MethylGene Reports Fourth Quarter and Full Year 2012 Financial Results

MONTREAL, CANADA--(Marketwire - March 13, 2013) - MethylGene Inc. (TSX:MYG) today reported financial results for the fourth quarter and full year ended December 31, 2012.

Highlights

- On November 12, 2012, we announced the appointment of Charles M. Baum, M.D., Ph.D., as President and Chief Executive Officer.

- On November 21, 2012, we completed a private placement of $26.1 million, extending our financial resources into the second half of 2014.

- We completed enrollment in the randomized controlled Phase II study evaluating MGCD290 plus fluconazole in patients with moderate to severe vulvovaginal candidiasis. We expect to report topline data from this study in March 2013.

- We announced the appointment of Mark J. Gergen to the position of Executive Vice President and Chief Operating Officer on February 19, 2013.

"2012 was a year of progress and renewal for MethylGene," said Charles Baum, M.D., Ph.D., President and CEO of MethylGene. "We are continuing to build momentum in our clinical programs, and we are moving forward in 2013 with a strengthened leadership team."

International Financial Reporting Standards

The financial statements of the Company for the year ended December 31, 2012, have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

Fourth Quarter 2012 Financial Results Reported in Canadian Dollars

There were no revenues in the fourth quarter of 2012, a reduction of $468,000 versus the fourth quarter of 2011. License and up-front fees decreased by $468,000 as we amortized the remaining deferred revenue in relation to the Taiho agreement in the fourth quarter of 2011.

Research and development expenditures for the fourth quarter of 2012, net of investment tax credits, were $4.9 million, which was $1.8 million higher versus the fourth quarter of 2011. This increase was mainly due to increased clinical development activities for both of our lead programs, MGCD290 and MGCD265, resulting in higher internal and third-party clinical costs.

General and administrative expenses in the fourth quarter of 2012 were $1.4 million, up $0.3 million versus the fourth quarter of 2011, primarily due to increased non-cash stock option costs and increased professional expenses relating to the appointment of our new CEO.

Financial income, relating primarily to interest income, was $64,000 in the fourth quarter of 2012, $18,000 lower than the fourth quarter of 2011 due to lower average cash balances for the quarter versus the prior year. The Company recorded a foreign exchange loss of $9,000 in the fourth quarter of 2012, similar to that realized in the fourth quarter of 2011.

The net loss and comprehensive loss for the fourth quarter of 2012 was $6.3 million, or ($0.016) per share, versus a net loss and comprehensive loss of $3.6 million, or ($0.01) per share, for the same period last year. The increased loss per share is primarily due to the increase in the net loss and comprehensive loss in the fourth quarter of 2012 versus the fourth quarter of 2011 due to higher operating costs, partially offset by the higher average number of shares outstanding in the fourth quarter of 2012 compared to the fourth quarter of 2011.

Full Year 2012 Financial Results in Canadian Dollars

Revenues for 2012 were $2,000, a reduction of $3.1 million versus 2011. Research collaboration and contract revenues decreased by $0.8 million as the research component of the Otsuka agreement ended on June 30, 2011 and the license and up-front fees decreased by $2.3 million as we amortized the remaining deferred revenues under the Otsuka and Taiho agreements in 2011.

Research and development expenditures, net of investment tax credits, for 2012 were $15.1 million, or $6.2 million higher than in 2011. This increase was driven by higher compensation costs relating to strengthening the clinical development department with the addition of key senior management, and higher third-party clinical development costs relating to our lead programs MGCD290 and MGCD265 in 2012 as compared to 2011. The increased expenses were partially offset by a $0.8 million increase in investment tax credits relating to the reversal of an accrual in 2012.

General and administrative expenses in 2012 were $5.4 million, a $1.1 million increase over 2011, primarily as a result of the departure of the previous CEO and higher non-cash stock option expenses, partially offset by lower lease related costs.

Financial income, relating primarily to interest income, was $241,000 for 2012, a decrease of $21,000 versus 2011 due to lower average cash assets versus the prior year. The Company recorded a foreign exchange loss of $13,000 in 2012 compared to a gain of $42,000 in 2011.

