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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 2008
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 þ | Form 40-F o |
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
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 7, 2008 | By: | /s/ Doug Ball
Doug Ball Chief Financial Officer |
||
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RENEWAL ANNUAL INFORMATION FORM
for the Year Ended December 31, 2007
March 5, 2008
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This Annual Information Form contains forward-looking statements, including statements that may
contain words such as “anticipate,” “estimate,” expect,” “project,” “intend,” “plan,” “believe” and
similar expressions and statements relating to matters that are not historical facts.
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 2008 and beyond, future financial position, business strategy and plans
for future operations, and statements that are not historical facts, involve known and unknown
risks and uncertainties, which could cause our actual results to differ materially from those in
the forward-looking statements. Such risks and uncertainties include, among others, the need for
and availability of funds and resources to pursue research and development projects, the efficacy
of REOLYSIN® as a cancer treatment, the success and timely completion of clinical
studies and trials, our ability to successfully commercialize REOLYSIN®, uncertainties
related to the research, development and manufacturing of pharmaceuticals, uncertainties related to
competition, changes in technology, the regulatory process and general changes to the economic
environment. Investors should consult our quarterly and annual filings with the Canadian and U.S.
securities commissions for additional information on risks and uncertainties relating to the
forward-looking statements. Forward-looking statements are based on assumptions, projections,
estimates and expectations of management at the time such forward-looking statements are made, and
such assumptions, projections, estimates and/or expectations could change or prove to be incorrect
or inaccurate. Investors are cautioned against placing undue reliance on forward-looking
statements. We do not undertake to update these forward-looking statements.
CORPORATE STRUCTURE
Oncolytics Biotech Inc. was incorporated pursuant to the provisions of the ABCA on April 2, 1998 as
779738 Alberta Ltd. On April 8, 1998, we amended our articles and changed our name to Oncolytics
Biotech Inc. On July 29, 1999, we further amended our articles by removing the private company
restrictions and subdividing our issued and outstanding 2,222,222 common shares to create 6,750,000
common shares. Our head office and principal place of business is located at 210, 1167 Kensington
Crescent N.W., Calgary, Alberta T2N 1X7. Our registered office is located at 4500 Bankers Hall
East, 855 – 2nd Street S.W., Calgary, Alberta T2P 4K7.
GENERAL DEVELOPMENT OF THE BUSINESS
General
We focus on the discovery and development of oncolytic viruses for the treatment of cancers that
have not been successfully treated with conventional therapeutics. Recent scientific advances in
oncology, virology, and molecular biology have created opportunities for new approaches to the
treatment of cancer. The product we are presently developing may represent a novel treatment for
Ras-mediated cancers which can be used as an alternative to existing cytotoxic or cytostatic
therapies or as an adjuvant therapy to conventional chemotherapy, radiation therapy, or surgical
resections. It could also potentially be used to treat certain cellular proliferative disorders
for which no current therapy exists.
Our technologies are based primarily on discoveries in the Department of Microbiology and
Infectious Diseases at the University of Calgary in the 1990s. Oncolytics Biotech Inc. was formed
in 1998 to explore the natural oncolytic capability of the reovirus, a virus that preferentially
replicates in cells with an activated Ras pathway.
The lead product being developed by us may represent a novel treatment for certain tumour types and
some cellular proliferative disorders. Our lead product is a virus that is able to replicate
specifically in, and hence kill, certain tumour cells both in tissue culture as well as in a number
of animal models without damaging normal cells. See
“Narrative Description of the Business – Our
Business; Scientific Background.”
We are also assessing the potential opportunities for product candidates resulting from issued
patents received for Ras-targeted adenovirus and herpes virus.
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2007 REOLYSIN® DEVELOPMENT
Clinical Trial Program
We began 2007 with five clinical trials of which three were actively enrolling patients and two had
been recently approved to commence. During the year, we received approval to commence another
three clinical trials, commenced patient enrollment in four trials and completed enrollment in one
trial. We exited 2007 with a clinical trial program of eight active clinical trials of which seven
are being conducted by us and one is being sponsored by the U.S. National Cancer Institute (“NCI”).
As well in 2007, we announced positive clinical trial results from two clinical trials.
2007 Clinical Trial Results
U.K. Phase Ia/Ib Combination REOLYSIN® and Radiation Clinical Trial
The primary objective of this Phase Ia/Ib trial was to determine the maximum tolerated dose
(“MTD”), dose limiting toxicity (“DLT”), and safety profile of REOLYSIN® when
administered intratumourally to patients receiving radiation treatment. A secondary objective was
to examine any evidence of anti-tumour activity. Eligible patients include those who have been
diagnosed with late stage advanced or metastatic solid tumours that are refractory (“have not
responded”) to standard therapy or for which no curative standard therapy exists. In the third
quarter of 2007, we announced positive interim results from this clinical trial for patients with
advanced or metastatic cancers and completed enrollment in the fourth quarter. At the time we
announced our interim results, 22 patients had been treated with 15 having completed the study.
Five patients had withdrawn from the study, and two patients were still on study.
A total of 11 patients in the Ia portion of the trial received two intratumoural treatments of
REOLYSIN® at dosages of 1x108, 1x109, or 1x1010
TCID50 with a constant localized radiation dose of 20 Gy given in five fractions. Of
these 11 patients, three patients (one with oesophageal, one with squamous skin carcinoma and one
with squamous cell scalp cancer) experienced significant partial responses.
One month following treatment, the oesophageal patient experienced a 28.5% reduction in the target
tumour, with stable disease noted in four, non-treated tumours. At two and three months, the target
tumour had shrunk 64%, with stable disease continuing in the four non-treated tumours, including a
15% volume reduction in non-treated mediastinal disease that was maintained for more than six
months. The squamous skin cancer patient experienced a 50% reduction in the target tumour, as well
as stable disease in two, non-treated tumours at one, two and three months post treatment. The
patient with squamous cell scalp cancer experienced stable disease in the target tumour for two
months which then became a partial response at three months. This patient also experienced stable
disease in one non-treated tumour measured at three months post-treatment.
Patients in the Ib portion of the trial received either two, four or six intratumoural doses of
REOLYSIN® at 1x1010 TCID50 with a constant localized radiation
dose of 36 Gy given in 12 fractions. Of the six patients who had completed the study, at the time,
three patients (one with colorectal, one with melanoma and one with lung cancer) experienced tumour
regression in the target tumour, as well as stable disease in non-treated tumours.
The patient with colorectal cancer experienced a partial response with a more than 50% regression
in the target tumour as well as stable disease in four, non-treated tumours measured at one month
following treatment. The patient with melanoma cancer experienced minor regression in the target
tumour as well as stable disease in two, non-treated tumours at one and two months following
treatment. The patient with lung cancer experienced minor regression in the target tumour, as well
as stable disease in three, non-treated tumours at two months following treatment.
The treatment has been well tolerated, with mostly Grade 1 or 2 toxicities noted including fatigue,
lymphopenia, fever, and neutropenia. Grade 3 toxicities including cellulitis, dysphasia and
diarrhoea were related to disease progression and not to the combination treatment. Viral
replication was unaffected by cellular irradiation.
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U.S. Phase I Systemic Clinical Trial
The primary objective of our U.S. Phase I clinical trial examining the systemic administration of
REOLYSIN® was to determine the MTD, DLT, and safety profile of REOLYSIN® 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. In 2007, we announced positive results from this trial
in patients with advanced cancers. The results indicated that REOLYSIN® 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
3x1010 TCID50 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” – a measure used by regulatory agencies in determining efficacy) 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®. 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®. Of the patients eligible for retreatment, three patients received a range of
two to seven one-hour infusions of REOLYSIN®. Toxicities possibly related to
REOLYSIN® treatment in this trial were generally mild (grade 1 or 2) and included
chills, fever and fatigue.
Clinical
Trials – Actively Enrolling
Throughout 2007, we continued to enroll patients in our Phase II and Phase Ib combination
REOLYSIN®/radiation clinical trials in the U.K. and in our Phase I/II recurrent
malignant glioma clinical trial in the U.S. As well in 2007, we commenced enrollment in the
following studies:
U.S. Phase II Sarcoma Clinical Trial
We received approval to commence and initiated patient enrollment in our U.S. Phase II trial to
evaluate the intravenous administration of REOLYSIN® 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® in patients with bone and soft tissue sarcomas
metastatic to the lung. REOLYSIN® is being given intravenously to patients at a dose of
3x1010 TCID50 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® Paclitaxel and Carboplatin Clinical Trial
We commenced patient enrolment in our U.K. clinical trial to evaluate the anti-tumour effects of
systemic administration of REOLYSIN® in combination with 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® given intravenously with paclitaxel and carboplatin every three weeks.
Standard dosages of paclitaxel and carboplatin will be delivered with escalating dosages of
REOLYSIN® intravenously. A maximum of three cohorts will be enrolled in the
REOLYSIN® dose escalation portion. The second component of the trial will immediately
follow and will include the enrolment of a further 12 patients at the maximum dosage of
REOLYSIN® in combination with a standard dosage of paclitaxel and carboplatin.
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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® 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® Gemcitabine Clinical Trial
We commenced patient enrolment in our U.K. clinical trial to evaluate the anti-tumour effects of
systemic administration of REOLYSIN® in combination with gemcitabine
(Gemzar®) 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® given intravenously with gemcitabine every three weeks. A standard dosage of
gemcitabine will be delivered with escalating dosages of REOLYSIN® intravenously. A
maximum of three cohorts will be enrolled in the REOLYSIN® dose escalation portion. The
second component of the trial will immediately follow and will include the enrolment of a further
12 patients at the maximum dosage of REOLYSIN® in combination with a standard dosage of
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® 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.K. Combination REOLYSIN® Docetaxel Clinical Trial
We commenced patient enrolment in our U.K. clinical trial to evaluate the anti-tumour effects of
systemic administration of REOLYSIN® in combination with docetaxel
(Taxotere®) in patients with advanced cancers including bladder, prostate, lung and
upper gastro-intestinal. In preclinical studies, the combination of REOLYSIN® and
various taxanes including docetaxel has been shown to be synergistic against a variety of cancer
cell lines.
The trial has two components. The first is an open-label, dose-escalating, non-randomized study of
REOLYSIN® given intravenously with docetaxel every three weeks. A standard dosage of
docetaxel will be delivered with escalating dosages of REOLYSIN® intravenously. A
maximum of three cohorts will be enrolled in the REOLYSIN® dose escalation portion. The
second component of the trial will immediately follow and will include the enrolment of a further
12 patients at the maximum dosage of REOLYSIN® in combination with a standard dosage of
docetaxel.
Eligible patients include those who have been diagnosed with advanced or metastatic solid tumours
such as bladder, prostate, lung or upper gastro-intestinal cancers that are refractory to standard
therapy or for which no curative standard therapy exists. The primary objective of the trial is to
determine the MTD, DLT, recommended dose and dosing schedule and safety profile of
REOLYSIN® when administered in combination with docetaxel. Secondary objectives include
the evaluation of immune response to the drug combination, the body’s response to the drug
combination compared to chemotherapy alone and any evidence of anti-tumour activity.
Clinical
Trial – Approved to Commence
U.K. REOLYSIN® in Combination with Cyclophosphamide
In 2007, we announced receipt of a letter of approval to commence our clinical trial using
intravenous administration of REOLYSIN® in combination with cyclophosphamide, a
chemotherapeutic agent as well as immune modulator, in patients with advanced cancers.
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The trial is an open-label, dose-escalating, non-randomized trial of REOLYSIN® given
intravenously with escalating doses of cyclophosphamide. A standard dose of REOLYSIN®
is administered intravenously over five consecutive days, while an intravenous dose of
cyclophosphamide is administered three days before REOLYSIN® treatment and continues
through the course of the treatment cycle. The total number of patients studied will depend on the
number of dose levels tested, but it is anticipated to be approximately 30 patients.
Eligible patients include those who have been diagnosed with advanced or metastatic solid tumours
including pancreatic, lung and ovarian cancers that are refractory to standard therapy or for which
no curative standard therapy exists. The primary objectives of the trial include determining the
Minimum Effective Immunomodulatory Dose of cyclophosphamide to obtain successful immune modulation.
Secondary objectives include the safety profile of the combination and gathering any evidence of
anti-tumour activity.
U.S. National Cancer Institute Phase II Melanoma Clinical Trial
In 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®. The NCI is sponsoring the trial under our Clinical Trials Agreement that
requires us to provide clinical supplies of REOLYSIN®. The trial is expected to enroll
up to 47 patients with metastatic melanoma.
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. Throughout 2007, 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. During 2007, in
conjunction with our various collaborators, we reported the results of a number of research
collaborations.
We announced that a poster presentation entitled “Reovirus Infection of Human Melanoma Cells
Supports Priming of Anti-Tumour Cytotoxic T Cell Immunity” was presented by Dr. Robin Prestwich of
CR-UK Clinical Centre, Leeds Institute of Molecular Medicine, University of Leeds, U.K at the
National Cancer Research Institute Cancer Conference in Birmingham, U.K. In this study, the
investigators infected melanoma cell lines with reovirus. The reovirus-infected cell lines
stimulated the maturation of dendritic cells, which in turn educated cancer-killing T cells to
attack and kill the melanoma cells.
Dr. Maureen E. Lane et al. of Cornell University, New York, presented a poster entitled “In Vivo
Synergy between Oncolytic Reovirus and Gemcitabine in Ras-Mutated Human HCT116 Xenografts” 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® and
gemcitabine resulted in both in vitro and in vivo synergy. There was no additional 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® and
gemcitabine is a promising therapeutic regimen for study in clinical trials.
An oral presentation entitled “Reovirus as a Potentially Immunogenic as well as Cytotoxic Therapy
for Metastatic Colorectal Cancer” was given by one of our collaborators, Dr. Sheila Fraser of St.
James’s University Hospital in Leeds, U.K. The investigators tested reovirus in vitro against
recently resected colorectal cancer liver metastases. The results showed that a significant
proportion of tumour cell cultures showed susceptibility to death following reovirus infection, and
also demonstrated effective replication of reovirus within these cells. In addition, dendritic
cells that prime the immune system to fight cancer cells were activated by exposure to the
reovirus. The investigators concluded that the data supports the development of reovirus as a
novel therapy for colorectal cancer, with the potential to direct the immune system to target
cancer cells.
