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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 April 2006
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 | ||||||||
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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 April 26, 2006 | By: | /s/ Douglas A. Ball
Douglas A. 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 2006 First Quarter Results
CALGARY, AB, -— April 26, 2006 - Oncolytics Biotech Inc. (“Oncolytics”) (TSX:ONC,
NASDAQ:ONCY) today announced its financial results and highlights for the three-month period ended
March 31, 2006.
First Quarter Highlights
| • | Announced the commencement of the National Cancer Institute’s solicitation process for two monotherapy trials in the U.S. using REOLYSIN®. | ||
| • | Secured two U.S. patents and one Canadian patent covering a variety of uses and methods of producing the reovirus. | ||
| • | Announced that Oncolytics’ research collaborators were chosen to deliver two poster presentations covering REOLYSIN® clinical trial data at the American Society of Clinical Oncology (ASCO) Annual Meeting to be held June 2-6, 2006 in Atlanta, Georgia. The presentations will cover additional interim results of Oncolytics’ U.K. Phase I systemic administration trial, and final results of its Canadian Phase I recurrent malignant glioma trial. | ||
| • | Oncolytics’ collaborators presented preclinical results at the 3rd Annual Conference of the British Society for Gene Therapy in London, U.K. that indicated that immune interventions which prolong local viral replication and/or enhance levels of tumour specific T cells, should have significant therapeutic impacts both against the local injected tumour and against systemic metastatic disease not accessible to direct viral injection. | ||
| • | On April 4, Oncolytics’ collaborators delivered an oral presentation covering interim results of the Phase I combination REOLYSIN®/radiation clinical trial at the American Association for Cancer Research (AACR) Annual Meeting. The interim results demonstrated that the combination of intratumoural REOLYSIN® and radiation was well tolerated and that both local clinical responses and early indications of systemic effects were observed. | ||
| • | Oncolytics’ collaborators presented a poster at the AACR with results indicating that the reovirus exhibited significant anti-tumour activity against a variety of pediatric sarcoma cell lines in vitro and in vivo, leading the investigators to conclude that a clinical trial of systemic reovirus in pediatric solid tumours is warranted. |
“During the quarter, we continued to make important progress in our clinical and preclinical trial
program,” said Dr. Brad Thompson, President and CEO of Oncolytics. “We have developed a more
thorough understanding of the interaction of REOLYSIN® with the immune system and in
combination with radiation therapy.”
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 months ended March 31, 2006 and 2005,
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, 2005. The financial statements have been prepared in
accordance with Canadian generally accepted accounting principles (“GAAP”).
FORWARD-LOOKING STATEMENTS
The following discussion contains forward-looking statements, within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements, including our
belief as to the potential of REOLYSIN® as a cancer therapeutic and our expectations as
to the success of our research and development and manufacturing programs in 2006 and beyond,
future financial position, business strategy and plans for future operations, and statements that
are not
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historical facts, involve known and unknown risks and uncertainties, which could cause our
actual results to differ materially from those in the forward-looking statements. Such risks and
uncertainties include, among others, the need for and availability of funds and resources to pursue
research and development projects, the efficacy of REOLYSIN® as a
cancer treatment, the success and timely completion of clinical studies and trials, our ability to
successfully commercialize REOLYSIN®, uncertainties related to the research, development
and manufacturing of pharmaceuticals, uncertainties related to competition, changes in technology,
the regulatory process and general changes to the economic environment. Investors should consult
our quarterly and annual filings with the Canadian and U.S. securities commissions for additional
information on risks and uncertainties relating to the forward-looking statements. Forward looking
statements are based on assumptions, projections, estimates and expectations of management at the
time such forward looking statements are made, and such assumptions, projections, estimates and/or
expectations could change or prove to be incorrect or inaccurate. Investors are cautioned against
placing undue reliance on forward-looking statements. We do not undertake to update these
forward-looking statements.
OVERVIEW
Oncolytics Biotech Inc. is a Development Stage Company
Since our inception in April of 1998, Oncolytics Biotech Inc. has been a development stage company
and we have focused our research and development efforts on the development of
REOLYSIN®, our potential cancer therapeutic. We have not been profitable since our
inception and expect to continue to incur substantial losses as we continue research and
development efforts. We do not expect to generate significant revenues until, if and when, our
cancer product becomes commercially viable.