The net loss and comprehensive loss for 2012 was $20.3 million, or ($0.06) per share, versus a net loss and comprehensive loss of $9.7 million, or ($0.04) per share, for 2011. The increased loss per share relates to the increased net loss and comprehensive loss in 2012 due to the reduced revenues and higher operating costs partially offset by the higher average number of shares outstanding in 2012.

Cash, cash equivalents, marketable securities and restricted cash totalled $37.2 million as at December 31, 2012 compared to $29.6 million as at December 31, 2011. The Company believes that based on its current clinical plan that it has sufficient financial resources to carry forward its current clinical development and operating plans into the second half of 2014.

About MethylGene

MethylGene Inc. (TSX:MYG) is a drug development company that is advancing novel therapeutics for cancer and infectious disease in human clinical trials. The Company's lead product candidates are: MGCD290, an oral antifungal agent targeting the fungal Hos2 enzyme that is in a Phase II trial for vulvovaginal candidiasis, and MGCD265, a multi-targeted receptor tyrosine kinase inhibitor that is in Phase I/II clinical trials for patients with solid tumors. MethylGene owns all rights to its lead product candidates, and has partnerships with Otsuka Pharmaceutical Co. Ltd., Taiho Pharmaceutical Co. Ltd., and EnVivo Pharmaceuticals, Inc. for its other pipeline programs.

Certain statements contained in this news release, other than statements of fact that are independently verifiable at the date hereof, may constitute forward-looking information and forward-looking statements (collectively "forward-looking statements" within the meaning of applicable securities laws). Such statements, based as they are on the current expectations of management of MethylGene and upon what management believes to be reasonable assumptions, inherently involve numerous risks and uncertainties, known and unknown, many of which are beyond MethylGene's control. Such statements can usually be identified by the use of words such as "may", "would", "believe", "plan", "estimate" and other similar terminology, or state that certain actions, events or results "may" or "would"be taken, occur or be achieved. These risks and uncertainties could cause future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements. Such results, performance or achievements include, but are not limited to, the timing and effects of regulatory action; the continuation of collaborations; the results of clinical trials; the timing of enrollment or completion of clinical trials; the success, efficacy or safety of MGCD265, MGCD290 or our other programs; the ability to scale up, formulate and manufacture sufficient GMP, clinical or commercialization quantities of MGCD265, MGCD290 or our other products, and the relative success or the lack of success in developing and gaining regulatory approval and/or market acceptance for any compound or new product including MGCD265 or MGCD290.

Such risks include, but are not limited to, the impact of general economic conditions, economic conditions in the pharmaceutical industry, changes in the regulatory environment in the jurisdictions in which MethylGene does business, stock market volatility, fluctuations in costs, expectations with respect to our intellectual property position and our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others, changes in the competitive landscape including changes in the standard of care for the various indications in which MethylGene is involved, and changes to the competitive environment due to consolidation, as well as other risks, as described in MethylGene's Annual Information Form under the heading "Risk Factors" which you are urged to read, and all other documents filed by the Company that can be found at www.sedar.com. Consequently, actual future results may differ materially from the anticipated results expressed in the forward-looking statements. The reader should not place undue reliance on the forward-looking statements included in this news release. These statements speak only as of the date they are made and MethylGene expressly disclaims any duty, obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in MethylGene's expectations with regard thereto of any change in events, conditions or circumstances on which any such statements are based except in accordance with law.

MethylGene Inc.

Incorporated under the Canada Business Corporation Act

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (unaudited)

[In thousands of Canadian dollars]
As at
	December 31, 2012		December 31, 2011
ASSETS
Current
Cash and cash equivalents	18,309		10,050
Marketable securities	18,485		18,878
Restricted cash equivalents and marketable securities	300		300
Interest and other receivables	505		174
Other current assets	1,529		1,574
Total current assets	39,128		30,976
Security deposits	67		55
Restricted cash equivalents and marketable securities	72		355
Property, plant and equipment, net	331		223
Total assets	39,598		31,609
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Trade payables and accrued liabilities	5,245		3,812
Current portion of other liability	67		-
Total current liabilities	5,312		3,812
Other liability	45		28
Total liabilities	5,357		3,840
Shareholders' equity
Share capital	165,557		145,685
Warrants	10,907		6,041
Contributed surplus	18,176		16,188
Deficit	(160,399	)	(140,145	)
Total shareholders' equity	34,241		27,769
Total liabilities and shareholders' equity	39,598		31,609

MethylGene Inc.

CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS (unaudited)

[In thousands of Canadian dollars except for share and per share amounts]	For the year ended December 31,
	2012		2011
Revenue
Research collaborations and contract revenues	2		791
License and up-front fees	-		2,301
Total revenue	2		3,092
Expenses
Research and development, net	15,059		8,834
General and administrative	5,386		4,289
Foreign exchange loss (gain)	13		(42	)
Financial income	(241	)	(262	)
Total expenses	20,217		12,819
Loss before income taxes	(20,215	)	(9,727	)
Income tax expense	39		-
Net loss and comprehensive loss for the year	(20,254	)	(9,727	)
Basic and diluted loss per share	(0.06	)	(0.04	)
Weighted average number of common shares	338,149,225		247,209,193

MethylGene Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)

[In thousands of Canadian dollars]
	Share capital	Warrants		Contributed surplus		Deficit		Total shareholders' equity
Balance as at January 1, 2011	119,189	-		15,289		(130,418	)	4,060
Net loss and comprehensive loss for the year	-	-		-		(9,727	)	(9,727	)
Stock option compensation expense	-	-		931		-		931
Costs of reorganization	-	-		(32	)	-		(32	)
Issuance of common shares, net of costs	26,496	-		-		-		26,496
Issuance of warrants, net of costs	-	6,041		-		-		6,041
Balance as at December 31, 2011	145,685	6,041		16,188		(140,145	)	27,769
Balance as at January 1, 2012	145,685	6,041		16,188		(140,145	)	27,769
Net loss and comprehensive loss for the year	-	-		-		(20,254	)	(20,254	)
Stock option compensation expense	-	-		2,004		-		2,004
Costs of reorganization	-	-		(16	)	-		(16	)
Issuance of common shares, net of costs	19,837	-		-		-		19,837
Issuance of warrants, net of costs	-	4,901		-		-		4,901
Exercise of warrants	35	(35	)	-		-		-
Balance as at December 31, 2012	165,557	10,907		18,176		(160,399	)	34,241

MethylGene Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

[In thousands of Canadian dollars]
		For the year ended December 31,
		2012		2011
Operating activities
Net loss for the year		(20,254	)	(9,727	)
Non-cash adjustments reconciling net loss to operating cash flows
	Depreciation of property, plant and equipment	122		194
	Write-off of property, plant and equipment	-		76
	Gain on disposal of property, plant and equipment	-		(30	)
	Reversal of provision for lease resiliation	-		(51	)
	Stock option compensation expense	2,004		931
	License and up-front fees	-		(2,298	)
	Interest income	(272	)	(290	)
	Lease incentive	84		28
		(18,316	)	(11,167	)
Net changes in non-cash working capital balances relating to operations		1,115		(589	)
Interest received		304		194
Cash flows related to operating activities		(16,897	)	(11,562	)
Investing activities
Purchase of property, plant and equipment		(230	)	(109	)
Purchases of marketable securities		(29,409	)	(43,660	)
Security deposit		(12	)	60
Restricted cash equivalents and marketable securities		283		597
Disposal and maturities of marketable securities		29,802		24,782
Proceeds from disposal of property, plant and equipment		-		76
Cash flows related to investing activities		434		(18,254	)
Financing activities
Issuance of common shares		20,893		28,088
Share issuance cost		(1,056	)	(1,592	)
Issuance of warrants		5,162		6,404
Warrant issuance cost		(261	)	(363	)
Cost of reorganization		(16	)	(32	)
Cash flows related to financing activities		24,722		32,505
Increase in cash and cash equivalents		8,259		2,689
Cash and cash equivalents, beginning of year		10,050		7,361
Cash and cash equivalents, end of year		18,309		10,050