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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934

For the month of October 2007

Commission File Number 000-31062

Oncolytics Biotech Inc.


(Translation of registrant’s name into English)

Suite 210, 1167 Kensington Crescent NW
Calgary, Alberta, Canada T2N 1X7


(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

     
Form 20-F   o   Form 40-F   þ

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):   o

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):   o

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

     
Yes   o   No   þ

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):   82 -             



 


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

         
    Oncolytics Biotech Inc.
(Registrant)
 
         
 
Date: October 31, 2007   By:   /s/ Doug Ball
Doug Ball
Chief Financial Officer

 


 

(ONCOLYTICS BIOTECH INC. LOGO)
Third Quarter Report
September 30, 2007
 
Oncolytics Biotech Inc.
TSX: ONC
NASDAQ: ONCY

 


 

Third Quarter Report
For the quarter ended September 30, 2007
Letter to Shareholders
Clinical trial results announced in the third quarter and the commencement of enrolment in a third combination clinical trial highlighted an exciting and busy quarter for the Company. We reported positive interim clinical results from our Phase Ia/Ib combination REOLYSIN® and radiation trial and also announced the start of enrolment in a combination REOLYSIN® and docetaxel trial. In October, we received permission to begin a unique clinical trial in the U.K. that will examine REOLYSIN® in combination with cyclophosphamide, an immune system modulator. In the quarter, the Company also secured two additional U.S. patents and made presentations regarding preclinical and manufacturing processes at several international meetings.
Clinical Trial Progress
Oncolytics is currently enrolling patients in seven clinical trials in the U.S. and the U.K., and has permission to begin a combination REOLYSIN®/cyclophosphamide trial in the U.K.
Positive Interim Combination REOLYSIN® and radiation results
Our Phase Ia/Ib trial using REOLYSIN® in combination with radiation continues to report encouraging results. In September, we announced positive interim results from our clinical trial examining the combination of REOLYSIN® and radiation for patients with advanced or metastatic cancers. A total of 22 patients were treated, with 15 completing the study. Five patients withdrew from the study and two patients are still on study. Of 11 patients treated in the 1a portion of the study, three patients experienced significant partial responses in the target tumour, as well as stable disease in non-treated tumours. Of 6 patients who completed the 1b portion of the study, three patients experienced tumour regression in the target tumour, as well as stable disease in non-treated treated tumours. The Ib trial is still enrolling patients and we are continuing to evaluate the data.
The interim results were presented at the National Cancer Research Institute (NCRI) conference in Birmingham, UK on October 2, 2007, as well as at the AACR-NCI-EORTC International Conference on Molecular Targets and Cancer Therapeutics in San Francisco on October 24, 2007.
Additional REOLYSIN® and chemotherapy trials move forward
In July, we commenced patient enrolment in our third trial using REOLYSIN® in combination with standard chemotherapeutic agents in the U.K. This trial will evaluate the systemic administration of REOLYSIN® in combination with docetaxel (Taxotere®) in patients with advanced cancers including bladder prostate, lung and upper gastro-

 


 

intestinal. Preclinical studies have demonstrated that this combination is synergistic against a variety of cancer cell lines.
A fourth clinical trial which will examine the systemic administration of REOLYSIN® in combination with cyclophosphamide, an immune modulator and chemotherapeutic agent, was approved by the U.K. health authorities in October. This is a unique trial that will deliver a standard dose of REOLYSIN® with escalating doses of cyclophosphamide to patients who have been diagnosed with advanced or metastatic solid tumours including pancreatic, lung and ovarian cancers that have not responded 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 evidence of anti-tumour activity.
Intellectual Property Advances
To date, Oncolytics has secured more than 150 issued patents worldwide including two U.S. patents issued in the third quarter. The two new U.S. patents cover the use of modified herpes simplex viruses to treat cancer, as well as the use of REOLYSIN® with chemotherapy to prevent the development of drug resistance to chemotherapeutic agents.
Preclinical Developments
Preclinical work completed by our collaborators at the CR-UK Clinical Centre, Leeds, U.K. demonstrated for the first time how reovirus-infected melanoma cells stimulate dendritic cells to prime the immune system against cancer cells. The work was presented in September at the National Cancer Research Institute Conference in Birmingham. U.K.
With the expansion of our clinical trial program, particularly into Phase II trials, we expect the remainder of 2007 and 2008 to be an exciting period of significant progress for the Company. As always, thank you for your continued support and encouragement.
-s- Brad Thompson
Brad Thompson, PhD
President and CEO
October 29, 2007

 


 

October 29, 2007
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis should be read in conjunction with the unaudited financial statements of Oncolytics Biotech Inc. as at and for the three and nine months ended September 30, 2007 and 2006, and should also be read in conjunction with the audited financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contained in our annual report for the year ended December 31, 2006. The financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“GAAP”).
FORWARD-LOOKING STATEMENTS
The following discussion contains forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements, including our belief as to the potential of REOLYSIN® as a cancer therapeutic and our expectations as to the success of our research and development and manufacturing programs in 2007 and beyond, future financial position, business strategy and plans for future operations, and statements that are not historical facts, involve known and unknown risks and uncertainties, which could cause our actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties include, among others, the need for and availability of funds and resources to pursue research and development projects, the efficacy of REOLYSIN® as a cancer treatment, the success and timely completion of clinical studies and trials, our ability to successfully commercialize REOLYSIN®, uncertainties related to the research, development and manufacturing of pharmaceuticals, uncertainties related to competition, changes in technology, the regulatory process and general changes to the economic environment. Investors should consult our quarterly and annual filings with the Canadian and U.S. securities commissions for additional information on risks and uncertainties relating to the forward-looking statements. Forward-looking statements are based on assumptions, projections, estimates and expectations of management at the time such forward-looking statements are made, and such assumptions, projections, estimates and/or expectations could change or prove to be incorrect or inaccurate. Investors are cautioned against placing undue reliance on forward-looking statements. We do not undertake to update these forward-looking statements.
OVERVIEW
Oncolytics Biotech Inc. is a Development Stage Company
Since our inception in April of 1998, Oncolytics Biotech Inc. has been a development stage company and we have focused our research and development efforts on the development of REOLYSIN®, our potential cancer therapeutic. We have not been profitable since our inception and expect to continue to incur substantial losses as we continue research and development efforts. We do not expect to generate significant revenues until, if and when, our cancer product becomes commercially viable.
General Risk Factors
Prospects for biotechnology companies in the research and development stage should generally be regarded as speculative. It is not possible to predict, based upon studies in animals, or early studies in humans, whether a new therapeutic will ultimately prove to be safe and effective in humans, or whether necessary and sufficient data can be developed through the clinical trial process to support a successful product application and approval.
If a product is approved for sale, product manufacturing at a commercial scale and significant sales to end users at a commercially reasonable price may not be successful. There can be no assurance that we will generate adequate funds to continue development, or will ever achieve significant revenues or profitable

