Oncothyreon Restructures, Sells Stimuvax Site

Oncothyreon Inc. has announced plans to restructure and focus on development of two compounds, PX-478 and PX-866. PX-478 is an inhibitor of hypoxia inducible factor-1 alpha that is currently in a Phase I trial for advanced metastatic cancer and lymphoma. PX-866 is an inhibitor of PI-3 kinase that is also in a Phase I trial in patients with advanced cancer.

The company will reduce the size of its workforce and its senior management team. Approximately eight employees in its Edmonton facility, primarily engaged in preclinical work and administrative functions, will be fired. In addition, Edward Taylor, vice president and chief financial officer, and Rao Koganty, Ph.D., vice president and head of Synthetic Biologics, will be retiring, effective December 31, 2008. The resignation of Lynn Kirkpatrick, Ph.D., as chief scientific officer effective December 31, was previously announced. Oncothyreon also intends to close its Tucson facility in 2009 and to transfer to Seattle or outsource activities in support of PX-478 and PX-866 that are currently conducted in Tucson.

In addition, Oncothyreon has sold responsibility for the manufacture of Stimuvax to Merck KGaA. Merck and its EMD Serono Canada subsidiary have purchased current inventory and certain assets utilized for the manufacture of Stimuvax for net payments of approximate $13 million. As part of the transaction Merck KGaA has assumed control of Oncothyreon’s Edmonton, Canada facility, which is primarily utilized for the manufacture and development of Stimuvax.

EMD Serono Canada intends to offer employment to the majority of Oncothyreon’s 52 employees in Edmonton. In addition, Merck KGaA will be responsible for all further development costs related to Stimuvax, including commercial-scale manufacturing process development, and for the cost of goods at commercialization. The royalty rates payable to Oncothyreon on future net sales of Stimuvax, if any, have been adjusted to reflect that Oncothyreon is no longer responsible for these costs. Potential payments upon achievement of certain milestones under the previous agreements between Merck KGaA and Oncothyreon remain unchanged.

Stimuvax is an investigational therapeutic cancer vaccine designed to induce an immune response to cancer cells that express MUC1, a glycoprotein antigen widely expressed on common cancers. It is currently in Phase III.

“We believe that an intense focus on these exciting product candidates is the best means to create value with our available resources,” said Robert L. Kirkman, M.D., President and Chief Executive Officer of Oncothyreon. “We currently expect to complete the Phase I trials for each of these products and, if the data are supportive, to move each of them into Phase I trials in 2009. We believe the approximately $13 we received from the sale of manufacturing rights for Stimuvax and certain assets to Merck KGaA, together with existing cash, will be sufficient to fund these objectives.”

With the payments from the sale of manufacturing rights for Stimuvax and current inventory and certain assets to Merck KGaA, together with existing cash, the company has sufficient cash resources to fund operations into the first quarter of 2010, according to a company statement