General
Risk Factors
Prospects for biotechnology companies in the research and development stage should generally be
regarded as speculative. It is not possible to predict, based upon studies in animals, or early
studies in humans, whether a new therapeutic will ultimately prove to be safe and effective in
humans, or whether necessary and sufficient data can be developed through the clinical trial
process to support a successful product application and approval.
If a product is approved for sale, product manufacturing at a commercial scale and significant
sales to end users at a commercially reasonable price may not be successful. There can be no
assurance that we will generate adequate funds to continue development, or will ever achieve
significant revenues or profitable operations. Many factors (e.g. competition, patent protection,
appropriate regulatory approvals) can influence the revenue and product profitability potential.
In developing a pharmaceutical product, we rely upon our employees, contractors, consultants and
collaborators and other third party relationships, including 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 Oncolytics.
REOLYSIN® Development Update for the First Quarter of 2006
We continue to develop our lead product REOLYSIN® as a possible cancer therapy. Our
goal each year is to advance REOLYSIN® through the various steps and stages of
development required for potential pharmaceutical products. In order to achieve this goal, we
actively manage the development of our clinical trial program, our pre-clinical and collaborative
programs, our manufacturing process and supply, and our intellectual property.
Clinical Trial Program
In the first quarter of 2006, we continued to actively enroll patients in our three ongoing
clinical trials (two systemic monotherapy delivery studies and one local delivery study using
REOLYSIN® in combination with radiation therapy). We were also able to report on the
conclusion of patient follow up in our Canadian malignant glioma clinical trial reporting that the
intratumoural administration of REOLYSIN® was well tolerated and a maximum tolerated
dose was not reached.
In the first quarter of 2006, the U.S. National Cancer Institute commenced its solicitation
process for two clinical trial studies, a Phase II study of REOLYSIN® administered
systemically in patients with melanoma and a Phase I/II study of REOLYSIN®
co-administered both systemically and intraperitoneally (“IP”) in patients with ovarian cancer.
The purpose
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of the Phase I portion of the trial is to determine the Maximum Tolerated Dose of
REOLYSIN® given by IP administration in combination with a constant systemic dose and
dosing regimen. We are also preparing clinical trial applications for
additional clinical studies that will be filed upon the conclusion of our existing radiation
combination and systemic clinical trials.
In January 2006, we announced that an oral presentation of the preliminary results of our Phase I
combination REOLYSIN®/radiation clinical trial was scheduled to be made at the American
Association for Cancer Research (“AACR”) annual meeting held April 1 – 5, 2006 in Washington D.C.
(see “Recent 2006 Progress).
In March 2006, we announced that two of our clinical trial investigators were scheduled to deliver
poster presentations at the American Society of Clinical Oncology (“ASCO”) annual meeting to be
held June 2 – 6, 2006 in Atlanta, Georgia. A poster entitled “A Phase I study of a wild-type
reovirus (Reolysin) given intravenously to patients with advanced malignancies” is scheduled to be
presented by Dr. Johann S. de Bono of The Royal Marsden Hospital and The Institute of Cancer
Research, U.K. A poster entitled “A phase I trial of intratumoral (i.t.) administration of
reovirus in patients with histologically confirmed recurrent malignant gliomas (MGs)” is scheduled
to be presented by Dr. P.A. Forsyth of the University of Calgary and the Alberta Cancer Board.
Manufacturing and Process Development
We currently have sufficient REOLYSIN® to supply our clinical trial program presently
underway. In the first quarter of 2006, we continued to contract cGMP (“current good
manufacturing practices”) production runs to supply our expanding clinical trial program. We
continued process development activity focused on improving process yields and increasing
production scale.
Pre-Clinical Trial and Collaborative Program
We perform pre-clinical studies and engage in collaborations to help support our clinical trial
programs and expand our intellectual property base. In the first quarter of 2006, we continued
with studies examining the interaction between the immune system and the reovirus, the use of the
reovirus as a co-therapy with existing chemotherapeutics and radiation, the use of new RAS active
viruses as potential therapeutics, and to investigate new uses for the reovirus in therapy.
In the first quarter of 2006, one of our collaborators presented a poster at the British Society of
Gene Therapy 3rd annual conference in London U.K. Our investigators concluded that
immune interventions which prolong local viral replication, and/or enhance levels of tumour
specific T cells, should have significant therapeutic impacts both against the local, injected
tumour and against systemic metastatic disease not accessible to direct viral injection.
Intellectual Property
In the first quarter of 2006, two U.S. and one Canadian patents were issued. At the end of the
first quarter of 2006, we had been issued a total of 15 U.S., five Canadian and two European
patents. 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 2006 that our monthly cash usage would be approximately $1,500,000
for 2006. Our cash usage for the first quarter of 2006 was $2,461,213 from operating activities
and $258,329 for the purchases of intellectual property and capital assets. We expect that our
monthly cash usage will increase to be in line with our estimate during the remainder of 2006 as we
progress into our Phase II clinical trial program and commence patient enrollment. Our net loss
for the first quarter of 2006 was $2,994,536.
Cash Resources
We exited the first quarter of 2006 with cash resources totaling $37,686,625 (see “Liquidity and
Capital Resources”).
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Expected REOLYSIN® Development for the Remainder of 2006
We continue to believe that patient enrollment in our two U.K. clinical trials and our U.S.
systemic trial will conclude in 2006 and we believe that we will be able to report additional
patient data pertaining to these trials. The timing of when and what we are able to report will be
determined in conjunction with the principal investigators and the clinical trial sites.
We plan to file additional clinical trial applications in 2006 that focus on specific cancer
indications and drug/treatment combinations. We believe that the results from our existing
clinical trials will provide us with support to move into Phase II studies.
We expect to produce REOLYSIN® in 2006 to supply our expanding clinical trial program.
We also plan to continue process yield improvement and scale up studies in 2006 in an effort to
continue to improve our manufacturing process.
Recent 2006 Progress
Interim Clinical Trial Results
On April 4, 2006, interim results from our Phase I combination REOLYSIN®/radiation
clinical trial was presented at the AACR annual meeting in Washington D.C. Preliminary
observations in the first seven patients show that the combination of intratumoural
REOLYSIN® and radiation has been well-tolerated. Most toxicities have been mild,
generally grade 1 and 2, and include fever, sweating and skin erythema. One patient in the second
cohort developed grade 3 fatigue and grade 2 flu-like symptoms and could not receive the second
REOLYSIN® injection. There has been no evidence that the REOLYSIN® injections
exacerbated the acute reactions expected from the radiation. There was also no evidence of viral
shedding in the blood, urine, stool or sputum on day eight post-REOLYSIN® injection.
Interim analysis has shown evidence of local responses and an indication of systemic effects.
Amongst the first five patients that completed treatment, three patients had partial tumour
responses. There was one case of progressive disease at one month, one case of stable disease at
one month, two cases of partial responses at one, two and three months and one case of stable
disease at one and two months, which became a pathological partial response at three months. CT
scans from the treated lymph node tumour in the first patient in the trial clearly show the partial
response, which has now lasted for over eight months. A metastatic tumour in this patient that was
outside the radiation field also showed a partial response.
Research Collaboration Results
On April 4, 2006, a poster by Dr. E. Anders Kolb was presented at the AACR annual meeting in
Washington D.C. The investigators tested reovirus against various pediatric sarcoma cell lines in
vitro and in vivo. In all tumor lines evaluated, the reovirus exhibited significant antitumor
activity. The investigators concluded that REOLYSIN® demonstrates excellent anti-tumor
activity in vitro and in vivo in childhood sarcoma cell lines, and that these promising results
suggest that a clinical trial of systemic reovirus in pediatric solid tumors is warranted.
RESULTS OF OPERATIONS
Net loss for the three month period ending March 31, 2006 was $2,994,536 compared to
$2,377,049 for the three month period ending March 31, 2005.
Research and Development Expenses (“R&D”)
| 2006 | 2005 | |||||||
| $ | $ | |||||||
Manufacturing and related process development expenses |
851,791 | 838,608 | ||||||
Clinical trial expenses |
503,974 | 232,348 | ||||||
Pre-clinical trial expenses and collaborations |
189,229 | 236,190 | ||||||
Other R&D expenses |
371,328 | 323,118 | ||||||
Research and development expenses |
1,916,322 | 1,630,264 | ||||||
For the first quarter of 2006, R&D increased to $1,916,322 compared to $1,630,264 for the
first quarter of 2005. The increase in R&D was due to the following:
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Manufacturing & Related Process Development (“M&P”)
| 2006 | 2005 | |||||||
| $ | $ | |||||||
Product manufacturing expenses |
652,073 | 802,029 | ||||||
Process development expenses |
199,718 | 36,579 | ||||||
Manufacturing and related process development expenses |
851,791 | 838,608 | ||||||
Our M&P expenses for the first quarter of 2006 increased to $851,791 compared to $838,608 for the
first quarter of 2005. In the first quarter of 2006, we completed the production runs that were
ongoing at the end of 2005 as we continue our focus on the production of REOLYSIN® in
order to supply our expanding clinical trial program and other research activity. We also entered
into additional production run contracts that are scheduled to occur throughout the remainder of
2006.
Our process development expenses increased to $199,718 for the first quarter of 2006 compared to
$36,579 for the first quarter of 2005. In the first quarter of 2006, we incurred process
development costs associated with scale up studies and the validation of the fill process used by
our manufacturer.
We still expect that our product manufacturing expenses for the remainder of 2006 will remain
consistent compared to 2005. However, we may choose to increase our product manufacturing
commitments in 2006 if we believe we will need additional REOLYSIN® as our clinical
trial program progresses.
For the remainder of 2006, our process development expenses are expected to increase compared to
2005. We will continue to work on improving process yields. We are also expecting to incur
additional process development expenses associated with the ongoing scale up of our manufacturing
process.
Clinical Trial Program
| 2006 | 2005 | |||||||
| $ | $ | |||||||
Direct clinical trial expenses |
456,840 | 232,348 | ||||||
Other clinical trial expenses |
47,134 | — | ||||||
Clinical trial expenses |
503,974 | 232,348 | ||||||
During the first quarter of 2006, our direct clinical trial expenses increased to $456,840 compared
to $232,348 for the first quarter of 2005. In the first quarter of 2006, we incurred direct
patient costs in our three ongoing clinical trials compared to only one enrolling clinical trial
study in the first quarter of 2005. As well in the first quarter of 2006, we incurred costs
associated with the patient follow up segment of our Canadian glioma clinical trial.
We expect our clinical trial expenses will continue to increase for the remainder of 2006 compared
to 2005. The increase in these expenses is expected to arise from enrollment in our existing
clinical trial program and expansion into Phase II clinical trials.
Pre-Clinical Trial Expenses and Research Collaborations
| 2006 | 2005 | |||||||
| $ | $ | |||||||
Research collaboration expenses |
146,436 | 183,423 | ||||||
Pre-clinical trial expenses |
42,793 | 52,767 | ||||||
Pre-clinical trial expenses and research collaborations |
189,229 | 236,190 | ||||||
During the first quarter of 2006, our research collaboration expenses were $146,436 compared to
$183,423 for the first quarter of 2005. Our research collaboration activity continues to focus on
the interaction of the immune system and the reovirus, the use of the reovirus as a co-therapy with
existing chemotherapeutics and radiation, the use of new RAS active viruses as potential
therapeutics, and to investigate new uses of the reovirus in therapy.
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During the first quarter of 2006, our pre-clinical trial expenses were $42,793 compared to $52,767
for the first quarter of 2005. 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 2006, we still expect that pre-clinical trial expenses and research
collaborations will remain consistent compared to 2005. We expect to continue expanding our
collaborations in order to provide support for our expanding clinical trial program. However, in
our efforts to enter into additional combination therapy clinical trials we may be required to
perform additional pre-clinical trial studies which could increase these costs compared to 2005.
Other Research and Development Expenses
| 2006 | 2005 | |||||||
| $ | $ | |||||||
R&D consulting fees |
32,955 | 76,003 | ||||||
R&D salaries and benefits |
321,125 | 208,437 | ||||||
Quebec scientific research and experimental development refund |
(52,344 | ) | — | |||||
Other R&D expenses |
69,592 | 38,678 | ||||||
Other research and development expenses |
371,328 | 323,118 | ||||||
During the first quarter of 2006, our R&D consulting fees decreased to $32,955 compared to $76,003
in 2005. In the first quarter of 2005 we incurred consulting costs associated with our initial two
U.S. clinical trial applications. In the first quarter of 2006, we did not incur this type of
consulting service.