Professor Hardev Pandha of The Royal Surrey Hospital, U.K. presented a poster entitled “Synergistic
Antitumour Activity of Oncolytic Reovirus and Cisplatin in Malignant Melanoma” at the 4th
International Conference on Oncolytic Viruses as Cancer Therapeutics in Carefree, Arizona. The
results of the preclinical study showed that the combination of reovirus and cisplatin was
significantly more effective than cisplatin or reovirus alone at killing
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melanoma cancer cells in a mouse model. The investigators concluded that the addition of
chemotherapeutic agents can enhance the efficacy of reovirus therapy.
Finally, Dr. Richard Vile of the Mayo College of Medicine, Rochester, Minnesota delivered an oral
presentation at the 4th International Conference on Oncolytic Viruses as Cancer Therapeutics in
Carefree, Arizona that covered a study of systemic administration of reovirus in combination with
cyclophosphamide, an immune modulator. The work demonstrated that systemic administration of
reovirus in combination with cyclophosphamide enhanced tumour regression in a melanoma animal model
without increasing toxicity. In addition, the investigators were able to demonstrate that the
addition of cyclophosphamide significantly increased the amount of reovirus replicating within the
tumour. The investigators concluded that the addition of cyclophosphamide may lead to improved
efficacy of REOLYSIN® treatment.
Manufacturing and Process Development
In 2007, we completed multiple production runs to build up a supply of REOLYSIN® for our
current clinical trial program. Our process development activity examined the scale up of our
manufacturing process, increasing the batch size from our present cGMP scale of 20-litres to
40-litres and then to 100-litres. Finally, towards the end of 2007, we commenced the technology
transfer of our 40-litre production run to a second toll manufacturer in the U.S.
Intellectual Property
During 2007, eight U.S. and one Canadian patents were issued. At the end of 2007, we had been
issued over 160 patents including 25 U.S. and six Canadian patents as well as issuances in other
jurisdictions. We also have over 180 patent applications filed in the U.S., Canada and other
jurisdictions.
2006
REOLYSIN® DEVELOPMENT
Clinical Trial Program
U.K. Phase I Systemic Administration Clinical Trial
During 2006, we completed patient enrollment in our U.K. phase I systemic delivery clinical trial.
The primary objective of our U.K. Phase I trial was to determine the maximum tolerated dose
(“MTD”), dose limiting toxicity (“DLT”), and
safety profile of
REOLYSIN® 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 were refractory (have not responded) to standard therapy or for which
no curative standard therapy exists.
A total of 33 patients were treated in this clinical trial to a maximum daily dose of
1x1011 TCID50. These 33 patients have received 77 courses of therapy, for a
total of 338 daily treatments. Patients were entered into the study at the following dose levels
(all TCID50): 1x108 for 1 day, 1x108 for 3 days, 1x108,
3x108, 1x109, 3x109, 1x1010 and 3x1010 for
five days, and 1x1011 for three days. An MTD was not reached and the treatment appears
to have been well tolerated by the patients.
Toxicities possibly related to REOLYSIN® treatment in this trial were generally mild
(grade 1 or 2) and included chills, fever, headache, cough, runny nose, sore throat and fatigue.
Transient grade 3 toxicities included lymphopenia, neutropenia and troponin I. These symptoms were
more frequently observed from day two of treatment and usually lasted less than six hours.
Of the thirty two patients assessed, anti-tumour activity was noted in seven patients. Patients
were assessed with CTR scans, and where possible tumour marker assessment, and histopathology of
tumour biopsies. Two patients with colorectal cancer had tumour stabilization (one for three
months, the other classified as stable disease for six months) and had CEA tumour marker reduction
of 27% and 60% respectively. One patient with metastatic prostate cancer had stable disease for
four months, had a 50% decrease in PSA, and had extensive product-induced necrosis with associated
intratumoural viral replication in metastatic lesions in the lymph nodes. One patient with
metastatic bladder cancer had stable disease for four months and had a minor tumour response in a
metastatic lesion in a lymph
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node (reduction from 2.5 to 1.9 cm). A patient with pancreatic cancer and a patient with lung
cancer had stable disease for four months. A patient with endometrial cancer had stable disease for
five months.
Phase Ia/Ib Combination REOLYSIN®/Radiation Clinical Trial
In 2006, we completed patient enrollment in our Phase Ia combination REOLYSIN®/radiation
clinical trial. The primary objective of this trial was to determine the MTD, DLT, and safety
profile of REOLYSIN® when administered intratumourally to patients receiving radiation
treatment. 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 were
refractory to standard therapy or for which no curative standard therapy exists.
A total of 11 patients were treated in this Phase Ia trial with two intratumoural treatments of
REOLYSIN® at dosages of 1x108, 1x109, or 1x1010
TCID50 with a constant localized radiation dose of 20 Gy in five fractions. Preliminary
results in the first seven patients showed that the combination of intratumoural
REOLYSIN® and radiation was well-tolerated and an MTD had not been reached. Most
toxicities were mild, generally grade 1 and 2, and included 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 was 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 also showed 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 at the time of the interim analysis, had lasted for over eight months. A metastatic
tumour in this patient that was outside the radiation field also showed a partial response.
Subsequent to completion of the Phase Ia portion of this trial, we commenced patient enrolment in
the Phase Ib portion. The Phase Ib trial will treat patients with a range of two to six
intratumoural doses of REOLYSIN® at 1x1010 TCID50 with a constant
radiation dose of 36 Gy in 12 fractions.
The primary objective of our Phase Ib trial is to determine the MTD, DLT, and safety profile of
REOLYSIN® when administered intratumourally to patients receiving radiation treatment.
A secondary objective is to examine any evidence of anti-tumour activity. Eligible patients
include those who have been diagnosed with advanced or metastatic solid tumours that are refractory
to standard therapy or for which no curative standard therapy exists. An additional group of
patients is planned to be treated at the maximum dose regimen reached in this Ib trial.
U.K. Phase II Combination REOLYSIN®/Radiation Clinical Trial
In 2006, we received a letter of approval from the U.K. Medicines and Healthcare products
Regulatory Agency (“MHRA”) for our Clinical Trial Application (“CTA”) to begin a Phase II clinical
trial to evaluate the anti-tumour effects of intratumoural administration of REOLYSIN®
in combination with low-dose radiation in patients with advanced cancers. In December 2006, we
initiated patient enrollment.
The trial is an open-label, single-arm, multi-centre Phase II study of REOLYSIN®
delivered via intratumoural injection to patients during treatment with low-dose radiotherapy. Up
to 40 evaluable patients, including approximately 20 patients with head and neck and esophageal
cancers, and approximately 20 patients with other advanced cancers, will be treated with two
intratumoural doses of REOLYSIN® at 1x1010 TCID50 with a constant
localized radiation dose of 20 Gy in five consecutive daily fractions. Eligible patients include
those who have been diagnosed with advanced or metastatic cancers including head, neck and
esophageal tumours that are refractory (have not responded) to standard therapy or for which no
curative standard therapy exists.
The primary objective of the trial is to assess the anti-tumour activity of the combination of
REOLYSIN® and low dose radiotherapy in treated and untreated lesions. Secondary
objectives include the evaluation of viral replication, immune response to the virus and to
determine the safety and tolerability of intratumoural administration of REOLYSIN® in
patients with advanced cancers who are receiving radiation treatment.
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U.K. REOLYSIN® in Combination with Paclitaxel and Carboplatin
In 2006, we received a letter of approval from the MHRA to begin our clinical trial using
intravenous administration of REOLYSIN® in combination with paclitaxel and carboplatin
in patients with advanced cancers including melanoma, lung, and ovarian. The combination of
paclitaxel and carboplatin chemotherapy is used in cancer patients with ovarian and lung cancers,
and is also used widely in the treatment of many other types of cancer.
In studies conducted by the U.S. National Cancer Institute (“NCI”), the combination of
REOLYSIN® and paclitaxel was uniformly synergistic against six non-small cell lung
cancer cell lines examined, including cell lines resistant to paclitaxel or REOLYSIN®.
Preclinical studies conducted at Cornell University also found that REOLYSIN® in
combination with platinum drugs enhanced the cytotoxicity of the chemotherapeutic agents.
This trial has two components. The first is an open-label, dose-escalating, non-randomized study of
REOLYSIN® given intravenously with paclitaxel and carboplatin every three weeks.
Standard dosages of paclitaxel and carboplatin will be delivered with escalating dosages of
REOLYSIN® intravenously. A maximum of three cohorts will be enrolled in the
REOLYSIN® dose escalation portion. The second component of the trial will immediately
follow and will include the enrolment of a further 12 patients at the maximum dosage of
REOLYSIN® in combination with standard dosages of paclitaxel and carboplatin.
Eligible patients include those who have been diagnosed with advanced or metastatic solid tumours
such as 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® when administered
in combination with carboplatin and paclitaxel. 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. Phase I Systemic Administration Clinical Trial
In 2006, we completed patient enrolment in our U.S. Phase I clinical trial investigating the
systemic delivery of REOLYSIN® to treat patients with advanced cancers. A total of 18
patients were treated in the Phase I trial with REOLYSIN® at escalating dosages of
1x108, 3x108, 1x109, 3x109, 1x1010 or
3x1010 TCID50. An MTD was not reached and the treatment appears to have been
well tolerated by the patients.
The clinical trial was an open-label, dose-escalation Phase I study in which a single dose of
REOLYSIN® was administered intravenously to patients diagnosed with selected advanced or
metastatic solid tumours that are refractory to standard therapy or for which no curative standard
therapy exists. The primary objective of the study is to determine the maximum tolerated dose, dose
limiting toxicity and safety profile of REOLYSIN®. Secondary objectives include the
evaluation of viral replication, immune response to the virus and any evidence of anti-tumour
activity.
U.S. Phase I/II Recurrent Malignant Glioma Clinical Trial
In 2006, we began patient enrolment in our clinical trial to investigate the use of
REOLYSIN® for patients with recurrent malignant gliomas. This clinical trial is an
open-label dose escalation Phase I/II trial in which a single dose of REOLYSIN® is
administered by infusion to patients with recurrent malignant gliomas that are refractory to
standard therapy. The administration involves the stereotactically-guided placement of a needle
into the tumour, through which REOLYSIN® will be administered or infused into the tumour
mass and surrounding tissue using a pump.
The primary objective of the study is to determine the maximum tolerated dose, dose limiting
toxicity and safety profile of REOLYSIN®. Secondary objectives include the evaluation of
viral replication, immune response to the virus and any evidence of anti-tumour activity.
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U.S. National Cancer Institute
In 2006, the NCI 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 of the Phase I portion of the trial is to determine the
MTD of REOLYSIN® given by IP administration in combination with a constant systemic dose
and dosing regimen.
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. Throughout 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.
During 2006, in conjunction with our various collaborators, we reported the results of a number of
research collaborations. 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.
As well, 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 tumour lines evaluated, the reovirus exhibited significant antitumour 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 tumours is warranted.
In the fourth quarter of 2006, Dr. Shizuko Sei of SAIC-Frederick, Inc., prime contractor to the
U.S. National Cancer Institute at Frederick presented a poster at the 18th EORTC-NCI-AACR symposium
on Molecular Targets and Cancer Therapeutics in Prague, Czech Republic. The research focused on
work conducted by the NCI with reovirus in combination with a number of common chemotherapeutic
agents. In general, the combination of reovirus with cisplatin, gemcitabine, mitomycin or
vinblastine was synergistic against NSCLC cell lines sensitive to anti-cancer drugs. Of particular
interest to the researchers, the combination of reovirus and paclitaxel was uniformly synergistic
in all six cell lines examined, including in those with high-level resistance to paclitaxel or
reovirus. The data suggest that the combination of reovirus and paclitaxel may help in promoting
cell-death signaling, resulting in a more efficient and synergistic anti-cancer effect against
these cell lines than using each agent on its own.
Manufacturing and Process Development
At the beginning of 2006, we completed the production runs that were ongoing at the end of 2005,
providing us with sufficient product to complete our U.K. Phase II combination
REOLYSIN®/radiation clinical trial and our existing Phase I clinical trials. At the
same time, our process development activity helped improve virus yields from our manufacturing
process. These improvements were transferred to our cGMP manufacturer and we began production runs
under this improved process. These production runs are expected to provide sufficient
REOLYSIN® to expand our Phase II clinical trial program. Our process development
activity has now shifted focus to the examination of the potential scale up of our manufacturing
process.
2005 REOLYSIN® DEVELOPMENT
Clinical Trial Program
In the first part of 2005, we reported that we received regulatory clearance to commence three
additional clinical trial studies. The first trial approved in 2005 was our first co-therapy study
that is investigating REOLYSIN® in combination with radiation therapy in the United Kingdom
(“U.K.”). Our second and third trials that received regulatory clearance were two United States
(“U.S.”) clinical trial studies. The first of these trials was a Phase I/II recurrent malignant
glioma clinical trial. The second was a Phase I systemic delivery clinical trial.
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During 2005, we commenced patient enrollment in the U.K. combination radiation therapy and the U.S.
systemic delivery clinical trials while continuing to enroll patients in our ongoing U.K. systemic
delivery and Canadian glioma clinical trials. In the fourth quarter of 2005, we ended patient
treatment in the Canadian glioma study and exited 2005 with three actively enrolling clinical
trials.
In the fourth quarter of 2005, we reported interim results from two of our clinical trials. The
first report was in conjunction with a poster presentation at the AACR-NCI-EORTC conference in
Philadelphia by our principal investigator for our Phase I systemic delivery clinical trial in the
U.K. Our principal investigator presented data on 22 patients and reported that REOLYSIN® is well
tolerated when administered intravenously with minimal toxicity observed and that reovirus
replication in tumours has been identified with evidence of tumor necrosis. The principal
investigator also reported that there have been encouraging hints of activity in prostate and
colorectal cancer. This trial continues to enroll and we expect that patient enrollment will be
completed in 2006. We also reported on the Canadian glioma clinical trial. In this trial a total
of 12 patients were enrolled. A maximum tolerated dose was not reached and REOLYSIN® was well
tolerated.
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 2005, we investigated the interaction of
the reovirus with the immune system and the use of reovirus as a co-therapy with existing
chemotherapies and radiation. In the fourth quarter of 2005, we reported in conjunction with one
of our collaborators at the AACR-NCI-EORTC conference in Philadelphia, that reovirus enhances
radiation cytotoxicity in vitro and in vivo. The results of this collaboration were also used to
support our radiation co-therapy clinical trial application in the U.K.
Manufacturing and Process Development
During 2005, we contracted cGMP (“current good manufacturing practices”)production runs that we
believe produced sufficient REOLYSIN® to supply our existing clinical trials in the U.S. and the
U.K. We also entered into process development activities that examined ways to improve the process
yields.
Financings and Other Distributions
Since inception we have raised net cash proceeds of $96,253,751 through public offerings, private
placements and the exercise of warrants and options.
Recent 2008 Developments
Clinical Trial Program
U.S. Phase II Interim Update
On January 31, 2008, we announced that we met the initial criteria to proceed to full enrolment in
our U.S. Phase II trial to evaluate the intravenous administration of REOLYSIN® in
patients with various sarcomas that have metastasized to the lung. According to the trial
protocol, to proceed to full enrolment of 52 patients, we had to demonstrate that at least one
patient in the first 38 patients treated experienced a complete or partial response, or stable
disease for greater than six months. The third patient treated in the study was demonstrated to
have stable disease by RECIST criteria for more than six months as measured by CT scan. A PET scan
taken at the same time showed that any residual tumour mass was metabolically inert.
A total of 12 patients have received REOLYSIN® treatment to date, with five remaining on
study. The 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® in patients with bone and soft tissue
sarcomas metastatic to the lung. REOLYSIN® is delivered intravenously to patients at a
dose of 3x1010 TCID50 for five consecutive days. Patients may receive
additional five-day cycles of therapy every four weeks for a maximum of eight cycles.
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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. These include patients with
osteosarcoma, Ewing sarcoma family tumours, malignant fibrous histiocytoma, synovial sarcoma,
fibrosarcoma and leiomyosarcoma.
U.S. National Cancer Institute Phase Clinical Trial
On January 3, 2008, the U.S. National Cancer Institute (“NCI”) filed a protocol with the U.S. Food
and Drug Administration for a Phase 1/2 clinical trial for patients with metastatic ovarian,
peritoneal or fallopian tube cancers using concurrent systemic and intraperitoneal administration
of REOLYSIN®. The NCI is sponsoring the trial under our Clinical Trials Agreement that
requires us to provide clinical supplies of REOLYSIN®. The trial, which is being
carried out at The Ohio State University Comprehensive Cancer Center, is expected to enroll up to
70 patients with metastatic ovarian, peritoneal or fallopian tube cancers.
COLLABORATIVE PROGRAM
On January 7, 2008, we reported that a research group led by Dr. Richard Vile of the Mayo Clinic
College of Medicine in Rochester, Minnesota, published the results of their work testing the
antitumor efficacy and safety of various combinations of reovirus and cyclophosphamide in vivo. The
paper is entitled “Cyclophosphamide Facilitates Antitumor Efficacy against Subcutaneous Tumors
following Intravenous Delivery of Reovirus” and appeared online in the January 1, 2008 issue of
Clinical Cancer Research.
The purpose of the research study was to investigate whether it was possible to use
cyclophosphamide, an immune modulator, to enhance the delivery and replication of the reovirus when
delivered intravenously. After testing various doses and dosing regimens of reovirus and
cyclophosphamide in mice, a metronomic dosing regimen was developed that resulted in increased
survival, high levels of reovirus recovered from regressing tumors, levels of neutralizing
antibodies that were protective, and only very mild toxicities. The data support investigation in
human clinical trials of the use of cyclophosphamide prior to systemic reovirus administration to
modulate, but not ablate, the immune system.
On February 4, 2008, we reported that Dr. Kevin Harrington and his research group at The Institute
of Cancer Research, London, U.K. published the results of their work testing combination treatment
schedules of reovirus and radiation in human and murine tumour cells in vitro and in vivo. The
paper, entitled “Enhanced In vitro and In vivo Cytotoxicity of Combined Reovirus and Radiotherapy”
appeared online in the February 1, 2008 issue of Clinical Cancer Research. The effect of different
schedules of reovirus and radiotherapy on viral replication and cytotoxicity was tested in vitro
and the combination was assessed in three tumour models in vivo. The results demonstrated that
combining reovirus and radiotherapy significantly increased cancer cell killing both in vitro and
in vivo, particularly in cell lines with moderate susceptibility to reovirus alone.
Future Developments
We plan to continue to enroll patients in our clinical trials throughout 2008 and expect to
complete enrollment in our chemotherapy co-therapy trials in the U.K. and our sarcoma study in the
U.S. We believe that the results from these trials will allow us to broaden our phase II clinical
trial program. As well, we believe that the NCI will commence enrollment in its Phase II melanoma
clinical trial and commence additional trials with REOLYSIN®.
We expect to complete the technology transfer of our 40-litre manufacturing process to our U.S.
toll manufacturer and produce REOLYSIN® for our clinical trial program throughout 2008.
We believe we will complete our 100-litre scale up studies and will begin to examine a
lyophilization (freeze drying) process for REOLYSIN®.
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Except for historical information, this review contains statements which by their nature are
forward-looking and which involve known and unknown risks, delays, uncertainties and other factors
not under our control. Any of these factors may cause our actual results, performance or
achievement to be materially different from the results, performance or expectations implied by
these forward-looking statements. These factors include, but are not limited to, results of
current or pending clinical trials, actions by regulatory authorities such as the FDA in the United
States, the HPB in Canada, or MHRA in the UK as well as those factors detailed in our regulatory
filings.
NARRATIVE DESCRIPTION OF THE BUSINESS
Our Business
Our potential product for human use, REOLYSIN®, is developed from the reovirus. This
virus has been demonstrated to replicate specifically in tumour cells bearing an activated Ras
pathway. Activating mutations of Ras occur in approximately 30% of all human tumours directly, but
considering its central role in signal transduction, activation of the Ras pathway has been shown
to play a role in approximately two-thirds of all tumours.
The functionality of the product is based upon the finding that tumours bearing an activated Ras
pathway are deficient in their ability to activate the anti-viral response mediated by the host
cellular protein, PKR. Since PKR is responsible for preventing reovirus replication, tumour cells
lacking the activity of PKR are susceptible to reovirus infections. As normal cells do not possess
Ras activations, these cells are able to thwart reovirus infections by the activity of PKR. In a
tumour cell with an activated Ras pathway, reovirus is able to freely replicate and hence kill the
host tumour cell. The result of this replication is progeny viruses that are then free to infect
surrounding cancer cells. This cycle of infection, replication and cell death is believed to be
repeated until there are no longer any tumour cells carrying an activated Ras pathway available.
The following schematic illustrates the molecular basis of how the reovirus kills cancer cells.
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Scientific Background
The Ras protein is a key regulator of cell growth and differentiation. It transmits signals from
the cell’s surface, via growth factor receptors, to downstream elements, which are in turn relayed
to the nucleus. This transmission of signals from the cell surface to the cell’s nucleus is
collectively referred to as “signal transduction.” The transmission of these signals results in
cell growth, division, and in some instances cellular differentiation. In normal cells, cell
growth occurs only in the presence of factors stimulating the cells to grow. Mutations in Ras
itself, or any of the elements along the Ras pathway, often lead to activation of the pathway in
the absence of the appropriate growth stimuli, leading to the uncontrolled growth of these cells
and ultimately to the development of a cancerous state. In fact, approximately 30% of all cancers
are known to be due to mutations in Ras itself. The frequency of these Ras mutations, as well as
their etiology in a given tumour is however, tissue specific. Activating mutations in Ras are
found in many types of human malignancies but are highly represented in pancreatic (90%), sporadic
colorectal (50%), lung carcinomas (40%), and myeloid leukemia (30%). Because Ras is a regulator of
key mitogenic signals, aberrant function of upstream elements such as receptor tyrosine kinases
(RTKs) can also result in Ras activation in the absence of mutations in Ras itself. Indeed,
over-expression of these RTKs such as HER2/neu/ErbB2 or the epidermal growth factor receptor is
common in breast cancer (25-30%), and over-expression of the platelet-derived growth factor
receptor (“PDGFR”) is common in glioblastomas and gliomas, all of which are tumour types in which
Ras mutations are relatively rare. Although activating mutations of Ras itself are thought to
occur in only about 30% of all tumours it is expected that approximately two-thirds of all tumours
have activated Ras signaling pathways as a result of mutations in genes that lie upstream of Ras.
With this in mind, Ras becomes a significant therapeutic target in oncology.
All available scientific evidence developed or reviewed by us to date supports the premise that the
reovirus only actively infects and replicates in cells with an activated Ras pathway. This
naturally occurring virus is believed to cause only mild infections of the respiratory and
gastrointestinal tract and in general, reovirus infections in humans are asymptomatic and usually
sub-clinical. Research has indicated this virus replicates in, and therefore kills, only cancer
cells (i.e. cancer cells with an activated Ras pathway), but does not replicate in normal cells.
It has been demonstrated that reovirus replication is restricted in “normal” cells due to the
activation of the double stranded RNA-activated protein kinase (“PKR”). PKR is a crucial element
in protecting cells from reovirus infection and is capable of blocking viral protein translation.
Activated Ras (or an activated element of the Ras pathway) prevents PKR activation, and thus allows
viral replication to ensue only in this subset of cancer cells. To prove that reovirus could be
used as a potential cancer therapeutic, a number of animal models were developed. Experiments
using this virus to treat mouse tumours, expanded animal models as well as human brain, breast, and
prostate tumours implanted in immuno-compromised mice have yielded promising results. In animals
where tumour regression was noted, a single injection of reovirus is often enough to cause complete
tumour regression. More importantly, it was demonstrated that this treatment is effective in
causing tumour regression in immune competent animals. We believe that the nature of this virus,
combined with its selective replication makes it an attractive candidate as a cancer therapy.
We also believe that this research may have broad utility in the treatment of tumours with an
activated Ras pathway as well as a potential use as an adjuvant therapy following surgical tumour
resection or as an adjuvant therapy to conventional chemotherapeutic or radiation therapies.
The Potential Cancer Product
Cancer is a group of related diseases characterized by the aberrant or uncontrolled growth of cells
and the spread of these cells to other sites in the body. These cancer cells eventually accumulate
and form tumours that can disrupt and impinge on normal tissue and organ function. In many
instances, cells from
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these tumours can break away from the original tumour and travel through the body to form new
tumours through a process referred to as metastasis.
Our cancer product is a potential therapeutic for tumours possessing an activated Ras pathway. In
tumour cells with this type of activation, the virus is cytotoxic but may have no effect on the
surrounding normal tissue. Activating mutations of Ras are believed to account for approximately
30% of all human tumours directly. It is also possible to activate Ras through mutation of
proteins that control its activity rather than through direct mutations of Ras itself. This
suggests that approximately two thirds of tumours may respond to this treatment.
Repayable Grants
Pursuant to the Technology Commercialization Agreement with the Alberta Heritage Foundation, we
received $150,000 to offset the REOLYSIN® development costs. Under the Technology
Commercialization Agreement, we agreed to repay the amount of the grant from our gross sales. We
agreed to repay the Alberta Heritage Foundation in annual installments in an amount equal to the
lesser of: (a) 5% of gross sales; or (b) $15,000 per annum until the entire grant has been paid in
full.
In accordance with the Clinical Trial Agreement with the ACB, we received funding and overhead
support from the ACB to offset the REOLYSIN® clinical trial expenditures. Under the
Clinical Trial Agreement, we agreed to repay the amount of the grant together with a royalty, to a
combined maximum amount of $400,000 plus an overhead repayment of $100,000, upon sales of product.
We agreed to repay the ACB in annual installments from the date of commencement of sales in an
amount equal to the lesser of: (a) 5% of gross sales of REOLYSIN®; or (b) $100,000 per
annum.
Business Strategy
Our business strategy is to develop and market REOLYSIN® in an effective and timely
manner, and access additional technologies at a time and in a manner that we believe is best for
our development. We intend to achieve our business strategy by focusing on these key areas:
| • | Develop REOLYSIN® by continuing to progress the product through our clinical
trial program assessing the safety and efficacy in human
subjects. |
| • | Establish collaborations with experts to assist us with scientific and clinical
developments of this new potential pharmaceutical product. |
| • | Implement strategic alliances with selected pharmaceutical and biotechnology companies and
selected laboratories, at a time and in a manner where such alliances may complement and
expand our research and development efforts on the product and provide sales and marketing
capabilities. |
| • | Utilize our broadening patent base and collaborator network as a mechanism to meet our strategic objectives. |
| • | Develop relationships with companies that could be instrumental in assisting us to access other innovative therapeutics. |
Our business strategy is based on attaining a number of commercial objectives, which, in turn, are
supported by a number of product development goals. Our new product development presently being
conducted is primarily of a research and development nature. In the context of this Annual
Information Form, statements of our “belief” are based primarily upon our results derived to date
from our research and development program with animals, and early stage human trials, and upon
which we believe that we
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have a reasonable scientific basis to expect the particular results to occur. It is not possible
to predict, based upon studies in animals, or early stage human trials, whether a new therapeutic
will ultimately prove to be safe and effective in humans. There are no assurances that the
particular result expected by us will occur. See “Risk Factors.”
At this time we do not intend to become a fully integrated pharmaceutical company with substantial
in-house research and development, marketing and distribution or manufacturing capabilities. We
are pursuing a strategy of establishing relationships with larger companies as strategic partners.
We intend to partner or joint venture with larger pharmaceutical companies that have existing and
relevant marketing capability for our products. It is anticipated that future clinical development
into large international or pivotal trials would generally occur in conjunction with a strategic
partner or partners, who would contribute expertise and financial assistance. In exchange for
certain product rights and commitments to market our products, the strategic partners would be
expected to share in gross proceeds from the sale of our product or products and potentially share
in various market or manufacturing opportunities. The proceeds generated from partnering or joint
venturing projects are expected to be distributed on the basis of relative risk taken and resources
contributed by each party to the partnership or joint venture.
Regulatory Requirements
The development of new pharmaceuticals is strongly influenced by a country’s regulatory
environment. The drug approval process in Canada is regulated by Health Canada. The primary
regulatory body in the United States is the FDA and in the UK is the MHRA. Similar processes are
conducted in other countries by equivalent regulatory bodies. Regulations in each jurisdiction
require the licensing of manufacturing facilities and mandate strict research and product testing
standards. Companies must establish the safety and efficacy of their products, comply with current
Good Manufacturing Practices and submit marketing materials before being allowed to market
pharmaceutical products. While we plan to pursue or support the pursuit of the approval of our
product, success in acquiring regulatory approval for any product is not assured.
In order to market our pharmaceutical product in Canada, the United States, Europe and other
jurisdictions, we must successfully meet the requirements of those jurisdictions. The requirements
of the Appropriate Regulatory Authority will generally include the following stages as part of the
regulatory process:
Pre-Pharmacological Studies - Pre-Pharmacological studies involve extensive testing on laboratory
animals to determine if a potential therapeutic product has utility in an in vivo disease model and
has any adverse toxicology in a disease model.
Investigational New Drug Application - An Investigational New Drug (“IND”) Submission, or the
equivalent, must be submitted to the appropriate regulatory authority prior to conducting
Pharmacological Studies.
Pharmacological
Studies (or Phase I Clinical Trials) - Pharmacological studies are designed to
assess the potential harmful or other side effects that an individual receiving the therapeutic
compound may experience. These studies, usually short in duration, are often conducted with
healthy volunteers or actual patients and use up to the maximum expected therapeutic dose.
Therapeutic
Studies (or Phase II and III Clinical Trials) - Therapeutic studies are designed
primarily to determine the appropriate manner for administering a drug to produce a preventive
action or a significant beneficial effect against a disease. These studies are conducted using
actual patients with the condition that the therapeutic is designed to remedy.
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Prior to initiating these studies, the organization sponsoring the program is required to satisfy a
number of requirements via the submission of documentation to support the approval for a clinical
trial.
New Drug Submission - After all three phases of a clinical trial have been completed, the results
are submitted with the original IND Submission to the appropriate regulatory authority for
marketing approval. Once marketing approval is granted, the product is approved for commercial
sales.
Market and Competition
According to estimates for 2007 from the American Cancer Society, 1.4 million Americans are
expected to be diagnosed with cancer in the year, and 559,650 Americans are forecast to die of
cancer. In the United States cancer accounts for 25% of all deaths, second only to heart disease.
In the United States, the relative lifetime risk of a male developing cancer is 1 in 2, while for
women, this risk is 1 in 3.
The costs of this disease state are also significant. In the United States, the National Institute
of Health estimates that the overall annual costs for cancer treatment are $206.3 billion. Of this
figure, $78.2 billion can be attributed to direct patient costs.
It has been estimated that approximately 30% of all tumours are a result of activating mutations of
Ras itself. Since Ras can be activated by mechanisms other than direct mutations it is believed
that the number of tumours with activated Ras (either through direct activating mutation or
mutation or over-expression of elements upstream of Ras) is approximately two thirds.
We are aware of large pharmaceutical companies developing small molecule programs for the
development of therapeutics to treat Ras mediated tumours. In addition, there are numerous
companies, both big and small, that are working in the field of cancer therapeutics including some
companies developing other oncolytic viruses. See “Risk Factors.”
Product Marketing Strategy
The markets for the cancer product being developed by us may be large and could require substantial
sales and marketing capability. Before or upon successful completion of the development of a
cancer product, we intend to enter into one or more strategic partnerships or other collaborative
arrangements with a pharmaceutical company or other company with marketing and distribution
expertise to address this need. If necessary, we will establish arrangements with various partners
for different geographical areas or specific applications at various times in the development
process. Our management and consultants have relevant experience with the partnering process.
Third Party Advisor, Collaborators and Scientific Advisory Board
We use various third party advisors, scientific collaborators and our scientific advisory board to
assist us with the advancement of REOLYSIN®. We typically report on the activity of
these groups once their work is completed.
Scientific Advisory Board
Our Scientific Advisory Board is comprised of Ramon Alemany, Ph.D., Richard Gorlick, M.D., Alan
Tuchman, M.D., and Frank Tufaro, Ph.D.
Ramon Alemany, Ph.D., is a recognized expert on the development of antitumoural agents based on
the adenovirus. During an eight year period in the United States he held progressively more
senior positions in gene therapy laboratories at the MD Anderson Cancer Center, Baxter
Healthcare Corporation and the University of Alabama at Birmingham. In 2001, he was appointed
Director of
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the Gene and Viral Therapy Group at the Institut Catala d’Oncologia in Barcelona. Dr. Alemany
has collaborated with us in the past in developing modified adenoviruses that are selective for
Ras mediated cancers.
Richard Gorlick, M.D., is the Section Chief of Hematology/Oncology in the department of
pediatrics at the Children’s Hospital at Montefiore in New York. He is actively involved in the
national pediatric cooperative group, the Children’s Oncology Group, for which he serves as the
Chairman of the subcommittee on Bone Tumour Biology. Dr. Gorlick is known for his research work
on molecular pharmacology of antifolate resistance and developing new therapeutic approaches for
osteosarcoma.
Alan Tuchman, M.D., works in private practice and is Clinical Professor of Neurology at New York
Medical College. He is also the Chairman and CEO of NeuroPhysics Corporation, a brain scanning
technology company. From 1997 to 2001 Dr. Tuchman was the Senior Vice President of Equity
Research for Oscar Gruss & Son, where he conducted investment research and helped develop
marketing strategies for healthcare companies. He also held senior neurology positions at New
York Medical College and Lincoln Medical and Mental Health Center.
Frank Tufaro, Ph.D., has extensive experience with biotech firms and was one of the founders of
NeuroVir Inc., a Vancouver-based biotech company, which is now merged with MediGene AG to
develop Herpes Simplex virus-based oncolytic vectors for cancer therapy. Under Dr. Tufaro’s
direction, NeuroVir and then MediGene Inc. were able to initiate and complete the first Phase
I/II U.S. clinical trials of two herpes-based oncolytic viruses for the treatment of malignant
brain tumours, and the treatment of colorectal cancer metastatic to the liver. He currently
serves on scientific advisory boards for several biotech companies.
Intellectual Property Policy
At the end of 2007, we had been issued over 160 patents including 25 U.S. and six Canadian patents
as well as issuances in other jurisdictions. We also have over 180 patent applications filed in
the U.S., Canada and other jurisdictions. All potentially valuable intellectual property is
identified by the inventor, and classified by us in terms of its sensitivity. All sensitive
documentation related to the intellectual property is protected and kept in secure areas. All
employees execute agreements containing confidentiality clauses, which assign any new intellectual
property to us. We believe that we apply our intellectual property protection policy consistently.
Where appropriate, and consistent with management’s objective, patents are pursued as soon as the
concepts have been validated through appropriate laboratory work. To that end, patents will
continue to be sought on components or concepts that we perceive to be essential.
We believe that one of the best intellectual property control policies is a strong human resources
policy to ensure that technical leaders with access to proprietary intellectual property do not
consider leaving us for other employment. We intend that all staff be compensated through
competitive salaries and participation in our stock option program.
Patent and Patent Application Summary
Where a patent is filed in the United States there is an option to file a Patent Cooperation Treaty
(“PCT”) application. The PCT application process is a means for technology patented in one of the
PCT signatory countries to receive protection in other PCT countries. The PCT includes over 100
countries. Within one year of filing a patent in the United States, the applicant files for PCT
coverage in all PCT countries. Approximately 18 months after the PCT filing, the applicant must
pay individual filing fees in designated
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PCT countries and at that time the applicant may wish to restrict coverage to a subset of countries
which have potential for the technology. At the time of filing the PCT application the applicant
designates which of the member countries are to be covered by the application. The PCT application
allows the applicant to defer national filings in the various designated countries for a period of
up to 30 months from the original PCT application filing date. After the PCT application deferral
period, the applicant must file for separate national or regional patents in one or more designated
countries, depending on which specific markets the applicant intends to target. For a list of
certain patents go to our website at www.oncolyticsbiotech.com.
Acquisition of all of the Shares of Oncolytics Biotech Inc. by SYNSORB
In April 1999, Oncolytics Biotech Inc., the Vendors and SYNSORB entered into the Share Purchase
Agreement whereby SYNSORB acquired all of our then outstanding common shares for a share and cash
exchange valued at $2,500,000 paid primarily in common shares of SYNSORB, four milestone payments
payable to the Vendors valued, in the aggregate, at up to $4,000,000 and a royalty commitment.
Pursuant to an assignment dated July 29, 1999, the obligation to make the milestone and certain
royalty payments was assigned from SYNSORB to us. We thereby agreed to indemnify and save harmless
SYNSORB from all actions, suits, demands, claims, costs, losses, expenses, charges and damages
brought against SYNSORB in relation to the payment or non-payment of such obligations; however such
assignment did not affect or release SYNSORB from its liabilities and responsibilities under the
terms of the Share Purchase Agreement. As at the date hereof, we have made three milestone payments
totaling $3,000,000. The final milestone payment is $1.0 million payable within 90 days of the
first receipt, in any country, from the Appropriate Regulatory Authority, for marketing approval to
sell REOLYSIN® to the public or the approval of a new drug application for
REOLYSIN®. In addition to the milestone payments, royalty payments payable to the
Vendors will become due and payable in accordance with the Share Purchase Agreement upon
realization of sales of REOLYSIN®.
In 2004, we reached an agreement that cancelled a portion of our future contingent obligation for
consideration of $400,000 consisting of $250,000 cash and 21,459 common shares valued at $150,000.
As a result, our future contingent obligations were reduced to 11.75% (formerly 14.25%) of royalty
payments or other payments received as a result of entering into partnerships or other arrangements
for the development of the reovirus technology. Alternatively, if we develop the reovirus treatment
to the point where it may be marketed at a commercial level, the payments referred to in the
foregoing sentence will be amended to equal a royalty payment of 2.35% (formerly 2.85%) of net
sales received by us for such products.
Employees
As of December 31, 2007, we had 14 employees. The majority of our activities are conducted under
contract with third party service providers.
Research and Development Expenditures
For the period ended December 31, 2007, we incurred research and development expenditures of
$11,315,088 representing approximately 67.1% of our total expenses for the year. See “Management’s
Discussion and Analysis – Results of Operations – Research
and Development Expenses”.
Dividend Policy
To date, we have not paid any dividends on our outstanding common shares. The future payment of
dividends will be dependent upon our financial requirements to fund future growth, our financial
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condition and other factors which our Board of Directors may consider appropriate in the
circumstances. It is unlikely that dividends will be paid in the foreseeable future.
MARKET FOR SECURITIES
Market for Common Shares
Our outstanding common shares are listed and posted for trading on the Toronto Stock Exchange under
the trading symbol “ONC” and on the Nasdaq Capital Market under the trading symbol “ONCY”. The
following table sets forth the market price ranges and the aggregate volume of trading of the
common shares on the Toronto Stock Exchange and Nasdaq Small Cap Market for the periods indicated:
| Toronto Stock Exchange | Nasdaq Capital Market | |||||||||||||||||||||||||||||||
| High | Low | Close | High | Low | Close | |||||||||||||||||||||||||||
Period |
($) | ($) | ($) | Volume | (US$) | (US$) | (US$) | Volume | ||||||||||||||||||||||||
2007 |
||||||||||||||||||||||||||||||||
January |
3.44 | 2.40 | 3.20 | 996,911 | 2.90 | 2.07 | 2.74 | 1,245,652 | ||||||||||||||||||||||||
February |
3.39 | 2.30 | 2.35 | 1,993,213 | 2.88 | 1.94 | 2.00 | 1,002,318 | ||||||||||||||||||||||||
March |
2.50 | 2.08 | 2.10 | 1,526,534 | 2.12 | 1.80 | 1.82 | 1,938,353 | ||||||||||||||||||||||||
April |
2.72 | 2.02 | 2.34 | 1,659,974 | 2.43 | 1.75 | 2.13 | 1,869,597 | ||||||||||||||||||||||||
May |
2.39 | 2.12 | 2.19 | 880,135 | 2.17 | 1.98 | 2.06 | 1,026,481 | ||||||||||||||||||||||||
June |
2.55 | 2.05 | 2.15 | 755,603 | 2.47 | 1.92 | 2.08 | 1,746,620 | ||||||||||||||||||||||||
July |
2.21 | 1.68 | 1.91 | 1,512,581 | 2.08 | 1.59 | 1.79 | 1,296,480 | ||||||||||||||||||||||||
August |
1.95 | 1.54 | 1.62 | 514,717 | 1.85 | 1.50 | 1.55 | 592,767 | ||||||||||||||||||||||||
September |
1.90 | 1.42 | 1.90 | 1,046,083 | 1.90 | 1.44 | 1.89 | 1,172,901 | ||||||||||||||||||||||||
October |
2.46 | 1.67 | 2.30 | 2,614,255 | 2.53 | 1,75 | 2.44 | 2,470,044 | ||||||||||||||||||||||||
November |
2.65 | 2.10 | 2.28 | 600,779 | 2.77 | 2.08 | 2.29 | 1,038,246 | ||||||||||||||||||||||||
December |
2.38 | 1.67 | 1.70 | 355,628 | 2.38 | 1.67 | 1.72 | 795,031 | ||||||||||||||||||||||||
Description of Common Shares
The holders of our common shares are entitled to one vote per share at meetings of shareholders, to
receive such dividends as declared by us and to receive our remaining property and assets upon
dissolution or wind up. Our common shares are not subject to any future call or assessment and
there are no pre-emptive, conversion or redemption rights attached to such shares. As at December
31, 2007, we have outstanding stock options and common share purchase warrants as set forth in Note
10 and 11 of our audited financial statements.
DIRECTORS AND OFFICERS
Our directors are elected by the shareholders at each Annual General Meeting and typically hold
office until the next Annual General Meeting at which time they may be re-elected or replaced.
Casual vacancies on the board are filled by the remaining directors and the persons filling those
vacancies hold office until the next Annual General Meeting at which time they may be re-elected or
replaced. The officers are appointed by the Board of Directors and hold office indefinitely at the
pleasure of the Board of Directors.
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The following table sets forth the names and municipalities of residence of all our directors and
officers as at the date hereof, as well as the positions and offices held by such persons and their
principal occupations.
| Name and | Director of the | |||||
| Municipality of | Position with the | Corporation | ||||
| Residence | Corporation | Principal Occupation | Since | |||
Bradley G. Thompson
Ph.D(2) Calgary, Alberta |
President, Chief Executive Officer and Executive Chairman of the Board | Executive Chairman
of the Board,
President and Chief
Executive Officer
since April 1999.
|
April 21, 1999 | |||
Douglas A. Ball C.A.
Calgary, Alberta
|
Chief Financial Officer and Director | Chief Financial
Officer since May
2000. Mr. Ball was
Vice President,
Finance and Chief
Financial Officer
of SYNSORB from
June 1997 to May
2000. Prior to
this, he was the
Vice President,
Finance and
Administration and
Chief Financial
Officer of ECL
Group of Companies
Ltd. Mr. Ball held
this position from
December 1995 until
May 1997. Prior to
ECL, he was
Controller and then
Vice President and
Controller of
Canadian Airlines
International Ltd.
from June 1993
until August 1995.
|
April 21, 1999 | |||
William
A. Cochrane, OC, M.D. (2),(3) Calgary, Alberta |
Director | President of W.A.
Cochrane &
Associates, Inc. (a
consulting company)
since 1989 and
Chairman of
Resverlogix Corp.
(a public
biopharmaceutical
company) since
2000, and is a
director of Sernova
Corp.. Dr.
Cochrane is an
Officer of the
Order of Canada and
a 2002 recipient of
the Queens Golden
Jubilee Medal. Dr.
Cochrane also
served as the
Deputy Minister of
Health Services for
the Province of
Alberta from 1973
to 1974 and
President of the
University of
Calgary from 1974
to 1978.
|
October 31, 2002 | |||
Matthew
C. Coffey Ph.D. Calgary, Alberta |
Chief Scientific Officer |
Chief Scientific
Officer of the
Corporation since
December 2004,
Vice-President of
Product Development
from July 1999 to
December 2004 and
Chief Financial
Officer from
September 1999 to
May 2000.
|
N/A | |||
George M. Gill, M.D.
Washington, D.C.
|
Senior Vice President, Clinical and Regulatory Affairs | Dr. Gill has been a
consultant in
clinical research
and regulatory
affairs to the
pharmaceutical and
biotechnology
industries since he
retired from Ligand
Pharmaceuticals in
1999. During his 38
years in the
industry, he also
served in senior
executive positions
with ICI
Pharmaceuticals
(now AstraZeneca),
Bristol-Myers
Squibb, and
Hoffmann-La Roche.
Dr. Gill holds a
B.Sc. in chemistry
from Dickinson
College in
Pennsylvania and an
M.D. from the
School of Medicine
of the University
of Pennsylvania in
Philadelphia.
|
N/A | |||
Robert
B. Schultz, F.C.A. (1) Toronto, Ontario |
Lead Director | Former Chairman and
Director of
Rockwater Capital
Corporation
formerly McCarvill
Corporation (a
financial services
company)..
Chairman and Chief
Executive Officer
of Merrill Lynch
Canada from August
1998 until his
retirement on May
1, 2000. Prior to
this appointment,
Mr. Schultz was
Chief Executive
Officer at Midland
Walwyn since 1990.
Since joining the
investment industry
in 1971, Mr.
Schultz has held a
variety of senior
positions, and has
participated on
various
industry-related
boards and
committees
including Director
and Chairman of the
|
June 30, 2000 |
Table of Contents
-24-
| Name and | Director of the | |||||
| Municipality of | Position with the | Corporation | ||||
| Residence | Corporation | Principal Occupation | Since | |||
| Investment Dealers Association of Canada. | ||||||
Fred
A. Stewart, Q.C.(1)(2), Calgary, Alberta |
Director | President of Fred
Stewart &
Associates Inc. (a
government and
corporate relations
consulting company)
since March 1996.
Prior to that, Mr.
Stewart was an
associate with
Milner Fenerty,
Barristers and
Solicitors from
June 1993 to March
1996. Mr. Stewart
served as Member of
the Legislative
Assembly of the
Province of
Alberta, and as
Minister of
Technology,
Research and
Telecommunications
from 1986 to 1993.
|
August 27, 1999 | |||
J. Mark Lievonen
C.A.(3) Markham, Ontario |
Director | President of Sanofi
Pasteur Limited, a
vaccine
development,
manufacturing and
marketing company,
since October 1998
and holding various
positions with
Sanofi Pasteur
Limited and its
predecessors since
1983. Mr. Lievonen
serves on a number
of industry and
community boards
and councils
including
BIOTECanada, the
Ontario Genomics
Institute, the
Ontario Institute
for Cancer
Research, and York
University.
|
April 5, 2004 | |||
Karl
Mettinger, M.D., Ph.D Berkeley, CA |
Chief Medical Officer |
Dr. Mettinger has
been involved in
clinical and
regulatory affairs
with various
pharmaceutical
companies since
1985. Prior to
joining Oncolytics,
he was Senior Vice
President and Chief
Medical Officer
with SuperGen Inc.
Prior to that, he
was Executive
Director, Clinical
Research at
IVAX/Baker Norton,
the new drug
subsidiary of IVAX
Corporation. He
began his career in
the industry as a
Medical Director
with KABI in
Sweden. Dr.
Mettinger holds an
MD from the
University of Lund
in Sweden and a PhD
(hematology/stroke)
from the Karolinska
Institute/Karolinska
Hospital in
Stockholm, Sweden,
where he was a
physician and an
Associate
Professor. He has
overseen the global
development and
approval of a
number of products
including several
in oncology.
|
N/A | |||
Jim Dinning(1)
Calgary, Alberta |
Director | Chair of Western
Financial Group
since September
2004. Mr. Dinning
was Executive Vice
President of
TransAlta
Corporation (power
generation and
wholesale marketing
company) from 1997
to 2004 and served
as Member of the
Legislative
Assembly of the
Province of Alberta
from 1986 to 1997.
Mr. Dinning the
Chair of Export
Development Canada
and Director of
Russel Metals as
well as other
public and private
companies.
|
March 24, 2004 |
Table of Contents
-25-
| Name and | Director of the | |||||
| Municipality of | Position with the | Corporation | ||||
| Residence | Corporation | Principal Occupation | Since | |||
Ger van Amersfoort,(2)
Oakville, Ont |
Director | President and Chief
Executive Officer
of Novartis Canada,
a pharmaceutical
company with in
excess of $1
billion in annual
sales and a
workforce of 1,500,
until his
retirement in 2001.
Before joining
Novartis, he was
President and Chief
Executive Officer
of the U.K.
SmithKline Beecham
operations from
1997 until managing
the merger with
Novartis in 1999.
From 1990 to 1997,
Mr. van Amersfoort
headed up
SmithKline Beecham
operations in
Canada as President
and Chief Executive
Officer. Prior to
that, he held
managing director
positions with
Beecham and The
Boots Company, and
sales positions
with Bristol Myers
in Holland. He is a
recipient of the
Paul Harris Medal
and the
Commemorative Medal
of the Queen for
outstanding
services to the
community. He has
served on the Board
of the
Pharmaceutical
Manufacturers
Association of
Canada (now Rx and
D) for more than
nine years, serving
as chairman in
1996.
|
June 15, 2006 | |||
Ed Levy, Ph.D, (3)
Lund, BC |
Director | Adjunct professor
at the W. Maurice
Young Centre for
Applied Ethics at
the University of
British Columbia
since retiring from
QLT Inc. in late
2002. From 1988 to
2002, Dr. Levy was
with
Vancouver-based
biotechnology
company QLT Inc.,
most recently as
Senior Vice
President from
1998. In these
roles, he was
primarily
responsible for
negotiating and
managing QLT’s
strategic
alliances, led
strategic planning
and oversaw the
company’s
intellectual
property. Dr. Levy
served on the board
of BIOTECanada from
1999-2002, and he
has served on the
boards of several
technology
companies and
not-for-profits.
Dr. Levy holds a
PhD in the History
and Philosophy of
Science from
Indiana University
and taught
philosophy of
science at UBC from
1967-1988.
|
May 17, 2006 | |||
Mary
Ann Dillahunty, JD, MBA Half Moon Bay, CA |
Vice President, Intellectual Property |
Ms. Dillahunty was
a principal in the
law firm of Fish &
Richardson, a
leading
intellectual
property firm in
the U.S. In 1992,
she joined the law
firm of Burns,
Doane, Swecker &
Mathis (now part of
Buchanan Ingersoll
& Rooney), and
subsequently became
a partner in the
firm. During
1996-1997, Ms.
Dillahunty held the
position of patent
counsel to the
Implant Division of
ALZA Corporation.
Before joining
Burns Doane, she
was a patent agent
and law clerk with
the law firm of
Heller, Ehrman,
White & McAuliffe.
Prior to focusing
her career on
patent law, Ms.
Dillahunty held
numerous positions
in the
biotechnology,
pharmaceutical and
medical device
industries,
including
responsibilities in
regulatory affairs
and research
science. Ms.
Dillahunty holds a
B.S. in
Microbiology from
Michigan State
University, an MBA
from George
Washington
University, and a
JD degree from
Stanford Law
School.
|
N/A | |||
George
M. Gill, M.D. Washington, D.C. |
Senior Vice President, Clinical and Regulatory Affairs | Dr. Gill has been a
consultant in
clinical research
and regulatory
affairs to the
pharmaceutical and
biotechnology
industries since he
retired from Ligand
Pharmaceuticals in
1999. During his 38
years in the
industry, he also
served in senior
executive positions
with ICI
Pharmaceuticals
(now AstraZeneca),
Bristol-Myers
Squibb, and
Hoffmann-La Roche.
Dr. Gill holds a
B.Sc. in chemistry
from Dickinson
College in
Pennsylvania and an
M.D. from the
School of Medicine
of the University
of Pennsylvania in
Philadelphia.
|
N/A |
Table of Contents
-26-
Notes:
| (1) | These persons are members of the Audit Committee. Mr. Stewart is the Chair of the Audit Committee. | |
| (2) | These persons are members of the Compensation Committee. Mr. Stewart is the Chair of the Compensation Committee. | |
| (3) | These persons are members of the Corporate Governance and Nominating Committee. Mr. Lievonen is the Chair of the Corporate Governance and Nominating Committee. |
As at the date hereof, the directors and senior officers as a group beneficially owned, directly or
indirectly, 793,201 of our common shares, representing 1.9% of the issued and outstanding common
shares.
Certain of our directors are associated with other companies, which may give rise to conflicts of
interest. In accordance with the ABCA, directors who have a material interest in any person who is
a party to a material contract or a proposed material contract with us are required, subject to
certain exceptions, to disclose that interest and abstain from voting on any resolution to approve
that contract. In addition, the directors are required to act honestly and in good faith with a
view to the best interests of Oncolytics Biotech Inc.
AUDIT COMMITTEE MATTERS
Mandate of the Audit Committee
1. Policy Statement
It is the policy of Oncolytics Biotech Inc. (the “Corporation”) to establish and maintain an Audit
Committee, composed entirely of independent directors, to assist the Board of Directors (the
“Board”) in carrying out their oversight responsibility for the Corporation’s internal controls,
financial reporting and risk management processes. The Audit Committee will be provided with
resources commensurate with the duties and responsibilities assigned to it by the Board including
administrative support. If determined necessary by the Audit Committee, it will have the
discretion to institute investigations of improprieties, or suspected improprieties within the
scope of its responsibilities, including the standing authority to retain special counsel or
experts.
2. Composition of the Committee
| (a) | The Audit Committee shall consist of a minimum of three (3) directors, at least
half of whom shall be resident Canadians. The Board shall appoint the members of the
Audit Committee and may seek the advice and assistance of the Corporate Governance and
Nominating Committee in identifying qualified candidates. The Board shall appoint one
member of the Audit Committee to be the Chair of the Audit Committee, or delegate such
authority to appoint the Chair of the Audit Committee to the Audit
Committee. |
||
| (b) | The Chair of the Committee shall be responsible for leadership of the
Committee, including preparing or approving the agenda, presiding over the meetings,
and making committee assignments. |
||
| (c) | Each director appointed to the Audit Committee by the Board shall be an outside
director who is unrelated. An outside, unrelated director is a director who meets the
requirements of NASDAQ Rule 4200 and Multilaterial Instrument 52-110. A director
appointed to the audit committee shall also meet the requirements of NASDAQ Rule 4350
(d)(2)(A)(ii) and Exchange Act Rule 10A-3(b)(1). Such director shall be independent of
management and free from any interest, any business or other relationship which could,
or could |
Table of Contents
-27-
reasonably be perceived, to materially interfere with the director’s ability to act
with a view to the best interests of the Corporation, other than interests and
relationships arising from shareholding. In determining whether a director is
independent of management, the Board shall make reference to the abovementioned
rules and any applicable revisions thereto, and any additional relevant then current
legislation, rules, policies and instruments of applicable regulatory
authorities. |
| (d) | Each member of the Audit Committee shall be financially literate. In order to
be financially literate, a director must be, at a minimum, able to read and understand
basic financial statements that present a breadth and level of complexity of accounting
issues that are generally comparable to the breadth and complexity of the issues that
can reasonably be expected to be raised by the Corporation’s financial statements. At
least one member shall have accounting or related financial management expertise,
meaning the ability to analyze and interpret a full set of financial statements,
including the notes attached thereto, in accordance with generally accepted accounting
principles. In determining whether a member of the Audit Committee is financially
literate or has accounting or related financial expertise, reference shall be made to
the then current legislation, rules, policies and instruments of applicable regulatory
authorities, which for further clarification, shall include but not be limited to the
definition of “financial expert” as defined by the U.S. Securities and Exchange
Commission rule. |
||
| (e) | A director appointed by the Board to the Audit Committee shall be a member of
the Audit Committee until replaced by the Board or until his or her
resignation. |
3. Meetings of the Committee
| (a) | The Audit Committee shall convene a minimum of four times each year at such
times and places as may be designated by the Chair of the Audit Committee and whenever
a meeting is requested by the Board, a member of the Audit Committee, the auditors, or
senior management of the Corporation. Scheduled meetings of the Audit Committee shall
correspond with the review of the year-end and quarterly financial statements and
management discussion and analysis. |
||
| (b) | Notice of each meeting of the Audit Committee shall be given to each member of
the Audit Committee and to the auditors, who shall be entitled to attend each meeting
of the Audit Committee and shall attend whenever requested to do so by a member of the
Audit Committee. |
||
| (c) | Notice of a meeting of the Audit Committee shall: |
| (i) | be in writing, including by electronic communication facilities; | ||
| (ii) | state the nature of the business to be transacted at the meeting in reasonable detail; | ||
| (iii) | to the extent practicable, be accompanied by copies of documentation to be considered at the meeting; and | ||
| (iv) | be given at least two business days prior to the time
stipulated for the meeting or such shorter period as the members of the Audit
Committee may permit. |
Table of Contents
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| (d) | A quorum for the transaction of business at a meeting of the Audit Committee
shall consist of a majority of the members of the Audit Committee. However, it shall
be the practice of the Audit Committee to require review, and, if necessary, approval
of certain important matters by all members of the Audit
Committee. |
||
| (e) | A member or members of the Audit Committee may participate in a meeting of the
Audit Committee by means of such telephonic, electronic or other communication
facilities, as permits all persons participating in the meeting to communicate
adequately with each other. A member participating in such a meeting by any such means
is deemed to be present at the meeting. |
||
| (f) | In the absence of the Chair of the Audit Committee, the members of the Audit
Committee shall choose one of the members present to be Chair of the meeting. In
addition, the members of the Audit Committee shall choose one of the persons present to
be the Secretary of the meeting. |
||
| (g) | A member of the Board, senior management of the Corporation and other parties
may attend meetings of the Audit Committee; however the Audit Committee (i) shall, at
each meeting, meet with the external auditors independent of other individuals other
than the Audit Committee and (ii) may meet separately with
management. |
||
| (h) | Minutes shall be kept of all meetings of the Audit Committee and shall be
signed by the Chair and the Secretary of the meeting. |
4. Duties and Responsibilities of the Committee
| (a) | The Audit Committee’s primary duties and responsibilities are to: |
| (i) | identify and monitor the management of the principal risks that
could impact the financial reporting of the Corporation ; |
||
| (ii) | monitor the integrity of the Corporation’s financial reporting
process and system of internal controls regarding financial reporting and
accounting compliance; |
||
| (iii) | monitor the independence and performance of the Corporation’s
external auditors. This will include receipt, review and evaluation, at least
annually, of a formal written statement from the independent auditors
confirming their independence, and qualifications, including their compliance
with the requirements of the relevant oversight boards ; |
||
| (iv) | deal directly with the external auditors to pre-approve
external audit plans, other services (if any) and fees; |
||
| (v) | directly oversee the external audit process and results (in
addition to items described in Section 4(d) below); |
||
| (vi) | provide an avenue of communication among the external auditors,
management and the Board; and |
||
| (vii) | carry out a review designed to ensure that an effective
“whistle blowing” procedure exists to permit stakeholders to express any
concerns regarding accounting, internal controls, auditing matters or financial
matters to an appropriately independent individual. |
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| (viii) | Pre-approve any related party transactions to be entered into by the Company,
and ensure appropriate disclosure thereof. |
||
| (ix) | Ensure financial disclosure incorporates inclusion of any
material correcting adjustments required by the external
auditors. |
||
| (x) | Require and ensure that the external auditors are directly
responsible to the Audit Committee, to whom they report |
| (b) | The Audit Committee shall have the
authority to: |
| (i) | inspect any and all of the books and records of the Corporation
and its affiliates; |
||
| (ii) | discuss with the management of the Corporation and its
affiliates, any affected party and the external auditors, such accounts,
records and other matters as any member of the Audit Committee considers
necessary and appropriate; |
||
| (iii) | engage independent counsel and other advisors as it determines
necessary to carry out its duties; and |
||
| (iv) | to set and pay the compensation for any advisors employed by
the Audit Committee. |
| (c) | The Audit Committee shall, at the earliest opportunity after each meeting,
report to the Board the results of its activities and any reviews undertaken and make
recommendations to the Board as deemed appropriate. |
||
| (d) | The Audit Committee shall: |
| (i) | review the audit plan with the Corporation’s external auditors
and with management; |
||
| (ii) | Review with the independent auditors the matters required to be
discussed relating to the conduct of the audit, including (a) the proposed
scope of their examination, with emphasis on accounting and financial areas
where the Committee, the independent auditors or management believes special
attention should be directed; (b) the results of their audit, including their
audit findings report and resulting letter, if any, of recommendations for
management; (c) their evaluation of the adequacy and effectiveness of the
Company’s internal controls over financial reporting; (d) significant areas of
disagreement, if any, with management; (e) co-operation received from
management in the conduct of the audit; (f) significant accounting, reporting,
regulatory or industry developments affecting the Company; and (g) review any
proposed changes in major accounting policies or principles proposed or
contemplated by the independent auditors or management, the presentation and
impact of material risks and uncertainties and key estimates and judgements of
management that may be material to financial reporting; |
||
| (iii) | review with management and with the external auditors material
financial reporting issues arising during the most recent fiscal period and the
resolution or proposed resolution of such issues; |
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| (iv) | review any problems experienced or concerns expressed by the
external auditors in performing an audit, including any restrictions imposed by
management or material accounting issues on which there was a disagreement with
management; |
||
| (v) | review with senior management the process of identifying,
monitoring and reporting the principal risks affecting financial
reporting; |
||
| (vi) | review audited annual financial statements (including
management discussion and analysis) and related documents in conjunction with
the report of the external auditors and obtain an explanation from management
of all material variances between comparative reporting periods. Without
restricting the generality of the foregoing, the committee will discuss with
management and the independent auditors to the extent required, any issues and
disclosure requirements regarding (a) the use of “pro forma” or “adjusted”
non-GAAP information, as well as financial information and earnings guidance
provided to analysts and rating agencies, (b) any off balance sheet
arrangements, and (c) any going concern qualification. |
||
| (vii) | consider and review with management, the internal control
memorandum or management letter containing the recommendations of the external
auditors and management’s response, if any, including an evaluation of the
adequacy and effectiveness of the internal financial controls of the
Corporation and subsequent follow-up to any identified
weaknesses; |
||
| (viii) | review with financial management and the external auditors the quarterly
unaudited financial statements and management discussion and analysis before
release to the public; |
||
| (ix) | before release, review and if appropriate, recommend for
approval by the Board, all public disclosure documents containing audited or
unaudited financial information, including any prospectuses, annual reports,
annual information forms, management discussion and analysis and press
releases; and |
||
| (x) | oversee, any of the financial affairs of the Corporation or its
affiliates, and, if deemed appropriate, make recommendations to the Board,
external auditors or management. |
| (e) | The Audit Committee shall: |
| (i) | evaluate the independence and performance of the external
auditors and annually recommend to the Board the appointment of the external
auditor or the discharge of the external auditor when circumstances are
warranted and monitor the audit partners’ rotation as required
by law.; |
||
| (ii) | consider the recommendations of management in respect of the
appointment of the external auditors; |
||
| (iii) | pre-approve all non-audit services to be provided to the
Corporation or its subsidiary entities by its external auditors’, or the
external auditors of affiliates of the Corporation subject to the over-riding
principle that the external auditors not being permitted to be retained by the
Corporation to perform specifically listed categories of non-audit services as
set forth by the Securities and Exchange |
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Commission as well as internal audit outsourcing services, financial
information systems work and expert services. Notwithstanding, the
foregoing the pre-approval of non-audit services may be delegated to a
member of the Audit Committee, with any decisions of the member with the
delegated authority reporting to the Audit Committee at the next scheduled
meeting; |
| (iv) | approve the engagement letter for non-audit services to be
provided by the external auditors or affiliates, together with estimated fees,
and considering the potential impact of such services on the independence of
the external auditors; |
||
| (v) | when there is to be a change of external auditors, review all
issues and provide documentation related to the change, including the
information to be included in the Notice of Change of Auditors and
documentation required pursuant to the then current legislation, rules,
policies and instruments of applicable regulatory authorities and the planned
steps for an orderly transition period; and |
||
| (vi) | review all reportable events, including disagreements,
unresolved issues and consultations, as defined by applicable securities
policies, on a routine basis, whether or not there is to be a change of
external auditors. |
| (f) | The Audit Committee shall enquire into and determine the appropriate resolution
of any conflict of interest in respect of audit or financial matters, which are
directed to the Audit Committee by any member of the Board, a shareholder of the
Corporation, the external auditors, or senior management. |
||
| (g) | The Audit Committee shall periodically review with management the need for an
internal audit function. |
||
| (h) | The Audit Committee shall review the Corporation’s accounting and reporting of
costs, liabilities and contingencies. |
||
| (i) | The Audit Committee shall establish and maintain procedures for: |
| (i) | the receipt, retention and treatment of complaints received by
the Corporation regarding accounting controls, or auditing matters;
and |
||
| (ii) | the confidential, anonymous submission by employees of the
Corporation or concerns regarding questionable accounting or auditing
matters. |
| (j) | The Audit Committee shall review and approve the Corporation’s hiring policies
regarding employees and former employees of the present and former
external auditors. |
||
| (k) | The Audit Committee shall review with the Corporation’s legal counsel, on no
less than an annual basis, any legal matter that could have a material impact on the
Corporation’s financial statements, and any enquiries received from regulators, or
government agencies. |
||
| (l) | The Audit Committee shall assess, on an annual basis, the adequacy of this
Mandate and the performance of the Audit Committee. |
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5. Date of Mandate
This Mandate was initially approved by the Board on September 3, 1999. Subsequent to that date,
the Board has amended and restated this Mandate on each of December 13, 2002 April 23, 2003, March
5, 2004 and December 8, 2004. This Mandate is effective from and after December 14, 2006.
Composition of the Audit Committee
The following table sets forth the name of each of the current members of the Audit Committee,
whether such member is independent, whether such member is financially literate and the relevant
education and experience of such member.
| Financially | ||||||
| Name | Independent | Literate | Relevant Education and Experience | |||
Fred
A. Stewart, Q.C. (Chairman) |
Yes | Yes | Mr. Stewart graduated with Bachelor of Commerce (Saskatchewan) and Bachelor of Laws (Toronto) and practised corporate and commercial law for over 20 years, receiving his Queen’s Counsel designation in 1980. Mr. Stewart served as a Member of Cabinet in the Government of Alberta. In addition, Mr. Stewart has acquired significant financial experience and exposure to accounting and financial issues as a founding partner of his law firm, as a Member of the Treasury Board of the Government of Alberta and while serving as a director and audit committee member of both private and public companies. | |||
Robert B. Schultz F.C.A.
|
Yes | Yes | Mr. Schultz is a Fellow of the Chartered Accountants and is formerly Chairman and Director of Rockwater Capital Corporation (a financial services company). Mr. Schultz has served as Chairman and Chief Executive Officer of Merrill Lynch Canada (a public financial services company) and as Chief Executive Officer of Midland Walwyn. Through his various roles as Chairman and Chief Executive Officer, Mr. Schultz supervised those involved in the preparation, analysis, and evaluation of financial statements. Mr. Schultz has also served as a director with several other public companies. | |||
Jim Dinning
|
Yes | Yes | Mr. Dinning is currently Chair of the Board of Western Financial Group. He graduated with a bachelor of commerce honours degree and a master’s degree in public administration from Queen’s University. Mr. Dinning served as a Member of the Legislative Assembly of the Province of Alberta from 1986 to 1997. Mr. Dinning has acquired significant financial experience and exposure to accounting and financial issues while serving as a director and audit committee chair/member for other publicly traded companies and as Provincial Treasurer for the Alberta Provincial Government. |
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RISK FACTORS
All of our potential products, including REOLYSIN®, are in the research and development
stage and will require further development and testing before they can be marketed commercially.
Prospects for companies in the biotechnology industry generally may be regarded as uncertain given
the nature of the industry and, accordingly, investments in biotechnology companies should be
regarded as speculative. We are currently in the research and development stage on one product,
REOLYSIN®, for human application, the riskiest stage for a company in the biotechnology
industry. It is not possible to predict, based upon studies in animals and early stage human
clinical trials whether REOLYSIN® will prove to be safe and effective in humans.
REOLYSIN® will require additional research and development, including extensive
additional clinical testing, before we will be able to obtain the approvals of the relevant
regulatory authorities in applicable countries to market REOLYSIN® commercially. There
can be no assurance that the research and development programs we conducted will result in
REOLYSIN® or any other products becoming commercially viable products, and in the event
that any product or products result from the research and development program, it is unlikely they
will be commercially available for a number of years.
To achieve profitable operations we, alone or with others, must successfully develop, introduce and
market our products. To obtain regulatory approvals for products being developed for human use, and
to achieve commercial success, human clinical trials must demonstrate that the product is safe for
human use and that the product shows efficacy. Unsatisfactory results obtained from a particular
study relating to a program may cause us to abandon our commitment to that program or the product
being tested. No assurances can be provided that any current or future animal or human test, if
undertaken, will yield favourable results. If we are unable to establish that REOLYSIN® is a safe,
effective treatment for cancer, we may be required to abandon further development of the product
and develop a new business strategy.
There are inherent risks in pharmaceutical research and development.
Pharmaceutical research and development is highly speculative and involves a high and significant
degree of risk. The marketability of any product we develop will be affected by numerous factors
beyond our control, including but not limited to:
| • | the discovery of unexpected toxicities or lack of sufficient efficacy of products which make them unattractive or unsuitable for human use; | ||
| • | preliminary results as seen in animal and/or limited human testing may not be substantiated in larger, controlled clinical trials; | ||
| • | manufacturing costs or other production factors may make manufacturing of products ineffective, impractical and non-competitive; | ||
| • | proprietary rights of third parties or competing products or technologies may preclude commercialization; | ||
| • | requisite regulatory approvals for the commercial distribution of products may not be obtained; and |
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| • | other factors may become apparent during the course of research, up-scaling or manufacturing which may result in the discontinuation of research and other critical projects. |
Our products under development have never been manufactured on a commercial scale, and there can be
no assurance that such products can be manufactured at a cost or in a quantity to render such
products commercially viable. Production and utilization of our products may require the
development of new manufacturing technologies and expertise. The impact on our business in the
event that new manufacturing technologies and expertise are required to be developed is uncertain.
There can be no assurance that we will successfully meet any of these technological challenges, or
others that may arise in the course of development.
Pharmaceutical products are subject to intense regulatory approval processes.
The regulatory process for pharmaceuticals, which includes preclinical studies and clinical trials
of each compound to establish its safety and efficacy, takes many years and requires the
expenditure of substantial resources. Moreover, if regulatory approval of a drug is granted, such
approval may entail limitations on the indicated uses for which it may be marketed. Failure to
comply with applicable regulatory requirements can, among other things, result in suspension of
regulatory approvals, product recalls, seizure of products, operating restrictions and criminal
prosecution. Further, government policy may change, and additional government regulations may be
established that could prevent or delay regulatory approvals for our products. In addition, a
marketed drug and its manufacturer are subject to continual review. Later discovery of previously
unknown problems with the product or manufacturer may result in restrictions on such product or
manufacturer, including withdrawal of the product from the market.
The U.S. FDA and similar regulatory authorities in other countries may deny approval of a new drug
application if required regulatory criteria are not satisfied, or may require additional testing.
Product approvals may be withdrawn if compliance with regulatory standards is not maintained or if
problems occur after the product reaches the market. The FDA and similar regulatory authorities in
other countries may require further testing and surveillance programs to monitor the pharmaceutical
product that has been commercialized. Non-compliance with applicable requirements can result in
fines and other judicially imposed sanctions, including product withdrawals, product seizures,
injunction actions and criminal prosecutions.
In addition to our own pharmaceuticals, we may supply active pharmaceutical ingredients and
advanced pharmaceutical intermediates for use in our customers’ drug products. The final drug
products in which the pharmaceutical ingredients and advanced pharmaceutical intermediates are
used, however, are subject to regulation for safety and efficacy by the FDA and other
jurisdictions, as the case may be. Such products must be approved by such agencies before they can
be commercially marketed. The process of obtaining regulatory clearance for marketing is uncertain,
costly and time consuming. We cannot predict how long the necessary regulatory approvals will take
or whether our customers will ever obtain such approval for their products. To the extent that our
customers do not obtain the necessary regulatory approvals for marketing new products, our product
sales could be adversely affected.
The FDA and other governmental regulators have increased requirements for drug purity and have
increased environmental burdens upon the pharmaceutical industry. Because pharmaceutical drug
manufacturing is a highly regulated industry, requiring significant documentation and validation of
manufacturing processes and quality control assurance prior to approval of the facility to
manufacture a specific drug, there can be considerable transition time between the initiation of a
contract to manufacture a product and the actual initiation of manufacture of that product. Any lag
time in the initiation of a contract to manufacture product and the actual initiation of
manufacture could cause us to lose profits or incur liabilities.
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The pharmaceutical regulatory regime in Europe and other countries is, by and large, generally
similar to that of the United States. We could face similar risks in these other jurisdictions, as
the risks described above.
Our operations and products may be subject to other government manufacturing and testing
regulations.
Securing regulatory approval for the marketing of therapeutics by the FDA in the United States and
similar regulatory agencies in other countries is a long and expensive process, which can delay or
prevent product development and marketing. Approval to market products may be for limited
applications or may not be received at all.
The products we anticipate manufacturing will have to comply with the FDA’s current Good
Manufacturing Practices (“cGMP”) and other FDA, and local government guidelines and regulations,
including other international regulatory requirements and guidelines. Additionally, certain of our
customers may require the manufacturing facilities contracted by us to adhere to additional
manufacturing standards, even if not required by the FDA. Compliance with cGMP regulations requires
manufacturers to expend time, money and effort in production, and to maintain precise records and
quality control to ensure that the product meets applicable specifications and other requirements.
The FDA and other regulatory bodies periodically inspect drug-manufacturing facilities to ensure
compliance with applicable cGMP requirements. If the manufacturing facilities contracted by us fail
to comply with the cGMP requirements, the facilities may become subject to possible FDA or other
regulatory action and manufacturing at the facility could consequently be suspended. We may not be
able to contract suitable alternative or back-up manufacturing facilities on terms acceptable to us
or at all.
The FDA or other regulatory agencies may also require the submission of any lot of a particular
product for inspection. If the lot product fails to meet the FDA requirements, then the FDA could
take any of the following actions: (i) restrict the release of the product; (ii) suspend
manufacturing of the specific lot of the product; (iii) order a recall of the lot of the product;
or (iv) order a seizure of the lot of the product.
We are subject to regulation by governments in many jurisdictions and, if we do not comply with
healthcare, drug, manufacturing and environmental regulations, among others, our existing and
future operations may be curtailed, and we could be subject to liability.
In addition to the regulatory approval process, we may be subject to regulations under local,
provincial, state, federal and foreign law, including requirements regarding occupational health,
safety, laboratory practices, environmental protection and hazardous substance control, and may be
subject to other present and future local, provincial, state, federal and foreign regulations.
The biotechnology industry is extremely competitive and we must successfully compete with larger
companies with substantially greater resources.
Technological competition in the pharmaceutical industry is intense and we expect competition to
increase. Other companies are conducting research on therapeutics involving the Ras pathway as well
as other novel treatments or therapeutics for the treatment of cancer which may compete with our
product. Many of these competitors are more established, benefit from greater name recognition and
have substantially greater financial, technical and marketing resources than us. In addition, many
of these competitors have significantly greater experience in undertaking research, preclinical
studies and human clinical trials of new pharmaceutical products, obtaining regulatory approvals
and manufacturing and marketing such products. In addition, there are several other companies and
products with which we may compete from time to time, and which may have significantly better and
larger resources than us.
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Accordingly, our competitors may succeed in manufacturing and/or commercializing products more
rapidly or effectively, which could have a material adverse effect on our business, financial
condition or results of operations.
We anticipate that we will face increased competition in the future as new products enter the
market and advanced technologies become available. There can be no assurance that existing products
or new products developed by our competitors will not be more effective, or be more effectively
manufactured, marketed and sold, than any that may be developed or sold by us. Competitive products
may render our products obsolete and uncompetitive prior to recovering research, development or
commercialization expenses incurred with respect to any such products.
We rely on patents and proprietary rights to protect our technology.
Our success will depend, in part, on our ability to obtain patents, maintain trade secret
protection and operate without infringing the rights of third parties. We have patents in the
United States, Canada and Europe and have filed applications for patents in the United States and
under the PCT, allowing us to file in other jurisdictions. See “Narrative Description—Patent and
Patent Application Summary”. Our success will depend, in part, on our ability to obtain, enforce
and maintain patent protection for our technology in Canada, the United States and other countries.
We cannot be assured that patents will issue from any pending applications or that claims now or in
the future, if any, allowed under issued patents will be sufficiently broad to protect our
technology. In addition, no assurance can be given that any patents issued to or licensed by us
will not be challenged, invalidated, infringed or circumvented, or that the rights granted
thereunder will provide continuing competitive advantages to us.
The patent positions of pharmaceutical and biotechnology firms, including us, are generally
uncertain and involve complex legal and factual questions. In addition, it is not known whether any
of our current research endeavours will result in the issuance of patents in Canada, the United
States, or elsewhere, or if any patents already issued will provide significant proprietary
protection or will be circumvented or invalidated. Since patent applications in the United States
and Canada may be maintained in secrecy until at least 18 months after filing of the original
priority application, and since publication of discoveries in the scientific or patent literature
tends to lag behind actual discoveries by several months, we cannot be certain that we or any
licensor were the first to create inventions claimed by pending patent applications or that we or
the licensor were the first to file patent applications for such inventions. Loss of patent
protection could lead to generic competition for these products, and others in the future, which
would materially and adversely affect our financial prospects for these products.
Similarly, since patent applications filed before November 29, 2000 in the United States may be
maintained in secrecy until the patents issue or foreign counterparts, if any, publish, we cannot
be certain that we or any licensor were the first creator of inventions covered by pending patent
applications or that we or such licensor were the first to file patent applications for such
inventions. There is no assurance that our patents, if issued, would be held valid or enforceable
by a court or that a competitor’s technology or product would be found to infringe such patents.
Accordingly, we may not be able to obtain and enforce effective patents to protect our proprietary
rights from use by competitors, and the patents of other parties could require us to stop using or
pay to use certain intellectual property, and as such, our competitive position and profitability
could suffer as a result.
In addition, we may be required to obtain licenses under patents or other proprietary rights of
third parties. No assurance can be given that any licenses required under such patents or
proprietary rights will be available on terms acceptable to us. If we do not obtain such licenses,
we could encounter delays in introducing one or more of our products to the market while we attempt
to design around such patents, or
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could find that the development, manufacture or sale of products requiring such licenses could be
foreclosed. In addition, we could incur substantial costs in defending ourselves in suits brought
against us on such patents or in suits in which our attempts to enforce our own patents against
other parties.
Our products may fail or cause harm, subjecting us to product liability claims.
Use of our product during current clinical trials may entail risk of product liability. We
maintain clinical trial liability insurance; however, it is possible this coverage may not provide
full protection against all risks. Given the scope and complexity of the clinical development
process, the uncertainty of product liability litigation, and the shrinking capacity of insurance
underwriters, it is not possible at this time to assess the adequacy of current clinical trial
coverage, nor the ability to secure continuing coverage at the same level and at reasonable cost in
the foreseeable future. While we carry, and intend to continue carrying amounts believed to be
appropriate under the circumstances, it is not possible at this time to determine the adequacy of
such coverage.
In addition, the sale and commercial use of our product entails risk of product liability. We
currently do not carry any product liability insurance for this purpose. There can be no assurance
that we will be able to obtain appropriate levels of product liability insurance prior to any sale
of our pharmaceutical products. An inability to obtain insurance on economically feasible terms or
to otherwise protect against potential product liability claims could inhibit or prevent the
commercialization of products developed by us. The obligation to pay any product liability claim or
a recall of a product could have a material adverse effect on our business, financial condition and
future prospects.
We have limited manufacturing experience and intend to rely on third parties to commercially
manufacture our products, if and when developed.
To date, we have relied upon a contract manufacturer to manufacture small quantities of
REOLYSIN®. The manufacturer may encounter difficulties in scaling up production,
including production yields, quality control and quality assurance. Only a limited number of
manufacturers can supply therapeutic viruses and failure by the manufacturer to deliver the
required quantities of REOLYSIN® on a timely basis at a commercially reasonable price
may have a material adverse effect on us. We have completed a program for the development of a
commercial process for manufacturing REOLYSIN® and have filed a number of patent
applications related to the process. There can be no assurance that we will successfully obtain
sufficient patent protection related to our manufacturing process.
New products may not be accepted by the medical community or consumers.
Our primary activity to date has been research and development and we have no experience in
marketing or commercializing products. We will likely rely on third parties to market our products,
assuming that they receive regulatory approvals. If we rely on third parties to market our
products, the commercial success of such product may be outside of our control. Moreover, there can
be no assurance that physicians, patients or the medical community will accept our product even if
it proves to be safe and effective and is approved for marketing by Health Canada, the FDA and
other regulatory authorities. A failure to successfully market our product would have a material
adverse effect on our revenue.
Our technologies may become obsolete.
The pharmaceutical industry is characterized by rapidly changing markets, technology, emerging
industry standards and frequent introduction of new products. The introduction of new products
embodying new technologies, including new manufacturing processes, and the emergence of new
industry standards may render our products obsolete, less competitive or less marketable. The
process of developing our products is extremely complex and requires significant continuing
development efforts and third party
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commitments. Our failure to develop new technologies and products and the obsolescence of existing
technologies could adversely affect our business.
We may be unable to anticipate changes in our potential customer requirements that could make our
existing technology obsolete. Our success will depend, in part, on our ability to continue to
enhance our existing technologies, develop new technology that addresses the increasing
sophistication and varied needs of the market, and respond to technological advances and emerging
industry standards and practices on a timely and cost-effective basis. The development of our
proprietary technology entails significant technical and business risks. We may not be successful
in using our new technologies or exploiting our niche markets effectively or adapting our
businesses to evolving customer or medical requirements or preferences or emerging industry
standards.
We are highly dependent on third party relationships for research and clinical trials.
We rely upon third party relationships for assistance in the conduct of research efforts,
pre-clinical development and clinical trials, and manufacturing. In addition, we expect to rely on
third parties to seek regulatory approvals for and to market our product. Although we believe that
our collaborative partners will have an economic motivation to commercialize our product included
in any collaborative agreement, the amount and timing of resources diverted to these activities
generally is expected to be controlled by the third party. Furthermore, if we cannot maintain these
relationships, our business may suffer.
We have no operating revenues and a history of losses.
To date, we have not generated sufficient revenues to offset our research and development costs and
accordingly have not generated positive cash flow or made an operating profit. As of December 31,
2007, we had an accumulated deficit of $80.5 million and we incurred net losses of $15.6 million,
$14.3 million, and $12.8 million, for the years ended December 31, 2007, 2006, and 2005,
respectively. We anticipate that we will continue to incur significant losses during 2008 and in
the foreseeable future. We do not expect to reach profitability at least until after successful
and profitable commercialization of one or more of our products. Even if one or more of our
products are profitably commercialized, the initial losses incurred by us may never be recovered.
We may not be able to obtain third-party reimbursement for the cost of our product.
Uncertainty exists regarding the reimbursement status of newly-approved pharmaceutical products and
reimbursement may not be available for REOLYSIN®. Any reimbursements granted may not be
maintained or limits on reimbursements available from third-party payors may reduce the demand for,
or negatively affect the price of, these products. If REOLYSIN® does not qualify for
reimbursement, if reimbursement levels diminish, or if reimbursement is denied, our sales and
profitability would be adversely affected.
We may need additional financing in the future to fund the research and development of our products
and to meet our ongoing capital requirements.
