Exercise of Underwriters' Over-Allotment Option

Biotech Inc. Announces

Exercise of Underwriters' Over-Allotment Option

CALGARY, AB - December 2, 2009 -

Oncolytics Biotech Inc. ("Oncolytics" or the

"Company") (TSX:ONC; NASDAQ:ONCY) announced today that in connection with its

previously announced unit offering, the underwriters have exercised in full

their over-allotment option and purchased an additional 637,500

units. Each unit is comprised of one common share and 0.4 of a common

share purchase warrant, and was sold at a price of US$3.00 per

unit. Each whole common share purchase warrant entitles the holder to

acquire one common share of Oncolytics upon payment of US$3.50 for a five year

period ending November 23, 2014, subject to an acceleration of the expiry date

in certain circumstances. Oppenheimer & Co. Inc. acted as the

sole book-running manager for the offering. Canaccord Capital Corporation and

Bloom Burton & Co. acted as Canadian co-managers for the

with the units sold on November 23, 2009, the Company has issued an aggregate of

4,887,500 units consisting of 4,887,500 common shares and 1,955,000 common share

purchase warrants for total gross proceeds of US$14,662,500.

intends to use the net proceeds from the offering to fund its previously

announced Phase III combination REOLYSIN and

paclitaxel/carboplatin trial for patients with platinum-failed head and neck

cancers, its other clinical development and research and development activities,

and for general corporate and working capital purposes.

this financing further strengthens our balance sheet and will allow us to

proceed beyond the 80 patient first stage of enrollment in our Phase III

clinical trial, while giving us improved flexibility in reviewing partnering

options," said Dr. Brad Thompson, President and CEO of Oncolytics. "After giving

effect to this financing, we have in excess of $36 million in cash on

securities were offered in each of the Canadian provinces of British Columbia,

Alberta, Manitoba and Ontario by way of a prospectus supplement to Oncolytics'

base shelf short form prospectus and in the United States pursuant to a

prospectus supplement to Oncolytics' effective Form F-10 shelf registration

statement (File No. 333-151513) previously filed with the United States

Securities and Exchange Commission on June 6, 2008, as amended on June 17, 2008,

pursuant to the United States Securities Act of 1933, as amended. Copies of the

prospectus supplement and accompanying base prospectus relating to the offering

may be obtained from the Securities and Exchange Commission website at http://www.sec.gov,

from the System for Electronic Document Analysis and Retrieval (SEDAR) website

at http://www.sedar.com or from the underwriters at:

Syndicate Prospectus Department

Madison Avenue, 5th Floor

number: (212) 667-8563

number (416) 869-3198

press release does not and shall not constitute an offer to sell or the

solicitation of an offer to buy any of the securities, nor shall there be any

sale of the securities in any state or jurisdiction in which such offer,

solicitation or sale would be unlawful prior to registration of qualification

under the securities laws of any state or jurisdiction.

Oncolytics Biotech Inc.

is a Calgary-based biotechnology company focused on the development of oncolytic

viruses as potential cancer therapeutics. Oncolytics' clinical program includes

a variety of human trials including a Phase III trial in head and neck cancers

using REOLYSIN, its proprietary formulation of the human reovirus.

This press release contains

forward-looking statements, within the meaning of Section 21E of the Securities

Exchange Act of 1934, as amended. Forward-looking

statements,including

the Company's expectations related to use of net proceeds; the Company's belief

as to the potential of REOLYSIN as a cancer therapeutic; the Company's

expectations as to the success of its research and development programs in 2009

and beyond, the Company's planned operations, the value of the additional

patents and intellectual property; the Company's expectations related to the

applications of the patented technology; the Company's expectations as to

adequacy of its existing capital resources; the design, timing, success of

planned clinical trial programs; and other statements related to anticipated

developments in the Company's business and technologies involve known and

unknown risks and uncertainties, which could cause the Company's actual results

to differ materially from those in the forward-looking statements. Such risks

and uncertainties include, among others, exercise of the over-allotment option

by the underwriters, use of net proceeds, 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, the

Company's ability to successfully commercialize REOLYSIN, uncertainties related

to the research and development of pharmaceuticals, uncertainties related to the

regulatory process and general changes to the economic

environment. Investors should consult the Company's 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. Investors are cautioned against placing undue reliance on

forward-looking statements. The Company does not undertake to update

these forward-looking statements, except as required by applicable

FURTHER INFORMATION PLEASE CONTACT: