,883 | ||||||
For the nine month period ending September 30, 2005, the Company’s operating expenses decreased to
$2,111,427 compared to $2,112,883 for the nine month period ending September 30, 2004. The Company
has not had to increase its administrative costs to support the increase in its research and
development activity.
Stock Based Compensation
| 2005 | 2004 | |||||||
| $ | $ | |||||||
Stock based compensation |
25,952 | 788,974 | ||||||
Stock based compensation recorded during the nine month period ending September 30, 2005 was
$25,952 compared to $788,974 for the nine month period ending September 30, 2004. The decline has
been a result of the reduction in the number of stock options granted in 2005 compared to 2004. As
well, the options that were granted in 2004 vested immediately requiring compensation expense to be
recorded on the grant date. The options that have been issued in 2005 vest over four years
requiring compensation expense to be recorded over the vesting period.
Foreign Exchange Loss
| 2005 | 2004 | |||||||
| $ | $ | |||||||
Foreign exchange loss |
198,481 | 353,964 | ||||||
The Company acquires investments in foreign currency to pay for anticipated expenses that are to be
incurred in the United States (“U.S.”) and the United Kingdom (“U.K.”). As a result of recent
movements in the U.S. and U.K. exchange rates the Company recorded a foreign exchange loss of
$198,481 for the nine month period ending September 30, 2005 compared to $353,964 for the nine
month period ending September 30, 2004.
Commitments
As at September 30, 2005, the Company has committed to payments totaling $1,818,500 for
activities primarily related to product manufacturing and ongoing research collaborations. The
Company anticipates that these committed payments will occur over the next twelve months. All of
these committed payments are considered to be part of the Company’s normal course of business.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
As at September 30, 2005, the Company had cash and cash equivalents (including short-term
investments) and working capital positions (current assets less current liabilities) of $28,206,326
and $27,778,367 respectively compared to $33,919,223 and $33,268,097 respectively for December 31,
2004. The decrease at September 30, 2005 reflects the Company’s cash outflows from research and
development expenses, operational expenses, and intellectual property expenditures offset by cash
inflows from the exercise of warrants and options that raised $3,384,787.
The Company desires to maintain adequate cash and short-term investment reserves to support its
planned activities which include its clinical trial program, production manufacturing, and its
intellectual property expansion and protection. The Company presently anticipates that its average
cash usage for 2005 will be approximately $1,000,000 per month and its existing capital resources
are adequate to fund its current plans for research and development activities through 2007. The
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Company continues to assess its clinical trial program and related manufacturing needs as further
information becomes available. Any change in these activities would have implications on the
Company’s cash requirements.
In the event that the Company chooses to seek additional capital, the Company will look to fund
additional capital requirements primarily through the issue of additional equity. The Company
recognizes the challenges and uncertainty inherent in the capital markets and the potential
difficulties it might face in raising additional capital. Market prices and market demand for
securities in biotechnology companies are volatile and there are no assurances that the Company
would have the ability to raise funds when required.
Capital Expenditures
During the nine month period ending September 30, 2005, the Company spent $706,982 on
intellectual property compared to $766,317 for the nine month period ending September 30, 2004.
The difference relates to variances in filing fees on existing patent applications.
SUMMARY OF QUARTERLY RESULTS
The following unaudited quarterly information is presented in thousands of dollars except for
the notes and per share amounts:
| 2005 | 2004 | 2003 | ||||||||||||||||||||||||||||||
| Sept. | June | March | Dec. | Sept. | June | March | Dec. | |||||||||||||||||||||||||
Revenue(1) |
211 | 168 | 245 | 205 | 194 | 183 | 117 | 127 | ||||||||||||||||||||||||
Net loss(2), (5) |
3,510 | 2,955 | 2,377 | 3,992 | 3,096 | 3,192 | 2,676 | 1,696 | ||||||||||||||||||||||||
Basic and diluted loss per common
share(2), (5) |
$ | 0.11 | $ | 0.09 | $ | 0.07 | $ | 0.14 | $ | 0.11 | $ | 0.11 | $ | 0.10 | $ | 0.06 | ||||||||||||||||
Total assets(3), (6) |
34,538 | 38,081 | 40,519 | 39,489 | 29,471 | 31,221 | 25,435 | 26,051 | ||||||||||||||||||||||||
Total cash(4), (6) |
28,206 | 31,975 | 34,713 | 33,919 | 23,806 | 25,522 | 20,298 | 20,753 | ||||||||||||||||||||||||
Total long-term debt(7) |
150 | 150 | 150 | 150 | 150 | 150 | 150 | 150 | ||||||||||||||||||||||||
Cash dividends
declared(8) |
Nil | Nil | Nil | Nil | Nil | Nil | Nil | Nil | ||||||||||||||||||||||||
| (1) | Revenue is comprised of interest income and income from short term investments. | |
| (2) | Included in net loss and net loss per share between September 2005 and December 2003 is a quarterly gain (loss) on sale of investment of $nil, $nil, $765, $nil, ($12,817), ($646), $47,648, and $264,453, respectively. | |
| (3) | Subsequent to the acquisition of the Company by SYNSORB in April 1999, the Company applied push down accounting. See note 2 to the audited financial statements for 2004. | |
| (4) | Included in total cash are cash and cash equivalents plus short-term investments. | |
| (5) | Included in net loss and loss per common share between June 2005 and September 2003 are quarterly stock based compensation expenses of $4,173, $8,404, $13,375, $1,870,596, $48,878, $734,670 $5,426, and $490,364, respectively. | |
| (6) | The Company issued 1,121,252 common shares for cash proceeds of $3,384,787 in the nine months ending September 30, 2005 (2004 — 4,685,775 common shares for $23,495,961 and 2003 - 5,062,978 common shares for $16,004,981). In addition, 21,459 common shares were issued in September 2004 as partial consideration for the cancellation of a portion of the Company’s contingent payments (see note 9 to the audited financial statements for 2004). | |
| (7) | The long-term debt recorded represents repayable loans from the Alberta Heritage Foundation. | |
| (8) | The Company has not declared or paid any dividends since incorporation. |
OTHER MD&A REQUIREMENTS
The Company has 33,036,748 common shares outstanding as at October 26, 2005. If all of the
Company’s warrants and options were exercised the Company would have 37,536,098 common shares
outstanding.
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Oncolytics Biotech Inc.
BALANCE SHEETS
(unaudited)
(unaudited)
As at,
| September 30, | December 31, | |||||||
| 2005 | 2004 | |||||||
| $ | $ | |||||||
ASSETS |
||||||||
Current |
||||||||
Cash and cash equivalents |
4,042,312 | 12,408,516 | ||||||
Short-term investments |
24,164,014 | 21,510,707 | ||||||
Accounts receivable |
48,450 | 47,767 | ||||||
Prepaid expenses |
953,171 | 250,365 | ||||||
| 29,207,947 | 34,217,355 | |||||||
Capital assets |
5,330,483 | 5,259,286 | ||||||
Investments [note 4] |
¾ | 12,000 | ||||||
| 34,538,430 | 39,488,641 | |||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
Current |
||||||||
Accounts payable and accrued liabilities |
1,429,580 | 949,258 | ||||||
Alberta Heritage Foundation loan |
150,000 | 150,000 | ||||||
Shareholders’ equity |
||||||||
Share capital [note 2] |
||||||||
Authorized: unlimited |
||||||||
Issued: 33,036,748 common shares
(December 31, 2004 - 31,915,496 common shares) |
70,825,980 | 66,643,325 | ||||||
Warrants [note 2] |
2,549,762 | 3,347,630 | ||||||
Contributed surplus [note 3] |
6,375,091 | 6,349,139 | ||||||
Deficit |
(46,791,983 | ) | (37,950,711 | ) | ||||
| 32,958,850 | 38,389,383 | |||||||
| 34,538,430 | 39,488,641 | |||||||
See accompanying notes
Table of Contents
Oncolytics Biotech Inc.
STATEMENTS OF LOSS AND DEFICIT
(unaudited)
(unaudited)
| Cumulative | ||||||||||||||||||||
| from inception | ||||||||||||||||||||
| Nine Month | Nine Month | Three Month | Three Month | on April 2, | ||||||||||||||||
| Period Ending | Period Ending | Period Ending | Period Ending | 1998 to | ||||||||||||||||
| September 30, | September 30, | September 30, | September 30, | September 30, | ||||||||||||||||
| 2005 | 2004 | 2005 | 2004 | 2005 | ||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
Revenue |
||||||||||||||||||||
Rights revenue |
¾ | ¾ | ¾ | ¾ | 310,000 | |||||||||||||||
Interest income |
623,615 | 494,816 | 210,978 | 194,001 | 3,409,355 | |||||||||||||||
| 623,615 | 494,816 | 210,978 | 194,001 | 3,719,355 | ||||||||||||||||
Expenses |
||||||||||||||||||||
Research and development |
6,499,034 | 5,682,712 | 2,818,063 | 2,232,381 | 29,940,562 | |||||||||||||||
Operating |
2,111,427 | 2,112,883 | 585,600 | 565,466 | 12,202,221 | |||||||||||||||
Stock based compensation [note 3] |
25,952 | 788,974 | 4,173 | 48,878 | 3,723,947 | |||||||||||||||
Foreign exchange loss |
198,481 | 353,964 | 97,997 | 239,881 | 558,451 | |||||||||||||||
Amortization |
632,283 | 554,476 | 216,173 | 190,620 | 3,294,129 | |||||||||||||||
| 9,467,177 | 9,493,009 | 3,722,006 | 3,277,226 | 49,719,310 | ||||||||||||||||
Loss before the following: |
8,843,562 | 8,998,193 | 3,511,028 | 3,083,225 | 45,999,955 | |||||||||||||||
(Gain) loss on sale and write down of BCY
LifeSciences Inc. [note 4] |
(765 | ) | (34,185 | ) | ¾ | 12,817 | (299,403 | ) | ||||||||||||
Loss on sale of Transition Therapeutics Inc. |
¾ | ¾ | ¾ | ¾ | 2,156,685 | |||||||||||||||
Loss before taxes |
8,842,797 | 8,964,008 | 3,511,028 | 3,096,042 | 47,857,237 | |||||||||||||||
Capital tax (recovery) |
(1,525 | ) | 158 | (1,525 | ) | ¾ | 49,746 | |||||||||||||
Future income tax recovery |
¾ | ¾ | ¾ | ¾ | (1,115,000 | ) | ||||||||||||||
Net loss for the period |
8,841,272 | 8,964,166 | 3,509,503 | 3,096,042 | 46,791,983 | |||||||||||||||
Deficit, beginning of period |
37,950,711 | 24,994,592 | 43,282,480 | 30,862,716 | ¾ | |||||||||||||||
Deficit, end of period |
46,791,983 | 33,958,758 | 46,791,983 | 33,958,758 | 46,791,983 | |||||||||||||||
Basic and diluted loss per share |
0.27 | 0.31 | 0.11 | 0.11 | ||||||||||||||||
Weighted average number of shares |
32,702,843 | 28,552,643 | 32,983,922 | 29,448,859 | ||||||||||||||||
See accompanying notes
Table of Contents
Oncolytics Biotech Inc.
STATEMENTS OF CASH FLOWS
(unaudited)
(unaudited)
| Cumulative | ||||||||||||||||||||
| from inception | ||||||||||||||||||||
| Nine Month | Nine Month | Three Month | Three Month | on April 2, | ||||||||||||||||
| Period Ending | Period Ending | Period Ending | Period Ending | 1998 to | ||||||||||||||||
| September 30, | September 30, | September 30, | September 30, | September 30, | ||||||||||||||||
| 2005 | 2004 | 2005 | 2004 | 2005 | ||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
OPERATING ACTIVITIES |
||||||||||||||||||||
Net loss for the period |
(8,841,272 | ) | (8,964,166 | ) | (3,509,503 | ) | (3,096,042 | ) | (46,791,983 | ) | ||||||||||
Deduct non-cash items |
||||||||||||||||||||
Amortization |
632,283 | 554,476 | 216,173 | 190,620 | 3,294,129 | |||||||||||||||
Non-cash compensation |
25,952 | 788,974 | 4,173 | 48,878 | 3,723,947 | |||||||||||||||
Foreign exchange loss |
74,555 | 353,964 | 35,905 | 239,881 | 340,537 | |||||||||||||||
Cancellation of contingent payment
obligation settled in common shares |
¾ | 150,000 | ¾ | 150,000 | 150,000 | |||||||||||||||
(Gain) loss on sale and write down of BCY
LifeSciences Inc. |
(765 | ) | (34,185 | ) | ¾ | 12,817 | (299,403 | ) | ||||||||||||
Loss on sale of Transition Therapeutics Inc. |
¾ | ¾ | ¾ | ¾ | 2,156,685 | |||||||||||||||
Future income tax recovery |
¾ | ¾ | ¾ | ¾ | (1,115,000 | ) | ||||||||||||||
Net changes in non-cash working capital |
(188,531 | ) | 198,946 | (297,460 | ) | 633,728 | 319,702 | |||||||||||||
| (8,297,778 | ) | (6,951,991 | ) | (3,550,712 | ) | (1,820,118 | ) | (38,221,386 | ) | |||||||||||
INVESTING ACTIVITIES |
||||||||||||||||||||
Intellectual property |
(706,982 | ) | (766,317 | ) | (242,223 | ) | (340,389 | ) | (4,330,617 | ) | ||||||||||
Other capital assets |
(31,134 | ) | (8,793 | ) | (15,914 | ) | (900 | ) | (557,336 | ) | ||||||||||
Purchase of short-term investments |
(5,470,458 | ) | (6,602,415 | ) | (136,620 | ) | (187,231 | ) | (30,359,245 | ) | ||||||||||
Redemption of short-term investments |
2,747,396 | 3,114,000 | ¾ | 1,114,000 | 5,861,396 | |||||||||||||||
Investment in BCY LifeSciences Inc. |
7,965 | 133,609 | ¾ | ¾ | 464,602 | |||||||||||||||
Investment in Transition Therapeutics Inc. |
¾ | ¾ | ¾ | ¾ | 2,532,343 | |||||||||||||||
| (3,453,213 | ) | (4,129,916 | ) | (394,757 | ) | 585,480 | (26,388,857 | ) | ||||||||||||
FINANCING ACTIVITIES |
||||||||||||||||||||
Alberta Heritage Foundation loan |
¾ | ¾ | ¾ | ¾ | 150,000 | |||||||||||||||
Proceeds from exercise of warrants and stock
options |
3,384,787 | 4,717,914 | 76,500 | 676,893 | 14,967,068 | |||||||||||||||
Proceeds from private placements |
¾ | 6,223,763 | ¾ | ¾ | 22,741,983 | |||||||||||||||
Proceeds from public offerings |
¾ | ¾ | ¾ | ¾ | 30,793,504 | |||||||||||||||
| 3,384,787 | 10,941,677 | 76,500 | 676,893 | 68,652,555 | ||||||||||||||||
(Decrease) increase in cash and cash
equivalents during the period |
(8,366,204 | ) | (140,230 | ) | (3,868,969 | ) | (557,745 | ) | 4,042,312 | |||||||||||
Cash and cash equivalents, beginning of the
period |
12,408,516 | 2,641,127 | 7,911,281 | 3,058,642 | ¾ | |||||||||||||||
Cash and cash equivalents, end of the period |
4,042,312 | 2,500,897 | 4,042,312 | 2,500,897 | 4,042,312 | |||||||||||||||
See accompanying notes
Table of Contents
Oncolytics Biotech Inc.
NOTES TO FINANCIAL STATEMENTS
September 30, 2005 (unaudited)
1. ACCOUNTING POLICIES
These unaudited interim financial statements do not include all of the disclosures included in
the Company’s annual 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, 2004 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.
2. SHARE CAPITAL
Authorized:
Unlimited number of common shares
| Issued: | Shares | Warrants | ||||||||||||||
| Amount | Amount | |||||||||||||||
| Number | $ | Number | $ | |||||||||||||
Balance, December 31, 2003 |
27,208,262 | 44,712,589 | 3,258,155 | 1,598,250 | ||||||||||||
Issued for cash pursuant to April 7, 2004
private placement |
1,077,100 | 5,924,050 | 646,260 | 1,028,631 | ||||||||||||
Issued for cash pursuant to pursuant to
November 23, 2004 public offering |
1,504,000 | 8,693,120 | 864,800 | 1,521,672 | ||||||||||||
Issued pursuant to cancellation of contingent
payment |
21,459 | 150,000 | — | — | ||||||||||||
Exercise of warrants |
1,907,175 | 8,178,546 | (1,907,175 | ) | (798,096 | ) | ||||||||||
Expired warrants |
— | 2,827 | (6,700 | ) | (2,827 | ) | ||||||||||
Exercise of options |
197,500 | 778,951 | — | — | ||||||||||||
Share issue costs |
— | (1,796,758 | ) | — | — | |||||||||||
Balance, December 31, 2004 |
31,915,496 | 66,643,325 | 2,855,340 | 3,347,630 | ||||||||||||
Exercise of options |
350,000 | 297,500 | — | — | ||||||||||||
Exercise of warrants |
771,252 | 3,417,271 | (771,252 | ) | (329,984 | ) | ||||||||||
Expired warrants |
— | 467,884 | (573,028 | ) | (467,884 | ) | ||||||||||
Balance September 30, 2005 |
33,036,748 | 70,825,980 | 1,511,060 | 2,549,762 | ||||||||||||
Table of Contents
Oncolytics Biotech Inc.
NOTES TO FINANCIAL STATEMENTS
September 30, 2005 (unaudited)
The following table summarizes the Company’s outstanding warrants as at September 30, 2005:
| Weighted | ||||||||||||||||||||||||
| Average | ||||||||||||||||||||||||
| Outstanding, | Granted | Expired | Remaining | |||||||||||||||||||||
| Exercise | Beginning of | During the | Exercised During | During the | Outstanding, | Contractual | ||||||||||||||||||
| Price | the Period | Period | the Period | Period | End of Period | Life (years) | ||||||||||||||||||
$4.00 |
768,972 | — | 768,972 | — | — | — | ||||||||||||||||||
$5.00 |
45,558 | — | 2,280 | 43,278 | — | — | ||||||||||||||||||
$6.25 |
529,750 | — | — | 529,750 | — | — | ||||||||||||||||||
$7.00 |
107,710 | — | — | — | 107,710 | 0.02 | ||||||||||||||||||
$7.06 |
112,800 | — | — | — | 112,800 | 0.65 | ||||||||||||||||||
$7.75 |
538,550 | — | — | — | 538,550 | 0.02 | ||||||||||||||||||
$8.00 |
752,000 | — | — | — | 752,000 | 2.15 | ||||||||||||||||||
| 2,855,340 | — | 771,252 | 573,028 | 1,511,060 | 1.17 | |||||||||||||||||||
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:
| September 30,2005 | September 30, 2004 | |||||||||||||||
| Weighted | ||||||||||||||||
| Average | Weighted | |||||||||||||||
| Share | Average | |||||||||||||||
| Stock | Price | Stock | Share Price | |||||||||||||
| Options | $ | Options | $ | |||||||||||||
Outstanding at beginning of period |
3,805,550 | 4.39 | 2,800,800 | 3.81 | ||||||||||||
Granted during period |
200,000 | 3.18 | 284,500 | 7.66 | ||||||||||||
Cancelled during period |
(21,000 | ) | 4.95 | ¾ | ¾ | |||||||||||
Exercised during period |
(350,000 | ) | 0.85 | (197,500 | ) | 2.31 | ||||||||||
Outstanding at end of period |
3,634,550 | 4.48 | 2,887,800 | 4.12 | ||||||||||||
Options exercisable at end of period |
3,387,050 | 4.77 | 2,783,133 | 4.19 | ||||||||||||
Table of Contents
Oncolytics Biotech Inc.
NOTES TO FINANCIAL STATEMENTS
September 30, 2005 (unaudited)
The following table summarizes information about the stock options outstanding and exercisable at
September 30, 2005:
| 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 |
632,550 | 4.1 | 0.85 | 632,550 | 0.85 | |||||||||||||||
$1.65 - $2.37 |
281,000 | 7.2 | 1.85 | 246,000 | 1.87 | |||||||||||||||
$2.70 - $3.33 |
678,750 | 8.1 | 3.10 | 478,750 | 3.06 | |||||||||||||||
$4.00 - $5.00 |
1,190,750 | 9.0 | 4.89 | 1,178,250 | 4.89 | |||||||||||||||
$6.77 - $9.76 |
708,500 | 6.4 | 8.66 | 708,500 | 8.66 | |||||||||||||||
$12.15 - $13.50 |
143,000 | 5.1 | 12.63 | 143,000 | 12.63 | |||||||||||||||
| 3,634,550 | 6.6 | 4.48 | 3,387,050 | 4.77 | ||||||||||||||||
As the Company is following the fair value based method of accounting for stock options, the
Company recorded compensation expense of $4,173 and $25,952 for the three and nine month periods
ending September 30, 2005 respectively, (September 30, 2004 — $48,878 and $788,974 respectively)
with respect to the vesting of options issued in prior periods with an offsetting credit to
contributed surplus.
The estimated fair value of stock options issued during the period was determined using the
Black-Scholes model using the following weighted average assumptions and fair value of options:
| 2005 | 2004 | |||||||
Risk-free interest rate |
3.27 | % | 2.83 | % | ||||
Expected hold period to exercise |
3.5 years | 2 years | ||||||
Volatility in the price of the Company’s shares |
64 | % | 71 | % | ||||
Dividend yield |
Zero | Zero | ||||||
Weighted average fair value of options |
$ | 1.51 | $ | 2.26 | ||||
In 2002, the Company granted 48,000 share incentive rights to a non-employee which, when exercised
by the holder, would require payment in cash or shares, at the sole option of the Company for
amounts in excess of $2.31 based on the weighted average trading price for the ten trading days
prior to the exercise. The Company accounted for this transaction with a non-employee at fair
value determined using the Black-Scholes model. The related compensation expense recorded in 2003
was $81,530, with an offsetting credit to contributed surplus. During the third quarter of 2005,
these share incentive rights were surrendered. In accordance with generally accepted accounting
principles, no credit to expense was recorded as a result of the surrender.
4. INVESTMENTS
During the three and nine month periods ending September 30, 2005, the Company sold nil and
120,000 (September 30, 2004 — nil and 697,945) of its BCY LifeSciences Inc. (“BCY”) shares for net
cash proceeds of $nil and $7,965 (September 30, 2004 — nil and $133,609) recording a gain on sale
(write down) of investment of $nil and $765 (September 30, 2004 — ($12,817) and $34,815),
respectively. As at September 30, 2005, the Company still owned 80,000 common shares of BCY with a
book value of $4,800. These common shares will be released from escrow in February 2006;
consequently the remaining investment in BCY has been reclassified as a short-term investment.
5. COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform with the current period’s
presentation.
Table of Contents
Oncolytics Biotech Inc.
NOTES TO FINANCIAL STATEMENTS
September 30, 2005 (unaudited)
6. SUBSEQUENT EVENT
On October 7, 2005, 538,550 warrants with an exercise price of $7.75 and 107,710 broker
warrants with an exercise price of $7.00 expired unexercised. These warrants were issued as part
of the Company’s April 7, 2004 private placement.
About Oncolytics Biotech Inc.
Oncolytics is a Calgary-based biotechnology company focused on the development of REOLYSIN®,
its proprietary formulation of the human reovirus, as a potential cancer therapeutic. Oncolytics’
researchers have demonstrated that the reovirus is able to selectively kill cancer cells and, in
vitro, kill human cancer cells that are derived from many types of cancer including breast,
bladder, prostate, pancreatic and brain tumours, and have also demonstrated successful cancer
treatment results in a number of animal models. Previous Phase I clinical trial results have
indicated that REOLYSIN® was well tolerated and that the reovirus demonstrated activity in tumours
injected with REOLYSIN®.
FOR FURTHER INFORMATION PLEASE CONTACT:
Oncolytics Biotech Inc.
|
The Equicom Group | |
Doug Ball
|
Joanna Longo | |
210, 1167 Kensington Cr NW
|
20 Toronto Street | |
Calgary, Alberta T2N 1X7
|
Toronto, Ontario M5C 2B8 | |
Tel: 403.670.7377
|
Tel: 416.815.0700 ext.233 | |
Fax: 403.283.0858
|
Fax: 416.815.0080 | |
www.oncolyticsbiotech.com
|
jlongo@equicomgroup.com | |
The Investor Relations Group
|
RenMark Financial Communications | |
John Nesbett or Damian McIntosh
|
John Boidman | |
11 Stone St, 3rd Floor
|
2080 Rene Levesque Blvd. W. | |
New York, NY 10004
|
Montreal, PQ H3H 1R6 | |
Tel: 212.825.3210
|
Tel: 514.939.3989 | |
Fax: 212.825.3229
|
Fax: 514.939.3717 | |
dmcintosh@investorrelationsgroup.com
|
jboidman@renmarkfinancial.com |
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