 


 

operations. Many factors (e.g. competition, patent protection, appropriate regulatory approvals) can influence the revenue and product profitability potential.
In developing a pharmaceutical product, we rely upon our employees, contractors, consultants and collaborators and other third party relationships, including our ability to obtain appropriate product liability insurance. There can be no assurance that these reliances and relationships will continue as required.
In addition to developmental and operational considerations, market prices for securities of biotechnology companies generally are volatile, and may or may not move in a manner consistent with the progress being made by Oncolytics.
See also “RISK FACTORS AFFECTING FUTURE PERFORMANCE” in our 2006 MD&A.
REOLYSIN® Development Update for the Third Quarter of 2007
We continue to develop our lead product REOLYSIN® as a possible cancer therapy. Our goal each year is to advance REOLYSIN® through the various steps and stages of development required for potential pharmaceutical products. In order to achieve this goal, we actively manage the development of our clinical trial program, our pre-clinical and collaborative programs, our manufacturing process and REOLYSIN® supply, and our intellectual property.
Clinical Trial Program
Our clinical trial program includes eight clinical trials of which seven are being conducted by us and one is being sponsored by the U.S. National Cancer Institute (“NCI”). In the third quarter of 2007, we announced positive interim results from our U.K. phase Ia/Ib combination REOLYSIN® and radiation clinical trial. As well, we commenced patient enrollment in our U.K. combination REOLYSIN®/docetaxel clinical trial, increasing our actively enrolling clinical trials to seven.
Clinical Trial Results
In the third quarter of 2007, we announced positive interim results from our U.K. Phase Ia/Ib combination REOLYSIN® and radiation clinical trial for patients with advanced or metastatic cancers. As of September 28, 2007, 22 patients had been treated with 15 having completed the study. Five patients withdrew from the study, and two patients are still on study.
A total of 11 patients in the Ia portion of the trial have 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 (oesophageal, squamous skin carcinoma and squamous cell scalp) 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 squamous cell scalp patient 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 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 have completed the study to date, three patients (colorectal, melanoma and lung cancer) experienced tumour regression in the target tumour, as well as stable disease in non-treated tumours.

 


 

The colorectal patient 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. A melanoma patient experienced minor regression in the target tumour as well as stable disease in two, non-treated tumours at one and two months following treatment. A lung cancer patient 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.
The primary objective of the 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 is 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.
Clinical Trials – Actively Enrolling
At the end of the third quarter of 2007, we were actively enrolling in seven clinical trials. In the third quarter of 2007, we commenced enrollment in the following study:
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.
Pre-Clinical Trial and Collaborative Program
In the third quarter of 2007, 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.
Manufacturing and Process Development
We continued to have REOLYSIN® manufactured in order to supply our current and future clinical trial program. In the third quarter of 2007, our manufacturing activity was focused on the completion of the vial filling and packaging of the production runs that were completed earlier in 2007. Also in the third quarter of 2007, we continued process development that examined the scale up of our manufacturing process increasing the batch size from our present GMP scale of 20-litres to 40-litres and then to 100-litres.
Intellectual Property
In the third quarter of 2007, two U.S. patents were issued. At the end of the third quarter of 2007, we had been issued over 150 patents including 23 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.
Financial Impact
We estimated at the beginning of 2007 that our monthly cash usage would be approximately $1,400,000 for 2007. Our cash usage for the nine months ending September 30, 2007 was $10,849,863 from operating activities and $635,815 for the purchases of intellectual property and capital assets which is in line with our estimate. Our net loss for the nine month period ending September 30, 2007 was $11,556,714.
Cash Resources
We exited the third quarter of 2007 with cash resources totaling $28,191,464 (see “Liquidity and Capital Resources”).
Expected REOLYSIN® Development for the Remainder of 2007
We plan to continue to enroll patients in our seven clinical trials and expect to add an additional clinical co-therapy trial. We believe that the NCI sponsored melanoma clinical trial will receive approval to commence in 2007. We believe we will complete enrollment in our U.K. Phase Ia/Ib clinical trial by the end of 2007 and complete enrollment in our Phase II combination REOLYSIN®/radiation and chemotherapy co-therapy studies in 2008. Also, our process development activity will focus on scale up studies and the examination of a lyophilization process for REOLYSIN®.
Based on our expected activity in 2007, we continue to estimate our average monthly cash usage to be $1,400,000 per month (see “Liquidity and Capital Resources”).
Recent 2007 Progress
On October 23, 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.
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.
THIRD QUARTER RESULTS OF OPERATIONS
(for the three months ended September 30, 2007 and 2006)
Net loss for the three month period ending September 30, 2007 was $3,763,901 compared to $3,425,169 for the three month period ending September 30, 2006.
Research and Development Expenses (“R&D”)
                 
    2007   2006
    $   $
 
Manufacturing and related process development expenses
    879,937       1,259,716  
Clinical trial expenses
    1,278,175       688,435  
Pre-clinical trial and research collaboration expenses
    293,785       301,165  
Other R&D expenses
    438,747       456,430  
 