Our R&D salaries and benefits costs were $321,125 in the first quarter of 2006 compared to $208,437
in the first quarter of 2005. The increase is a result of increases in salary levels along with
the hiring of our Chief Medical Officer in the third quarter of 2005.
We expect that our Other R&D expenses for the remainder of 2006 will remain consistent with 2005.
We expect that salaries and benefits will increase as 2006 should include a complete year of salary
and benefit costs for our Chief Medical Officer. This increase should be offset by a decline in
our R&D consulting fees as we do not expect to require the same level of consulting services in
2006 as we incurred in 2005. 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
| 2006 | 2005 | |||||||
| $ | $ | |||||||
Public company related expenses |
834,720 | 518,104 | ||||||
Office expenses |
283,216 | 238,212 | ||||||
Operating expenses |
1,117,936 | 756,316 | ||||||
During the first quarter of 2006, our public company related expenses increased to $834,720
compared to $518,104 for the first quarter of 2005. The increase in public company related
expenses was a result of an increase in our investor relations activity in the first quarter of
2006 compared to 2005.
During the first quarter of 2006, our office expenses increased to $283,216 compared to $238,212
for the first quarter of 2005. Our office expense activity has remained consistent in the first
quarter of 2006 compared to the first quarter of 2005 with the change mainly due to increased
compensation levels.
Commitments
As at March 31, 2006, we are committed to payments totaling $1,800,000 during the remainder of 2006
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.
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SUMMARY OF QUARTERLY RESULTS
The following unaudited quarterly information is presented in thousands of dollars except for
per share amounts:
| 2006 | 2005 | 2004 | ||||||||||||||||||||||||||||||
| March | Dec. | Sept. | June | March | Dec. | Sept. | June | |||||||||||||||||||||||||
Revenue(1) |
292 | 160 | 211 | 168 | 245 | 205 | 194 | 183 | ||||||||||||||||||||||||
Net loss(2),(5) |
2,995 | 3,941 | 3,510 | 2,955 | 2,377 | 3,992 | 3,096 | 3,192 | ||||||||||||||||||||||||
Basic and diluted loss per common
share(2), (5) |
$ | 0.08 | $ | 0.12 | $ | 0.11 | $ | 0.09 | $ | 0.07 | $ | 0.14 | $ | 0.11 | $ | 0.11 | ||||||||||||||||
Total assets(3), (6) |
43,660 | 46,294 | 34,538 | 38,081 | 40,519 | 39,489 | 29,471 | 31,221 | ||||||||||||||||||||||||
Total cash(4), (6) |
37,687 | 40,406 | 28,206 | 31,975 | 34,713 | 33,919 | 23,806 | 25,522 | ||||||||||||||||||||||||
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 March 2006 and April 2004 is a quarterly gain (loss) on sale of investment of $nil, $nil, $nil, $nil, $765, $nil, ($12,817), and ($646) , respectively. | |
| (3) | 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 2005. | |
| (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 March 2006 and April 2004 are quarterly stock based compensation expenses of $36,833, $38,152, $4,173, $8,404, $13,375, $1,870,596, $48,878, and $734,670, respectively. | |
| (6) | We issued nil common shares in 2006 (2005 – 4,321,252 common shares for cash proceeds of $18,789,596; 2004 – 4,685,775 common shares for $23,495,961). In addition, 21,459 common shares were issued in September 2004 as partial consideration for the cancellation of a portion of our contingent payments (see note 10 to the audited financial statements for 2005). | |
| (7) | The long-term debt recorded represents repayable loans from the Alberta Heritage Foundation. | |
| (8) | We have not declared or paid any dividends since incorporation. |
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
As at March 31, 2006, we had cash and cash equivalents (including short-term investments) and
working capital positions of $37,686,624 and $36,315,597, respectively compared to $40,406,167 and
$39,301,444, respectively for December 31, 2005. The decrease in 2006 reflects cash usage from
operating activities and purchases of intellectual property of $2,461,213 and $230,948,
respectively with no cash inflows from financing activities.
