Kinase Inhibitors for Ocular Disease

A subset of MethylGene’s kinase inhibitors has been evaluated with our partner Otsuka Pharmaceutical Co. Ltd., a global Japanese pharmaceutical company, for the development of novel, small molecule, kinase inhibitors for local delivery and treatment of ocular diseases, excluding cancer. We have demonstrated that a set of our molecules can inhibit neovascularization in in vivo models of eye disease. MethylGene was responsible for the design, characterization and initial screening of kinase inhibitors and control over determining which compounds to synthesize. Otsuka is responsible for efficacy and toxicity studies, synthesis of limited compounds as determined by MethylGene, as well as preclinical and clinical development of compounds. Otsuka is also responsible for the global commercialization of any resulting product.

In 2008, MethylGene entered into a worldwide research collaboration and license agreement with Otsuka. MethylGene received an upfront license fee of US$2 million and may receive additional payments based on successful development, regulatory, commercialization and sales milestones that could total US$50.5 million, as well as royalties on net sales. Otsuka has provided MethylGene with US$1.9 million in research funding for the initial 18 months of the research collaboration which was extended for an additional six months in September 2009, resulting in additional funding of US$625,000. In October 2009 Otsuka made, in relation to the terms of the agreement, a US$1.5 million equity investment in MethylGene common shares at a share price of $0.426 which was a 20% premium over the five-day volume-weighted average closing price at the date of the transaction. On April 23, 2010, the collaboration agreement was extended to September 30, 2010. On June 30, 2010, the collaboration agreement was amended to, among certain other changes, provide Otsuka the rights to synthesize a limited number of compounds predetermined by MethylGene and to further extend the collaboration to June 30, 2011. The two extensions will result in additional revenues of $2 million through June 30, 2011 bringing the total potential benefits, including milestone payments, to $59.0 million.

EVP-0334

In 2005, MethylGene entered into an exclusive research, collaboration and license agreement with EnVivo Pharmaceuticals, a private U.S. biotechnology company, to exploit MethylGene’s histone deacetylase (HDAC) inhibitors in diseases such as Huntington’s, Parkinson’s, and Alzheimer’s. The result of this agreement is EVP-0334, a first-in-class, CNS-penetrant HDAC inhibitor in development expressly for CNS diseases for which EnVivo has completed Phase 1 clinical trials.

As part of this agreement, EnVivo paid MethylGene US$600,000 for research, plus a US$500,000 license fee for a total of US$1.1 million. In 2008, MethylGene exercised its right to opt-out of the program. As a result, MethylGene has granted EnVivo exclusive rights to its HDAC inhibitors for neurodegenerative diseases and MethylGene will cease research and development funding for this program. MethylGene will receive royalties on net sales of any approved compound and will share in any sublicense income from future partnerships that EnVivo may enter into.