Research and development expenses
    2,890,644       2,705,746  
 
For the third quarter of 2007, R&D increased to $2,890,644 compared to $2,705,746 for the third quarter of 2006. The increase in R&D was due to the following:
Manufacturing & Related Process Development (“M&P”)
                 
    2007   2006
    $   $
 
Product manufacturing expenses
    610,842       896,776  
Technology transfer expenses
          184,761  
Process development expenses
    269,095       178,179  
 
Manufacturing and related process development expenses
    879,937       1,259,716  
 
During the third quarter of 2007, our M&P expenses decreased to $879,937 compared to $1,259,716 for the third quarter of 2006. In the third quarter of 2007, we continued to fill, test, and package the REOLYSIN® that was produced earlier in the year. During the third quarter of 2006, we commenced a number of cGMP production runs using our improved manufacturing process. The technology transfer of our improved process was successfully completed at the beginning of the third quarter of 2006.
Our process development studies in the third quarter of 2007 focused on increasing the scale of our production runs from batch sizes of 20 litres to 40 and then 100 litres. In the third quarter of 2006, we completed process development studies that were successful in improving virus yields.
Clinical Trial Program
                 
    2007   2006
    $   $
 
Direct clinical trial expenses
    1,201,557       639,719  
Other clinical trial expenses
    76,618       48,716  
 
Clinical trial expenses
    1,278,175       688,435  
 

 


 

During the third quarter of 2007, our direct clinical trial expenses increased to $1,201,557 compared to $639,719 for the third quarter of 2006. In the third quarter of 2007, we incurred direct clinical trial expenses in our seven actively enrolling trials compared to only four enrolling trials in the third quarter of 2006.
Pre-Clinical Trial Expenses and Research Collaborations
                 
    2007   2006
    $   $
 
Research collaboration expenses
    293,785       252,460  
Pre-clinical trial expenses
          48,705  
 
Pre-clinical trial expenses and research collaborations
    293,785       301,165  
 
During the third quarter of 2007, our research collaboration expenses were $293,785 compared to $252,460 for the third quarter of 2006. Our research collaboration activity continues to focus on the interaction of the immune system and the reovirus, the use of the reovirus as a co-therapy with existing chemotherapeutics, and to investigate new uses of the reovirus as a therapeutic.
Other Research and Development Expenses
                 
    2007   2006
    $   $
 
R&D consulting fees
    38,152       70,323  
R&D salaries and benefits
    342,155       299,224  
Other R&D expenses
    58,440       86,883  
 
Other research and development expenses
    438,747       456,430  
 
Our R&D salaries and benefits costs were $342,155 in the third quarter of 2007 compared to $299,224 in the third quarter of 2006. The increase is a result of increases in salary and staff levels along with the addition of our Vice President of Intellectual Property in 2007.
Operating Expenses
                 
    2007   2006
    $   $
 
Public company related expenses
    635,076       507,828  
Office expenses
    245,082       258,790  
 
Operating expenses
    880,158       766,618  
 
During the third quarter of 2007, our public company related expenses were $635,076 compared to $507,828 for the third quarter of 2006. In the third quarter of 2007, we increased our professional fees and investor relations activity in the United States and Europe compared to the third quarter of 2006.
Stock Based Compensation
                 
    2007   2006
    $   $
 
Stock based compensation
    38,909       34,671  
 
Stock based compensation for the third quarter of 2007 was $38,909 compared to $34,671 for the third quarter of 2006. In the third quarters of 2007 and 2006, we incurred stock based compensation associated with the vesting of previously granted options.

 


 

YEAR TO DATE RESULTS OF OPERATIONS
(for the nine months ended September 30, 2007 and 2006)
Net loss for the nine month period ending September 30, 2007 was $11,556,714 compared to $9,407,419 for the nine month period ending September 30, 2006.
Research and Development Expenses (“R&D”)
                 
    2007   2006
    $   $
 
Manufacturing and related process development expenses
    3,546,732       2,751,207  
Clinical trial expenses
    2,983,688       1,920,467  
Pre-clinical trial and research collaboration expenses
    731,445       691,553  
Other R&D expenses
    1,553,390       1,219,460  
 
Research and development expenses
    8,815,255       6,582,687  
 
For the nine month period ending September 30, 2007, R&D increased to $8,815,255 compared to $6,582,687 for 2006. The increase in R&D was due to the following:
Manufacturing & Related Process Development (“M&P”)
                 
    2007   2006
    $   $
 
Product manufacturing expenses
    3,134,143       1,664,308  
Technology transfer expenses
          457,975  
Process development expenses
    412,589       628,924  
 
Manufacturing and related process development expenses
    3,546,732       2,751,207  
 
Our M&P expenses for the nine month period ending September 30, 2007 increased to $3,546,732 compared to $2,751,207 in 2006. For the nine month period ending September 30, 2007, our production and vial filling activity increased compared to 2006. During this period of 2007, we completed production runs that commenced in 2006 and initiated additional production runs to manufacture REOLYSIN® at the beginning of 2007. Also, as a result of the increased viral yields from the process development activity in 2006, we have incurred additional vial filling and packaging costs compared to 2006.
For the nine month period ending September 30, 2006, we completed the production runs that were ongoing at the end of 2005 for our Phase I trials. At the same time, our process development activity helped improve the virus yields from our manufacturing process. These improvements were then transferred to our cGMP manufacturer with additional production runs initiated in the third quarter of 2006.
Our process development expenses for the nine month period ending September 30, 2007 were $412,589 compared to $628,924 for the nine month period ending September 30, 2006. During this period of 2007, our main process development focus has been on the scale up of our production process, which has included scale up studies at 40 and 100 litres. During the nine month period ending September 30, 2006, our process development activity included viral yield and scale up studies along with the validation of our fill process.
We still expect that our overall manufacturing and related process development expenses for 2007 will be in line with 2006. In the fourth quarter of 2007, we plan to initiate a 40-litre technology transfer, complete our 100-litre scale up studies and investigate the lyophilization of REOLYSIN®. We are also examining ways to reduce our economic dependence resulting from having only a single cGMP manufacturer. This might include building up a level of inventory, increasing the scale of each production run, engaging another cGMP manufacturer or manufacturing REOLYSIN® ourselves. Depending on how we mitigate our risk of economic dependence our expectation of our 2007 M&P expenses may change.