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 2006, we are
expecting to expand our clinical trial program to include additional co-therapy clinical trials and
Phase II clinical trials. We are also expecting to continue with our collaborative studies
pursuing support for our future clinical trial program. Therefore, we will also need to ensure
that we have enough REOLYSIN® to supply our potentially expanding clinical trial and
collaborative programs. We continue to estimate our expected average monthly cash usage for 2006
to increase to $1,500,000 per month and we believe our existing capital resources are adequate to
fund our current plans for research and development activities into 2008. Factors that will affect
our anticipated average 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, 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.
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Capital Expenditures
We spent $230,948 on intellectual property in the first quarter of 2006 compared to $297,396 in the
first quarter of 2005. 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 first quarter
of 2006, two U.S. patents were issued bringing our total patents issued to 15 in the U.S., five in
Canada and two 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 $31,244,253 invested under this
policy and we are currently earning interest at an effective rate of 3.56% (2005 – 3.22%).
OTHER MD&A REQUIREMENTS
We have 36,236,748 common shares outstanding at April 25, 2006. If all of our warrants and
options were exercised we would have 42,656,098 common shares outstanding.
Additional information relating to Oncolytics Biotech Inc.
is available on SEDAR at www.sedar.com.
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Oncolytics Biotech Inc.
BALANCE SHEETS
(unaudited)
(unaudited)
As at
| March 31, | December 31, | |||||||
| 2006 | 2005 | |||||||
| $ | $ | |||||||
ASSETS |
||||||||
Current |
||||||||
Cash and cash equivalents |
6,442,372 | 3,511,357 | ||||||
Short-term investments |
31,244,253 | 36,894,810 | ||||||
Accounts receivable |
117,311 | 47,390 | ||||||
Prepaid expenses |
527,596 | 540,368 | ||||||
| 38,331,532 | 40,993,925 | |||||||
Property and equipment |
178,499 | 189,863 | ||||||
Intellectual property |
5,150,046 | 5,110,538 | ||||||
| 43,660,077 | 46,294,326 | |||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
Current |
||||||||
Accounts payable and accrued liabilities |
2,015,935 | 1,692,481 | ||||||
Alberta Heritage Foundation loan |
150,000 | 150,000 | ||||||
Shareholders’ equity |
||||||||
Share capital [note 2] |
||||||||
Authorized: unlimited number of common shares
Issued: 36,236,748 (December 31, 2005 — 36,236,748) |
84,341,212 | 84,341,212 | ||||||
Warrants [note 2] |
4,429,932 | 4,429,932 | ||||||
Contributed surplus |
6,450,076 | 6,413,243 | ||||||
Deficit |
(53,727,078 | ) | (50,732,542 | ) | ||||
| 41,494,142 | 44,451,845 | |||||||
| 43,660,077 | 46,294,326 | |||||||
See accompanying notes
Table of Contents
Oncolytics Biotech Inc.
STATEMENTS OF LOSS AND DEFICIT
(unaudited)
(unaudited)
For the three month periods ended March 31,
| Cumulative | ||||||||||||
| from inception | ||||||||||||
| on April 2, | ||||||||||||
| 1998 to March | ||||||||||||
| 2006 | 2005 | 31, 2006 | ||||||||||
| $ | $ | $ | ||||||||||
Revenue |
||||||||||||
Rights revenue |
¾ | ¾ | 310,000 | |||||||||
Interest income |
292,222 | 244,658 | 3,861,418 | |||||||||
| 292,222 | 244,658 | 4,171,418 | ||||||||||
Expenses |
||||||||||||
Research and development |
1,916,322 | 1,630,264 | 34,751,827 | |||||||||
Operating |
1,117,936 | 756,316 | 14,208,627 | |||||||||
Stock based compensation [note 2] |
36,833 | 13,375 | 3,798,932 | |||||||||
Foreign exchange loss (gain) |
(10,051 | ) | 16,566 | 603,527 | ||||||||
Amortization — intellectual property |
210,440 | 188,782 | 3,373,231 | |||||||||
Amortization — property and equipment |
15,278 | 17,169 | 370,324 | |||||||||
| 3,286,758 | 2,622,472 | 57,106,468 | ||||||||||
Loss before the following: |
2,994,536 | 2,377,814 | 52,935,050 | |||||||||
Gain on sale of BCY LifeSciences Inc. |
¾ | (765 | ) | (299,403 | ) | |||||||
Loss on sale of Transition Therapeutics Inc. |
¾ | ¾ | 2,156,685 | |||||||||
Loss before taxes |
2,994,536 | 2,377,049 | 54,792,332 | |||||||||
Capital tax |
¾ | ¾ | 49,746 | |||||||||
Future income tax recovery |
¾ | ¾ | (1,115,000 | ) | ||||||||
Net loss for the period |
2,994,536 | 2,377,049 | 53,727,078 | |||||||||
Deficit, beginning of period |
50,732,542 | 37,950,711 | ¾ | |||||||||
Deficit, end of period |
53,727,078 | 40,327,760 | 53,727,078 | |||||||||
Basic and diluted loss per share |
(0.08 | ) | (0.07 | ) | ||||||||
Weighted average number of shares (basic and diluted) |
36,236,748 | 32,267,528 | ||||||||||
See accompanying notes
Table of Contents
Oncolytics Biotech Inc.