As of December 31, 2007, we had cash and cash equivalents (including short-term investments) of
$25.2 million and working capital of approximately $22.4 million. We anticipate that we may need
additional financing in the future to fund research and development and to meet our ongoing capital
requirements. The amount of future capital requirements will depend on many factors, including
continued scientific progress in our drug discovery and development programs, progress in our
pre-clinical and clinical evaluation of drug candidates, time and expense associated with filing,
prosecuting and enforcing our patent claims and costs associated with obtaining regulatory
approvals. In order to meet such capital requirements, we will consider contract fees,
collaborative research and development arrangements, and
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additional public or private financings (including the incurrence of debt and the issuance of
additional equity securities) to fund all or a part of particular programs as well as potential
partnering or licensing opportunities. There can be no assurance that additional funding will be
available or, if available, that it will be available on acceptable terms. If adequate funds are
not available on terms favorable to us, we may have to reduce substantially or eliminate
expenditures for research and development, testing, production and marketing of our proposed
product, or obtain funds through arrangements with corporate partners that require us to relinquish
rights to certain of our technologies or product. There can be no assurance that we will be able
to raise additional capital if our current capital resources are exhausted.
The cost of director and officer liability insurance may increase substantially and may affect our
ability to retain quality directors and officers.
We carry liability insurance on behalf of our directors and officers. Given a number of large
director and officer liability insurance claims in the U.S. equity markets, director and officer
liability insurance has become increasingly more expensive with increased restrictions.
Consequently, there is no assurance that we will continue to be offered this insurance or be able
to obtain adequate coverage. The inability to acquire the appropriate insurance coverage may limit
our ability to attract and maintain directors and officers as required to conduct our business.
We are dependent on our key employees and collaborators.
Our ability to develop the product will depend, to a great extent, on our ability to attract and
retain highly qualified scientific personnel and to develop and maintain relationships with leading
research institutions. Competition for such personnel and relationships is intense. We are highly
dependent on the principal members of our management staff as well as our advisors and
collaborators, the loss of whose services might impede the achievement of development objectives.
The persons working with us are affected by a number of influences outside of our control. The loss
of key employees and/or key collaborators may affect the speed and success of product development.
We presently carry key man insurance in the amounts of $1,500,000, $1,000,000 and $500,000 for Dr.
Thompson, Dr. Coffey and Mr. Ball, respectively.
Our share price may be highly volatile.
Market prices for securities of biotechnology companies generally are volatile. This increases the
risk of securities litigation. Factors such as announcements (publicly made or at scientific
conferences) of technological innovations, new commercial products, patents, the development of
proprietary rights, results of clinical trials, regulatory actions, publications, quarterly
financial results, our financial position, public concern over the safety of biotechnology, future
sales of shares by us or our current shareholders and other factors could have a significant effect
on the market price and volatility of the common shares.
We incur some of our expenses in foreign currencies and therefore we are exposed to foreign
currency exchange rate fluctuations.
We incur some of our manufacturing, clinical, collaborative and consulting expenses in foreign
currencies, primarily the U.S. dollar and the Great British pound (“GBP”). Over the past few years
the Canadian dollar has appreciated relative to the U.S. dollar and the GBP thereby decreasing the
Canadian dollar equivalent. However, if this trend reverses, our Canadian dollar equivalent costs
will increase. Also, as we expand to other foreign jurisdictions there may be an increase in our
foreign exchange exposure.
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We earn interest income on our excess cash reserves and are exposed to changes in interest rates.
We invest our excess cash reserves in investment vehicles that provide a rate of return with little
risk to principal. As interest rates change the amount of interest income we earn will be directly
impacted.
ADDITIONAL INFORMATION
Legal Proceedings
We are not aware of any material legal proceedings nor are we aware of any such proceedings being
contemplated.
Interest of Management and Others in Material Transactions
Other than as discussed herein, there are no material interests, direct or indirect, of directors,
executive officers, senior officers, or any direct or indirect shareholder of ours who beneficially
owns, or who exercises control over, more than 10% of our outstanding common shares or any known
associate or affiliate of such persons, in any transaction within the three most recently completed
financial years or during the current financial year that has materially affected or will
materially affect us.
Transfer Agent and Registrar
The transfer agent and registrar for our common shares is Computershare Trust Company of Canada at
its principal offices in Calgary, Alberta and Toronto, Ontario.
Material Contracts
Other than as discussed herein, there are no material contracts, other than contracts entered into
in the ordinary course of business, that are material to us that were entered into within the most
recently completed financial year, or before the most recently completed financial year but are
still in effect.
Interests of Experts
Ernst & Young LLP, Chartered Accountants, have audited our financial statements for the year ended
December 31, 2007, as set forth in our Annual Report.
As at the date hereof, the partners and associates of Ernst & Young LLP, Chartered Accountants, our
independent auditors, as a group did not beneficially own any of our outstanding common shares.
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External Auditor Service Fees
During the financial years ended December 31, 2007, 2006, and 2005, Ernst & Young LLP received the
following fees:
| December 31, | ||||||||||||
| 2007 | 2006 | 2005 | ||||||||||
| Item | $ | $ | $ | |||||||||
Audit fees |
50,825 | 79,900 | 63,500 | |||||||||
Audit-related fees (1),(3), |
82,628 | 32,260 | 20,250 | |||||||||
Tax fees (2) |
11,608 | 8,214 | 9,048 | |||||||||
All other fees (4) |
146,893 | — | — | |||||||||
| Notes: | ||
| (1) | Includes review of interim financial statements, accounting consultations and subscription to on-line accounting services. | |
| (2) | Comprised of tax return preparation, scientific research and development return and other tax consultation fees. | |
| (3) | Includes fees associated with matters relating to the prospectus offerings in 2007. | |
| (4) | Includes fees associated with the examination and anticipated expansion of our corporate structure. |
Audit Fees
Audit fees were for professional services rendered by Ernst & Young, LLP for the audit of our
annual financial statements and services provided in connection with statutory and regulatory
filings or engagements.
Audit-Related Fees
Audit-related fees were for assurance and related services reasonably related to the performance of
the audit or review of the annual statements and are not reported under the heading Audit Fees
above. These services consisted of accounting consultations, assistance with prospectus filings
and assistance with preparations for compliance with section 404 of the Sarbanes-Oxley Act of 2002.
Tax Fees
Tax fees were for tax compliance and professional tax consultations.
All Other Fees
Other fees are for products and services other than those described under the headings Audit Fees,
Audit-Related Fees and Tax Fees above.
Other Additional Information
Additional information, including information as to our directors’ and officers’ remuneration and
indebtedness, principal holders of our securities, options to purchase securities and interests of
insiders in material transactions is contained in our Information Circular for our most recent
annual meeting of shareholders that involved the election of directors, which is incorporated
herein by reference and forms an integral part of this Annual Information Form.
Additional financial information is contained in our financial statements for the year ended
December 31, 2007 and under the heading “Management’s Discussion and Analysis of Financial
Condition and Results
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of Operations” in our 2007 Annual Report, which are incorporated herein by reference and form an
integral part of this Annual Information Form.
The documents referred to above as well as additional information relating to us are available
through the Internet on the Canadian System for Electronic Document Analysis and Retrieval
(“SEDAR”) at www.sedar.com.
Alternatively, a request for any documents referred to above may be made to the Chief Financial
Officer, Oncolytics Biotech Inc., Suite 210, 1167 Kensington Crescent N.W., Calgary, Alberta,
Canada, T2N 1X7 or by telecopier at (403) 283-0858.
GLOSSARY
In this Annual Information Form, unless the context otherwise requires, the following words and
phrases shall have the meaning set forth below:
ABCA - Business Corporations Act (Alberta), as amended.
ACB - Alberta Cancer Board.
Activating
mutations – a type of genetic mutation that results in a particular protein being
active in the absence of an appropriate stimuli. This type of mutation typically leads to the
development of a cancerous transformation of a cell.
Adjuvant therapy - a form of therapy that is to be used in conjunction with one or more addition
therapies.
Alberta
Heritage Foundation – the Alberta Heritage Foundation for Medical Research.
Animal model - a human disease given to an animal which exhibits similar or identical
characteristics to this disease in humans.
Appropriate
Regulatory Authority – means (a) Health Canada, (b) the Food and Drug Administration
in the United States, or (c) the comparable authorities in the following countries or areas:
United Kingdom, France, Germany, Japan, Benelux.
Asymptomatic
– without any signs or symptoms.
Cancer - a heterogeneous group of diseases that is characterized by the uncontrolled or aberrant
growth of cells. In addition to the uncontrolled growth of these tumour cells, these cells are
able to invade and colonize other sites in the body; by definition these tumours are malignant.
Carcinomas
– a type of cancer that arises from epithelial tissue.
CEA
– Carcinoembryonic antigen – a substance that is sometimes found in an increased amount in
the blood of people who have certain cancers, other diseases, or who smoke. It is used as a tumor
marker for colorectal cancer.
Cellular proliferative disorder - a heterogeneous group of disease characterized by the
uncontrolled or aberrant growth of cells; is distinct from cancer in that it does not necessarily
imply a malignant state.
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Clinical Trial Agreement - the agreement among Oncolytics Biotech Inc., Dr. Don Morris and the ACB
dated May 1, 1999, providing for, among other things, a repayable grant of $200,000 to us to offset
the future REOLYSIN® clinical trial expenditures. (this also refers to our NCI
arrangement)
CT – computed tomography
Cytostatic - any drug or agent that is capable of preventing a cell’s growth and division.
Cytotoxic - any drug or agent that is capable of causing cell death.
Differentiation – a form of growth; a process whereby a cell develops different or more advanced
processes than were possessed by the cell before.
DLT – Dose-Limiting Toxicity
Epidermal growth factor - a compound that promotes the growth of cells.
Epidermal growth factor receptor – the cellular receptor that interacts with the epidermal growth
factor; a particular family of receptor tyrosine kinase.
Epithelial - the tissue that forms the outer layer of the body surface or the tissue that lines the
gut or other hollow structure.
Etiology – the reason or causation of an illness, disease or disorder.
FDA – the U.S. Food and Drug Administration
GAAP – Generally Accepted Accounting Principles
Gastrointestinal tract - within the digestive system including the stomach, intestine, and all
accessory organs.
Glioblastoma - a specific form of cancer derived from brain tissue.
Gliomas - a specific form of cancer derived from brain tissue.
GGT
– Gamma-Glutamyl Transpeptidase - is a liver enzyme. It is involved in the transfer of amino
acids across the cellular membrane and in glutathione metabolism. GGT is found in high
concentrations in the liver, bile ducts and kidney.
GLP – Good Laboratory Practice
Good Manufacturing Practices - the current regulatory requirements and standards regarding quality
assurance procedures to be adhered to in the manufacturing of therapeutic products established and
monitored by various governments including Canada and the United States.
Growth factor receptor – a form of receptor that interacts with growth factors.
Gy – a measurement of dosage of radiation.
HER2/neu/ErbB2 – a form of receptor tyrosine kinase that is frequently overexpressed in breast
cancers.
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Immune competent - an animal with a fully functional immune system; an animal that can mount a
response to a foreign or infectious agent.
Immuno-compromised - an animal that is lacking an immune system.
Investigational New Drug Submission (“IND”) - documentation filed with government agencies
responsible for evaluating and licensing pharmaceutical drugs. This documentation is necessary for
the initiation of clinical trials.
In Vivo - in the living body.
Lesion - a morbid change in the functioning or texture of an organ or tissue.
Metastasis - the process whereby a tumour cell is able to leave the original tumour mass and spread
to secondary sites in the body forming additional tumour sites.
MHRA - Medicines and Healthcare products Regulatory Agency (U.K.)
Mitogenic - a drug or agent that promotes cellular division or growth.
MTD – Maximum Tolerated Dose
Neoplasia – a group of diseases characterized by uncontrolled cell growth, including, but not
limited to, cancer.
Nucleus - an organelle in the cell that contains genetic material.
Oncology - the study and treatment of cancer and tumours.
Patent Cooperation Treaty or PCT - an international patent treaty, of which Canada is a signatory,
whereby a single international patent application can be filed in the applicant’s or inventor’s
home country for possible protection of intellectual property in over 100 PCT member countries.
PKR (or double stranded RNA dependent protein kinase) - a host protein that plays a key role in
mediating the cell’s antiviral activity.
Platelet-derived growth factor receptor (PDGFR) - the cellular receptor that interacts with the
platelet-derived growth factor; a particular family of receptor tyrosine kinase.
PSA – Prostate Specific Antigen is a protein produced by the cells of the prostate gland.
Ras - a cellular protein that is a key relay in the transmission of growth signals from the outside
of the cell to the cell’s nucleus. In a noncancerous cell, Ras is activated in the presence of an
appropriate growth signal.
Receptor - a cellular structure, usually found on the cell surface, that can interact with a
certain compound to elicit a specific type of cellular response.
Receptor tyrosine kinase (RTK) - a type of host receptor that uses a particular residue for
cellular signaling to the nucleus. Mutation or overexpression of this type of receptor is
frequently seen in the development of a variety of cancers.
REOLYSIN®
- is our trademark for the human reovirus for the treatment of a specific
disease.
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Reovirus - a double stranded RNA virus first identified in 1959. The name is an acronym for
Respiratory Enteric Orphan virus. The virus is given the designate of orphan virus since it is not
associated with a known disease state. For the purpose of this document, all reference to reovirus
is to reovirus type III Dearing.
Research Contract - an agreement between Oncolytics Biotech Inc. and the Governors of the
University of Calgary, providing for the aggregate sum of $102,000 to be paid by us for a research
project under the direction and supervision of Dr. Patrick Lee.
Share Purchase Agreement - the share purchase agreement among the Vendors, SYNSORB and Oncolytics
Biotech Inc. dated April 21, 1999 providing for the purchase by SYNSORB of all of our issued and
outstanding shares.
Signal Transduction - The transmission of signals from the cell surface to the cell’s nucleus.
SYNSORB - SYNSORB Biotech Inc. (now Iteration Energy Ltd. by name change formerly Hawker Resources
Inc.), a public Company incorporated under the ABCA.
Technology Commercialization Agreement - the agreement between Oncolytics Biotech Inc. and the
Alberta Heritage Foundation dated February 9, 1999 providing for a repayable grant of $150,000 to
us to offset reovirus clinical trial expenditures.
TCID50
- a measure of viral particle concentration.
Toxicology - the scientific determination of the quantity of a substance that is required to act
adversely in the body.
Tumour - an abnormal growth of tissue whether benign or malignant.
Vendors - Dr. Patrick Lee, Dr. James Strong, Dr. Matthew Coffey, Dr. Bradley Thompson and
University Technologies International Inc.