 


 

Clinical Trial Program
                 
    2007   2006
    $   $
 
Direct clinical trial expenses
    2,798,024       1,783,138  
Other clinical trial expenses
    185,664       137,329  
 
Clinical trial expenses
    2,983,688       1,920,467  
 
During the nine month period ending September 30, 2007, our direct clinical trial expenses were $2,798,024 compared to $1,783,138 for the nine month period ending September 30, 2006. In this period of 2007, we incurred direct patient costs in our seven ongoing clinical trials. As well, we incurred clinical site start up costs for our three co-therapy trials in the U.K. and our Phase II sarcoma clinical trial in the U.S. During the nine month period ending September 30, 2006, we incurred direct patient costs in four ongoing clinical trials along with clinical site start up costs associated with our U.S. recurrent malignant glioma and U.K. Phase Ia combination REOLYSIN® /radiation therapy trials.
We expect our clinical trial expenses will continue to increase for the remainder of 2007 compared to 2006 as we continue patient enrollment and expand our clinical trial program to include other trial sites and other studies.
Pre-Clinical Trial Expenses and Research Collaborations
                 
    2007   2006
    $   $
 
Research collaboration expenses
    694,315       634,199  
Pre-clinical trial expenses
    37,130       57,354  
 
Pre-clinical trial expenses and research collaborations
    731,445       691,553  
 
During the nine month period ending September 30, 2007, our research collaboration expenses were $694,315 compared to $634,199 for the nine month period ending September 30, 2006. Our research collaboration activity continues to focus on the interaction of the immune system and the reovirus, the use of the reovirus as a co-therapy with existing chemotherapeutics, the use of new RAS active viruses as potential therapeutics, and to investigate new uses of the reovirus as a therapeutic.
For the remainder of 2007, we still expect that pre-clinical trial expenses and research collaborations will decline compared to 2006. We expect to continue with our various collaborations in order to provide support for our expanding clinical trial program. As well, we may expand our collaborative activities to include other viruses.

 


 

Other Research and Development Expenses
                 
    2007   2006
    $   $
 
R&D consulting fees
    180,043       134,650  
R&D salaries and benefits
    1,109,709       907,115  
Quebec scientific research and experimental development refund
    (15,927 )     (52,344 )
Other R&D expenses
    279,565       230,039  
 
Other research and development expenses
    1,553,390       1,219,460  
 
During the nine month period ending September 30, 2007, our R&D consulting fees were $180,043 compared to $134,650 for the nine month period ending September 30, 2007. During this period of 2007, we incurred consulting activity associated with our ongoing clinical trials and assistance with our clinical trial applications. During this period of 2006, our consulting activity related to our ongoing clinical trials.
Our R&D salaries and benefits costs were $1,109,709 for the nine month period ending September 30, 2007 compared to $907,115 for the nine month period ending September 30, 2006. The increase is a result of increases in salary and staff levels along with the addition of our Vice President of Intellectual Property in 2007.
We still expect that our Other Research and Development expenses for the remainder of 2007 will increase compared to 2006. We expect that salaries and benefits will increase to reflect increased compensation levels and the salary and benefit costs for our Vice President of Intellectual Property. Our R&D consulting fees are expected to remain consistent with 2006. However, we may choose to engage additional consultants to assist us in the development of protocols and regulatory filings for our additional combination therapy and phase II clinical trial studies, possibly causing our R&D consulting expenses to increase.
Operating Expenses
                 
    2007   2006
    $   $
 
Public company related expenses
    1,970,903       2,007,464  
Office expenses
    827,727       782,183  
 
Operating expenses
    2,798,630       2,789,647  
 
During the nine month period ending September 30, 2007, our public company related expenses were $1,970,903 compared to $2,007,464 for the nine month period ending September 30, 2006. In this period of 2007, our financial advisory expenses decreased compared to 2006. This decrease was offset by an increase in expenses associated with our investor relations activity in the U.S. and Europe and professional fees during the nine month period ending September 30, 2007 compared to 2006.
During the nine month period ending September 30, 2007, our office expenses were $827,727 compared to $782,183 for the nine month period ending September 30, 2006. Our office expense activity has remained consistent in 2007 to date compared to 2006 with increases mainly due to increased compensation levels and a general increase in office costs.
Stock Based Compensation
                 
    2007   2006
    $   $
 
Stock based compensation
    142,878       293,880  
 
Stock based compensation for the nine month period ending September 30, 2007 was $142,878 compared to $293,880 for the nine month period ending September 30, 2006. During this period of 2007, we incurred

 


 

stock based compensation associated with the vesting of options previously granted. In 2006, we incurred stock based compensation associated with the issue and immediate vesting of stock options to our two newly appointed directors and the vesting of previously granted options.
Commitments
As at September 30, 2007, we are committed to payments totaling $1,162,000 for the remainder of 2007 for activities related to clinical trial activity and collaborations. All of these committed payments are considered to be part of our normal course of business.
SUMMARY OF QUARTERLY RESULTS
The following unaudited quarterly information is presented in thousands of dollars except for per share amounts:
                                                                 
    2007   2006   2005
    Sept.   June   March   Dec.   Sept.   June   March   Dec.
Revenue
                                               
Interest income
    319       359       268       286       320       335       292       160  
Net loss(3),
    3,764       3,680       4,156       4,890       3,425       2,988       2,995       3,941  
Basic and diluted loss per common share(3)
  $ 0.09     $ 0.09     $ 0.11     $ 0.13     $ 0.09     $ 0.08     $ 0.08     $ 0.12  
Total assets(1), (4)
    33,897       37,670       41,775       33,566       37,980       40,828       43,660       46,294  
Total cash(2), (4)
    28,191       31,533       35,681       27,614       31,495       34,501       37,687       40,406  
Total long-term debt(5)
                      150       150       150       150       150  
Cash dividends declared(6)
  Nil     Nil     Nil     Nil     Nil     Nil     Nil     Nil  
 
(1)   Subsequent to the acquisition of Oncolytics Biotech Inc. by SYNSORB in April 1999, we applied push down accounting. See note 2 to the audited financial statements for 2006.
 
(2)   Included in total cash are cash and cash equivalents plus short-term investments.
 
(3)   Included in net loss and loss per common share between September 2007 and October 2005 are quarterly stock based compensation expenses of $38,909, $82,573, $21,396, $109,670, $34,671, $222,376, $36,833, and $38,152, respectively.
 
(4)   We issued 4,600,000 common shares for net cash proceeds of $12,063,394 during 2007 (2006 – 284,000 common shares for cash proceeds of $241,400; 2005 – 4,321,252 common shares for cash proceeds of $18,789,596).
 
(5)   The long-term debt recorded represents repayable loans from the Alberta Heritage Foundation. On January 1, 2007, in conjunction with the adoption of the CICA Handbook section 3855 “Financial Instruments”, this loan was recorded at fair value (see note 1 of the September 30, 2007 interim financial statements).
 
(6)   We have not declared or paid any dividends since incorporation.
LIQUIDITY AND CAPITAL RESOURCES
As at September 30, 2007, we had cash and cash equivalents (including short-term investments) and working capital positions of $28,191,464 and $26,343,848, respectively compared to $27,613,748 and $25,719,870, respectively for December 31, 2006. The increase in 2007 reflects the cash inflow from financing activities of $12,063,394 offset by cash usage from operating activities and additions to our intellectual property of $10,849,863 and $586,124, respectively.
We desire to maintain adequate cash and short-term investment reserves to support our planned activities which include our clinical trial program, product manufacturing, administrative costs, and our intellectual property expansion and protection. For the remainder of 2007, we are expecting to continue to enroll patients in our existing trials and we also expect to expand our clinical trial program. As well, we expect to continue with our collaborative studies pursuing support for our future clinical trial program. We will therefore need to ensure that we have enough REOLYSIN® to supply our clinical trial and collaborative

 


 

programs. We continue to expect our cash usage in 2007 to be $1,400,000 per month and we believe our existing capital resources are adequate to fund our current plans for research and development activities well into 2009. Factors that will affect our anticipated monthly burn rate include, but are not limited to, the number of manufacturing runs required to supply our clinical trial program and the cost of each run, additional activities reducing our economic dependence on a single supplier, the number of clinical trials ultimately approved, the timing of patient enrollment in the approved clinical trials, the actual costs incurred to support each clinical trial, the number of treatments each patient will receive, the timing of the NCI’s R&D activity, and the level of pre-clinical activity undertaken.
In the event that we choose to seek additional capital, we will look to fund additional capital requirements primarily through the issue of additional equity. We recognize the challenges and uncertainty inherent in the capital markets and the potential difficulties we might face in raising additional capital. Market prices and market demand for securities in biotechnology companies are volatile and there are no assurances that we will have the ability to raise funds when required.
Capital Expenditures
We spent $586,124 on intellectual property during the nine month period ending September 30, 2007 compared to $552,319 during the nine month period ending September 30, 2006. The change in intellectual property expenditures reflects the timing of filing costs associated with our expanded patent base. As well, we have benefited from a stronger Canadian dollar as our patent costs are typically incurred in U.S. currency. In the third quarter of 2007, two U.S. patents were issued bringing our total patents issued to 23 in the U.S. and six in Canada.
Investing Activities
Under our Investment Policy, we are permitted to invest in short-term instruments with a rating no less than R-1 (DBRS) with terms less than two years. We have $24,865,090 invested under this policy and we are currently earning interest at an effective rate of 4.23% (2006 – 3.89%).
OTHER MD&A REQUIREMENTS
We have 41,120,748 common shares outstanding at October 29, 2007. If all of our warrants (4,972,000) and options (3,497,950) were exercised we would have 49,590,698 common shares outstanding.
Additional information relating to Oncolytics Biotech Inc. is available on SEDAR at www.sedar.com.

 


 

FINANCIAL STATEMENTS
Oncolytics Biotech Inc.
September 30, 2007

 


 

Oncolytics Biotech Inc.
BALANCE SHEETS
(unaudited)
As at,
                 
    September   December 31,
    30, 2007   2006
    $   $
 
ASSETS
               
Current
               
Cash and cash equivalents
    3,326,374       3,491,511  
Short-term investments [note 7]
    24,865,090       24,122,237  
Accounts receivable
    36,637       84,003  
Prepaid expenses
    413,811       638,540  
 
 
    28,641,912       28,336,291  
 
               
Property and equipment
    169,226       149,596  
 
               
Intellectual property
    5,085,755       5,079,805  
 
 
    33,896,893       33,565,692  
 
 
               
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
Current
               
Accounts payable and accrued liabilities
    2,298,064       2,616,421  
 
Alberta Heritage Foundation loan [notes 1 and 8]
          150,000  
 
 
               
Shareholders’ equity
               
Share capital [note 2]
               
Authorized: unlimited number of common shares
               
Issued: 41,120,748 (December 31, 2006 – 36,520,748)
    92,708,665       83,083,271  
Warrants [note 2]
    6,654,740       4,216,740  
Contributed surplus [note 4]
    8,672,204       8,529,326  
Deficit [notes 1 and 5]
    (76,436,780 )     (65,030,066 )
 
 
    31,598,829       30,799,271  
 
 
               
 
    33,896,893       33,565,692  
 
See accompanying notes

 


 

Oncolytics Biotech Inc.
STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(unaudited)
                                         
                                    Cumulative
    Nine Month   Nine Month   Three Month   Three Month   from inception
    Period   Period   Period   Period   on April 2,
    Ending   Ending   Ending   Ending   1998 to
    September   September   September   September   September 30,
    30, 2007   30, 2006   30, 2007   30, 2006   2007
    $   $   $   $   $
 