STATEMENTS OF CASH FLOWS
(unaudited)
(unaudited)
For the three month periods ended March 31,
| Cumulative | ||||||||||||
| from inception | ||||||||||||
| on April 2, 1998 | ||||||||||||
| to March 31, | ||||||||||||
| 2006 | 2005 | 2006 | ||||||||||
| $ | $ | $ | ||||||||||
OPERATING ACTIVITIES |
||||||||||||
Net loss for the period |
(2,994,536 | ) | (2,377,049 | ) | (53,727,078 | ) | ||||||
Deduct non-cash items
|
||||||||||||
Amortization — intellectual property |
210,440 | 188,782 | 3,373,231 | |||||||||
Amortization
— property and equipment |
15,278 | 17,169 | 370,324 | |||||||||
Stock based compensation |
36,833 | 13,375 | 3,798,932 | |||||||||
Other non-cash items [note 3] |
¾ | 29,714 | 1,383,537 | |||||||||
Net changes in non-cash working capital [note 3] |
270,772 | 166,445 | 1,363,771 | |||||||||
| (2,461,213 | ) | (1,961,564 | ) | (43,437,283 | ) | |||||||
INVESTING ACTIVITIES |
||||||||||||
Purchase of intellectual property |
(230,948 | ) | (297,396 | ) | (4,887,618 | ) | ||||||
Purchase of property and equipment |
(27,381 | ) | (5,598 | ) | (614,892 | ) | ||||||
Purchase of short-term investments |
(249,443 | ) | (5,207,879 | ) | (47,333,483 | ) | ||||||
Redemption of short-term investments |
5,900,000 | 443,745 | 15,670,746 | |||||||||
Investment in BCY LifeSciences Inc. |
¾ | 7,965 | 464,602 | |||||||||
Investment in Transition Therapeutics Inc. |
¾ | ¾ | 2,532,343 | |||||||||
| 5,392,228 | (5,059,163 | ) | (34,168,302 | ) | ||||||||
FINANCING ACTIVITIES |
||||||||||||
Alberta Heritage Foundation loan |
¾ | ¾ | 150,000 | |||||||||
Proceeds from exercise of warrants and stock options |
¾ | 3,075,887 | 14,967,068 | |||||||||
Proceeds from private placements |
¾ | ¾ | 38,137,385 | |||||||||
Proceeds from public offerings |
¾ | ¾ | 30,793,504 | |||||||||
| ¾ | 3,075,887 | 84,047,957 | ||||||||||
Increase (decrease) in cash and cash equivalents
during the period |
2,931,015 | (3,944,840 | ) | 6,442,372 | ||||||||
Cash and cash equivalents, beginning of the period |
3,511,357 | 12,408,516 | ¾ | |||||||||
Cash and cash equivalents, end of the period |
6,442,372 | 8,463,676 | 6,442,372 | |||||||||
See accompanying notes
Table of Contents
Oncolytics Biotech Inc.