Revenue
                                       
Rights revenue
                            310,000  
 
 
                            310,000  
 
 
                                       
Expenses
                                       
Research and development
    8,815,255       6,582,687       2,890,644       2,705,746       52,036,449  
Operating
    2,798,630       2,789,647       880,158       766,618       19,569,211  
Stock-based compensation [note 3]
    142,878       293,880       38,909       34,671       4,308,527  
Foreign exchange loss/(gain)
    2,829       (2,703 )     18,917       5,129       651,677  
Amortization – intellectual property
    713,887       647,893       244,299       220,774       4,750,721  
Amortization – property and equipment
    30,061       43,379       10,197       12,685       437,744  
 
 
    12,503,540       10,354,783       4,083,124       3,745,623       81,754,329  
 
 
                                       
Loss before the following:
    12,503,540       10,354,783       4,083,124       3,745,623       81,444,329  
 
                                       
Interest income
    (946,826 )     (947,364 )     (319,223 )     (320,454 )     (5,749,831 )
 
                                       
Gain on sale of BCY LifeSciences Inc.
                            (299,403 )
 
                                       
Loss on sale of Transition Therapeutics Inc.
                            2,156,685  
 
 
                                       
Loss before taxes
    11,556,714       9,407,419       3,763,901       3,425,169       77,551,780  
 
                                       
Future income tax recovery
                            (1,115,000 )
 
 
                                       
Net loss and comprehensive loss for the period
    11,556,714       9,407,419       3,763,901       3,425,169       76,436,780  
 
 
                                       
Basic and diluted loss per share
    0.29       0.26       0.09       0.09          
   
 
                                       
Weighted average number of shares (basic and diluted)
    40,181,777       36,317,687       41,120,748       36,368,270          
   
See accompanying notes

 


 

Oncolytics Biotech Inc.
STATEMENTS OF CASH FLOWS
(unaudited)
                                         
                                    Cumulative
                    Three Month   Three Month   from inception
    Nine Month   Nine Month   Period   Period   on April 2,
    Period Ending   Period Ending   Ending   Ending   1998 to
    September 30,   September 30,   September   September   September 30,
    2007   2006   30, 2007   30, 2006   2007
    $   $   $   $   $
 
OPERATING ACTIVITIES
                                       
Net loss for the period
    (11,556,714 )     (9,407,419 )     (3,763,901 )     (3,425,169 )     (76,436,780 )
Add/(deduct) non-cash items
                                       
Amortization – intellectual property
    713,887       647,893       244,299       220,774       4,750,721  
Amortization – property and equipment
    30,061       43,379       10,197       12,685       437,744  
Stock-based compensation
    142,878       293,880       38,909       34,671       4,308,527  
Other non-cash items [note 6]
                            1,383,537  
Net changes in non-cash working capital [note 6]
    (179,975 )     (34,485 )     239,121       261,875       1,724,946  
 
 
    (10,849,863 )     (8,456,752 )     (3,231,375 )     (2,895,164 )     (63,831,305 )
 
 
                                       
INVESTING ACTIVITIES
                                       
Intellectual property
    (586,124 )     (552,319 )     (99,066 )     (187,283 )     (6,085,404 )
Property and equipment
    (49,691 )     (29,342 )     (11,386 )     (8,294 )     (673,039 )
Purchase of short-term investments
    (742,853 )     (801,358 )     (255,688 )     (261,480 )     (48,862,320 )
Redemption of short-term investments
          10,158,000                   23,578,746  
Investment in BCY LifeSciences Inc.
                            464,602  
Investment in Transition Therapeutics Inc.
                            2,532,343  
 
 
    (1,378,668 )     8,774,981       (366,140 )     (457,057 )     (29,045,072 )
 
 
                                       
FINANCING ACTIVITIES
                                       
Proceeds from exercise of warrants and stock options
          127,500             85,000       15,208,468  
Proceeds from private placements
                            38,137,385  
Proceeds from public offerings [note 2]
    12,063,394                         42,856,898  
 
 
    12,063,394       127,500             85,000       96,202,751  
 
 
                                       
Increase (decrease) in cash and cash equivalents during the period
    (165,137 )     445,729       (3,597,515 )     (3,267,221 )     3,326,374  
Cash and cash equivalents, beginning of the period
    3,491,511       3,511,357       6,923,889       7,224,307        
 
 
                                       
Cash and cash equivalents, end of the period
    3,326,374       3,957,086       3,326,374       3,957,086       3,326,374  
 
See accompanying notes

 


 

Oncolytics Biotech Inc.
NOTES TO FINANCIAL STATEMENTS
September 30, 2007 (unaudited)
1. ACCOUNTING POLICIES
These unaudited interim financial statements have been prepared in accordance with Canadian generally accepted accounting principles. The notes presented in these unaudited interim financial statements include only significant events and transactions occurring since the Company’s last fiscal year end and are not fully inclusive of all matters required to be disclosed in the Company’s annual audited financial statements. Accordingly, these unaudited interim financial statements should be read in conjunction with the Company’s most recent annual financial statements. The information as at and for the year ended December 31, 2006 has been derived from the Company’s audited financial statements.
The accounting policies used in the preparation of these unaudited interim financial statements conform with those used in the Company’s most recent annual financial statements except for the following:
Adoption of New Accounting Policies
Financial Instruments
On January 1, 2007, the Company prospectively adopted, without restatement, CICA Handbook Section 3855 “Financial Instruments – Recognition and Measurement” and Section 1530 “Other Comprehensive Income”. Pursuant to the transitional provisions of Section 3855, the Company classified its short-term investments as held-to-maturity fixed income securities and recorded its Alberta Heritage Foundation interest free loan at fair value. As a result, there were no adjustments made to short-term investments or other comprehensive income and there was a decrease in the Alberta Heritage Foundation loan of $150,000 with a corresponding decrease of $150,000 in the Company’s deficit.
Financial Assets
Financial assets are comprised of cash and cash equivalents, accounts receivable (mainly goods and service tax receivable), and short-term investments.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and interest bearing deposits with the Company’s bank.
Short-term investments
The Company determines the appropriate classification of its short-term investments at the time of purchase and reevaluates such designation as of each balance sheet date. Short-term investments can be classified as held-for-trading, available-for-sale or held-to-maturity. Currently, the Company has classified all of its short-term investments as held-to-maturity as it has the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are stated at original cost, adjusted for amortization of premiums and accretion of discounts to maturity computed under the effective interest rate method. Such amortization and interest on securities classified as held-to-maturity are included in interest income.
Financial Liabilities
Financial liabilities are comprised of trade accounts payable and accrued liabilities.