NOTES TO FINANCIAL STATEMENTS
March 31, 2006 (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, 2005 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 | ||||||||||||||
| Number | Amount $ | Number | Amount $ | |||||||||||||
Balance, December 31, 2004 |
31,915,496 | 66,643,325 | 2,855,340 | 3,347,630 | ||||||||||||
Issued for cash pursuant to December 29, 2005
private placement |
3,200,000 | 14,176,000 | 1,920,000 | 2,908,800 | ||||||||||||
Exercise of warrants |
771,252 | 3,417,271 | (771,252 | ) | (329,984 | ) | ||||||||||
Expired warrants |
— | 1,496,514 | (1,219,288 | ) | (1,496,514 | ) | ||||||||||
Exercise of options |
350,000 | 297,500 | — | — | ||||||||||||
Share issue costs |
— | (1,689,398 | ) | — | — | |||||||||||
Balance, December 31, 2005 and March 31, 2006 |
36,236,748 | 84,341,212 | 2,784,800 | 4,429,932 | ||||||||||||
The following table summarizes the Company’s outstanding warrants as at March 31, 2006:
| Weighted | ||||||||||||||||||
| Average | ||||||||||||||||||
| Outstanding, | Granted | Exercised | Expired | Remaining | ||||||||||||||
| Exercise | Beginning of | During the | During the | During the | Outstanding, | Contractual | ||||||||||||
| Price | the Period | Period | Period | Period | End of Period | Life (years) | ||||||||||||
$5.65
|
320,000 | — | — | — | 320,000 | 2.75 | ||||||||||||
$6.15
|
1,600,000 | — | — | — | 1,600,000 | 2.75 | ||||||||||||
$7.06
|
112,800 | — | — | — | 112,800 | 0.15 | ||||||||||||
$8.00
|
752,000 | — | — | — | 752,000 | 1.65 | ||||||||||||
| 2,784,800 | — | — | — | 2,784,800 | 2.35 | |||||||||||||
Table of Contents
Oncolytics Biotech Inc.
NOTES TO FINANCIAL STATEMENTS
March 31, 2006 (unaudited)
Stock Based Compensation
As the Company is following the fair value based method of accounting for stock options, the
Company recorded compensation expense of $36,833 (March 31, 2005 — $13,375) for the period with
respect to the vesting of options issued in prior periods with an offsetting credit to contributed
surplus.
3. ADDITIONAL CASH FLOW DISCLOSURE
Net Change In Non-Cash Working Capital
For the three month period ending March 31,
| Cumulative | ||||||||||||
| from inception | ||||||||||||
| on April 2, | ||||||||||||
| 1998 to March | ||||||||||||
| 2006 $ | 2005 $ | 31, 2006 $ | ||||||||||
Change in: |
||||||||||||
Accounts receivable |
(69,921 | ) | 7,183 | (117,311 | ) | |||||||
Prepaid expenses |
12,772 | (165,762 | ) | (527,596 | ) | |||||||
Accounts payable and accrued liabilities |
323,454 | 318,027 | 2,015,935 | |||||||||
Change in non-cash working capital |
266,305 | 159,448 | 1,371,028 | |||||||||
Net change associated with investing
activities |
4,467 | 6,997 | (7,317 | ) | ||||||||
Net change associated with operating
activities |
270,772 | 166,445 | 1,363,771 | |||||||||
Other Non-Cash Items
| Cumulative | ||||||||||||
| from inception | ||||||||||||
| on April 2, | ||||||||||||
| 1998 to March | ||||||||||||
| 2006 $ | 2005 $ | 31, 2006 $ | ||||||||||
Foreign exchange loss |
— | 30,479 | 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. |
— | (765 | ) | (299,403 | ) | |||||||
Cancellation of contingent payment
obligation settled in common shares |
— | — | 150,000 | |||||||||
Future income tax recovery |
— | — | (1,115,000 | ) | ||||||||
| — | 29,714 | 1,383,537 | ||||||||||
4. COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform with the current period’s
presentation.
Table of Contents
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 I/II human trials using REOLYSIN®, its proprietary formulation of the human
reovirus, alone and in combination with radiation. For further information about Oncolytics please
visit www.oncolyticsbiotech.com
FOR FURTHER INFORMATION PLEASE CONTACT:
Oncolytics Biotech Inc.
|
The Equicom Group | |
Cathy Ward
|
Nick Hurst | |
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.226 | |
Fax: 403.283.0858
|
Fax: 416.815.0080 | |
cathy.ward@oncolytics.ca
|
nhurst@equicomgroup.com | |
www.oncolyticsbiotech.com |
||
The Investor Relations Group
|
RenMark Financial Communications | |
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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