 


 

Oncolytics Biotech Inc.
NOTES TO FINANCIAL STATEMENTS
September 30, 2007 (unaudited)
2. SHARE CAPITAL
Authorized:
Unlimited number of common shares
                                 
Issued:   Shares           Warrants    
            Amount           Amount
    Number   $   Number   $
 
Balance, December 31, 2005
    36,236,748       82,841,871       2,784,800       4,429,932  
 
Exercise of options
    284,000       241,400              
 
Expired warrants
                (112,800 )     (213,192 )
 
 
Balance, December 31, 2006
    36,520,748       83,083,271       2,672,000       4,216,740  
 
Issued for cash pursuant to February 22, 2007 public offering (a)
    4,600,000       11,362,000       2,300,000       2,438,000  
 
Share issue costs
          (1,736,606 )            
 
 
Balance, September 30, 2007
    41,120,748       92,708,665       4,972,000       6,654,740  
 
     
(a)   Pursuant to a public offering, 4,600,000 units were issued at an issue price of $3.00 per unit for gross proceeds of $13,800,000. Each unit included one common share (ascribed value of $2.47) and one-half of one common share purchase warrant (ascribed value of $0.53) for a total of 2,300,000 warrants. The ascribed value was determined using the relative fair value method. Each whole common share purchase warrant entitles the holder to acquire one common share in the capital of the Company upon payment of $3.50 per share until February 22, 2010. Share issue costs for this offering were $1,736,606.
The following table summarizes the weighted average assumptions used in the Black-Scholes Model with respect to the valuation of warrants:
     
    2007
 
Risk-free interest rate
  4.08 %
Expected hold period to exercise
  3 years
Volatility
  62.8 %
Dividend yield
 
 
There were no warrants issued during the nine month period ending September 30, 2006.

 


 

Oncolytics Biotech Inc.
NOTES TO FINANCIAL STATEMENTS
September 30, 2007 (unaudited)
The following table summarizes the Company’s outstanding warrants as at September 30, 2007:
                                         
                                    Weighted
                                    Average
    Outstanding,   Granted   Exercised   Expired           Remaining
Exercise   Beginning of   During the   During the   During the   Outstanding,   Contractual
Price   the Period   Period   Period   Period   End of Period   Life (years)
 
$3.50
          2,300,000           2,300,000       2.40  
 
$5.65
    320,000                 320,000       1.25  
 
$6.15
    1,600,000                 1,600,000       1.25  
 
$8.00
    752,000                 752,000       0.15  
 
 
 
    2,672,000       2,300,000           4,972,000       1.62  
 
3. STOCK BASED COMPENSATION
Stock Option Plan
The Company has issued stock options to acquire common stock through its stock option plan of which the following are outstanding:
                                 
    2007   2006
            Weighted           Weighted
            Average           Average
    Stock   Share Price   Stock   Share Price
    Options   $   Options   $
 
Outstanding, January 1
    3,537,950       4.88       3,634,550       4.66  
Granted during period
    100,000       3.28       100,000       3.85  
Exercised during period
                    (150,000 )     0.85  
Cancelled
    (140,000 )     2.90              
                         
 
                               
Outstanding, September 30
    3,497,950       4.84       3,584,550       4.79  
                         
 
                               
Options exercisable, September 30
    3,290,450       4.94       3,352,050       4.91  
                         

 


 

Oncolytics Biotech Inc.
NOTES TO FINANCIAL STATEMENTS
September 30, 2007 (unaudited)
The following table summarizes information about the stock options outstanding and exercisable at September 30, 2007:
                                         
            Weighted   Weighted           Weighted
            Average   Average           Average
            Remaining   Exercise           Exercise
Range of Exercise   Number   Contractual   Price   Number   Price
Prices   Outstanding   Life (years)   $   Exercisable   $
 
$0.75 - $1.00
    318,550       2.1       0.85       318,550       0.85  
$1.65 - $2.37
    358,400       6.1       1.95       338,400       1.95  
$2.70 - $3.50
    800,250       6.7       3.15       625,250       3.13  
$4.00 - $5.00
    1,208,250       7.0       4.86       1,195,750       4.86  
$6.77 - $9.76
    684,500       4.4       8.66       684,500       8.66  
$12.15 - $13.50
    128,000       3.1       12.63       128,000       12.63  
 
 
                                       
 
    3,497,950       5.7       4.84       3,290,450       4.94  
 
Options granted vest immediately or annually over one, three or four years at the discretion of the Board. The outstanding options vest annually or after the completion of certain milestones. The Company has reserved 4,052,075 common shares for issuance relating to outstanding stock options.
As the Company is following the fair value based method of accounting for stock options, the Company recorded compensation expense of $38,909 and $142,878 for the three and nine month periods ending September 30, 2007, respectively (September 30, 2006 – $34,671 and $293,880, respectively) with respect to the granting of options in the period and vesting of options issued in prior periods with an offsetting credit to contributed surplus.
The estimated fair value of stock options issued during the nine month period ending September 30, 2007 was determined using the Black-Scholes Model using the following weighted average assumptions and fair value of options:
             
    2007   2006
 
Risk-free interest rate
  4.11%     4.24 %
Expected hold period to exercise
  3.5 years   3.5 years
Volatility
  63%     64 %
Dividend yield
       
Weighted average fair value of options
  $1.56   $ 1.86  
 

 


 

Oncolytics Biotech Inc.
NOTES TO FINANCIAL STATEMENTS
September 30, 2007 (unaudited)
4. CONTRIBUTED SURPLUS
         
    Amount
    $
 
Balance, December 31, 2005
    7,912,584  
 
Expired warrants
    213,192  
 
Stock based compensation
    403,550  
 
Exercise of stock options
     
 
 
Balance, December 31, 2006
    8,529,326  
 
Stock based compensation
    142,878  
 
 
Balance, September 30, 2007
    8,672,204  
 
5. DEFICIT
         
    Amount
    $
 
Balance, December 31, 2005
    50,732,542  
 
Net loss for the year
    14,297,524  
 
 
Balance, December 31, 2006
    65,030,066  
 
Adjustment – Alberta Heritage Foundation loan [note 1]
    (150,000 )
 
Net loss and comprehensive loss, September 30, 2007
    11,556,714  
 
 
Balance, September 30, 2007
    76,436,780  
 

 


 

Oncolytics Biotech Inc.
NOTES TO FINANCIAL STATEMENTS
September 30, 2007 (unaudited)
6. ADDITIONAL CASH FLOW DISCLOSURE
Net Change In Non-Cash Working Capital
                                         
                                    Cumulative
    Nine   Nine   Three   Three   from
    Month   Month   Month   Month   inception
    Period   Period   Period   Period   on April 2,
    Ending   Ending   Ending   Ending   1998 to
    September   September   September   September   September
    30, 2007   30, 2006   30, 2007   30, 2006   30, 2007
    $   $   $   $   $
 
Change in:
                                       
Accounts receivable
    47,366       9,750       10,080       16,507       (36,637 )
Prepaid expenses
    224,729       (691,329 )     384,380       (233,919 )     (413,811 )
Accounts payable and accrued liabilities
    (318,357 )     671,927       (147,926 )     457,687       2,298,064  
 
Net change in non-cash working capital
    (46,262 )     (9,652 )     246,534       240,275       1,847,616  
Portion related to investing activities
    (133,713 )     (24,833 )     (7,413 )     21,600       (122,670 )
 
Net change associated with operating activities
    (179,975 )     (34,485 )     239,121       261,875       1,724,946  
 
                         
                    Cumulative
Other Non-Cash Items   Nine   Nine   Three   Three   from
    Month   Month   Month   Month   inception on
    Period   Period   Period   Period   April 2,
    Ending   Ending   Ending   Ending   1998 to
    September   September   September   September   September
    30, 2007   30 ,2006   30, 2007   30, 2006   30, 2007
    $   $   $   $   $
 
Foreign exchange loss
            425,186  
Donation of medical equipment
            66,069  
Loss on sale of Transition Therapeutics Inc.
            2,156,685  
Gain on sale of BCY LifeSciences Inc.
            (299,403 )
Cancellation of contingent payment obligation settled in common shares
            150,000  
Future income tax recovery
            (1,115,000 )
 
 
            1,383,537  
 
7. SHORT-TERM INVESTMENTS
Short-term investments, consisting of Government of Canada treasury bills, are liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. The objectives for holding short-term investments are to invest the Company’s excess cash resources in investment vehicles that provide a better rate of return compared to the Company’s interest bearing bank

 


 

Oncolytics Biotech Inc.
NOTES TO FINANCIAL STATEMENTS
September 30, 2007 (unaudited)
account with limited risk to the principal invested. The Company also intends to match the maturities of these short-term investments with the cash requirements of the Company’s activities.
                                         
                                    Effective
    Original   Accrued   Carrying   Fair   Interest
    Cost   Interest   Value   Value   Rate
 
September 30, 2007
                                       
Short-term investments
    24,413,733       451,357       24,865,090       24,868,366       4.23 %
 
 
                                       
December 31, 2006
                                       
Short-term investments
    23,672,719       449,518       24,122,237       24,124,810       3.95 %
 
Fair value is determined by using published market prices provided by the Company’s investment advisor.
8. ALBERTA HERITAGE FOUNDATION LOAN
The Company received an interest free loan of $150,000 from the Alberta Heritage Foundation for Medical Research. Pursuant to the terms of the agreement, the Company is required to repay this amount in annual installments from the date of commencement of sales in an amount equal to the lesser of: (a) 5% of the gross sales generated by the Company; or (b) $15,000 per annum until the entire loan has been paid in full.
9. COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform with the current period’s presentation.

 


 

Shareholder Information
For public company filings please go to www.sedar.com or contact us at:
Oncolytics Biotech Inc.
Suite 210, 1167 Kensington Crescent NW
tel: 403.670.7377 fax: 403.283.0858
Calgary, Alberta, Canada T2N 1X7
www.oncolyticsbiotech.com
Officers
Brad Thompson, PhD
Chairman, President and CEO
Doug Ball, CA
Chief Financial Officer
Matt Coffey, PhD
Chief Scientific Officer
Karl Mettinger, MD, PhD
Chief Medical Officer
George Gill, MD
Senior Vice President, Clinical and Regulatory Affairs
Mary Ann Dillahunty, JD, MBA
Vice President, Intellectual Property
Directors
Brad Thompson, PhD
Chairman, President and CEO, Oncolytics Biotech Inc.
Doug Ball, CA
CFO, Oncolytics Biotech Inc.
Ger van Amersfoort
Biotech Consultant
William. A. Cochrane, OC, AOE, MD, FRCP(C)
Biotech Consultant
Jim Dinning, BCom, MPA
Chairman, Western Financial Group
Ed Levy, PhD
Adjunct Professor, University of British Columbia
J. Mark Lievonen, CA
President, Sanofi Pasteur Limited
Bob Schultz, FCA
Corporate Director
Fred A. Stewart, QC
President, Fred Stewart and Associates Inc.

 


 

Oncolytics Biotech Inc.
Suite 210, 1167 Kensington Crescent NW, Calgary, AB T2N 1X7
Phone: (403) 670.7377 Fax: (403) 283.0858
www.oncolyticsbiotech.com