the quarter ended March 31, 2009

the quarter ended March 31, 2009

first quarter, we announced updated clinical results from three combination

REOLYSIN and chemotherapy trials, all of which reported clinical benefit

(complete response + partial response + stable disease) in a majority of the

patients treated. This clinical benefit rate continues to surpass our

expectations as we move towards the initiation of our first pivotal program for

results are emerging from our work with REOLYSIN in combination with paclitaxel

and carboplatin for patients with advanced head and neck cancers. Our

investigators recently presented updated interim results of our U.K. Phase I/II

trial (REO 011) for patients with this type of cancer at the Fifth International

Meeting on Replicating Oncolytic Virus Therapeutics in Banff,

Alberta. Of 12 evaluable patients, five patients had partial

responses (PR), and four patients had stable disease (SD) ranging from two to

six months, for a response rate (PR + CR) of 42%, and an overall clinical

benefit rate (PR + CR + SD) of 75%. The expected response rate in

this patient population is generally in the 3-10% range. These

results provided the rationale for our decision to pursue a Phase III program

using this treatment combination in this patient population, and the planning

for this program is well underway.

same conference in Banff, our investigators provided updated information on our

U.K. combination REOLYSIN and docetaxel clinical trial (REO 010) for patients

with a variety of advanced cancers. Fifteen of the 17 evaluable

patients experienced SD or better, including five patients who experienced minor

and partial responses, for a clinical benefit rate of 88% - a very high

percentage in this heavily pretreated patient population.

the quarter, we completed patient enrolment in our U.K. REOLYSIN and gemcitabine

clinical trial (REO 009) for patients with advanced cancers. A total

of 15 patients were enrolled in the trial. Of the ten patients

evaluable for response, two patients (breast and nasopharyngeal) had PRs and

five patients had SD for 4-8 cycles, for a clinical benefit rate of

Collaborator-Sponsored

begin to focus our activities on our pivotal program, several of our

collaborators are beginning to initiate clinical studies of their

own. We announced in the quarter that the Cancer Therapy &

Research Center at The University of Texas Health Science Center in San Antonio,

(CTRC at UTHSCSA) plans to initiate up to five, open-label Phase II studies

exploring the use of intravenous REOLYSIN in combination with chemotherapy for

various cancer indications.

this year, the University of Leeds started enrolment in an

investigator-sponsored trial investigating intravenous administration of

REOLYSIN in patients with metastatic colorectal cancer prior to surgical

resection of liver metastases. The investigators will assess resected

tumours after REOLYSIN has been administered prior to their planned

operation. In addition to possible benefit to patients, the data will

tell us more about how REOLYSIN kills cancers cells, helping to guide future

research and development.

addition, the U.S. National Cancer Institute continues to enroll patients in two

clinical trials using REOLYSIN; a Phase II melanoma trial, and a Phase I/II

ovarian, peritoneal and fallopian tube cancer trial.

very pleased with the increased investigator interest in REOLYSIN as a cancer

therapeutic, and look forward to our future collaborations.

of Enrolment in Phase II NSCLC Trial

the quarter, we also started patient enrolment in a U.S. Phase II clinical

trial using intravenous administration of REOLYSIN in combination with

paclitaxel and carboplatin in patients with non-small cell lung cancer (NSCLC)

with K-RAS or EGFR-activated tumours. Eligible patients include those

who have not received chemotherapy treatment for their metastatic or recurrent

(REO 016) is a single arm, two-stage, open-label, Phase 2 study of REOLYSIN

given intravenously with paclitaxel and carboplatin every 3 weeks. Patients will

receive four to six cycles of paclitaxel and carboplatin in conjunction with

REOLYSIN, at which time REOLYSIN may be continued as a monotherapy. It is

anticipated that up to 36 patients will be treated in this trial. Previous

preclinical data indicates that reovirus tends to localize in the lungs, and we

have seen clinical responses in metastatic lung lesions with REOLYSIN as a

monotherapy as well as in combination with paclitaxel and carboplatin. A

significant clinical opportunity for REOLYSIN exists in the treatment of

patients with metastatic cancers, including NSCLC, who have a mutated K-RAS gene

and are unlikely to respond to treatment with EGF receptor

REOLYSIN and Radiation Results

to the quarter end, positive clinical results were announced from our U.K. Phase

II trial examining local administration of REOLYSIN in combination with low-dose

of 16 heavily pretreated patients with advanced cancer (melanoma (5), colorectal

(4), gastric (1), pancreas (1), ovarian (1), lung (1), cholangiocarcinoma (1)

sinus (1), and thyroid (1)) were enrolled in the trial. Most patients

had received prior chemotherapy (13 patients) or radiation (5 patients). Of 14

patients evaluable for response, 13 patients had stable disease (SD) or better

in the treated target lesions. Of these, partial responses (PR) were

observed in four patients (lung, melanoma (2) and gastric) and minor responses

were observed in two patients (thyroid, ovarian), for a total clinical benefit

rate of 93% in the treated lesions. The combination was well

tolerated, with only mild (Grade 1 or 2) toxicities noted.

high disease control rate in patients who have undergone prior

therapies. This combination resulted in marked responses or

stabilization in the treated target lesions for most of the patients. These

results are expected to allow us to pursue REOLYSIN in combination with radical

radiotherapy in future clinical trials.

Position Strengthened

Oncolytics completed its acquisition of an inactive private

company. The private company had accumulated tax losses from its

previous development business, and had approximately $2.1 million in net cash at

the closing of the transaction. In early May, we announced a proposed

equity financing that will consist of up to 3.45 million units at $2.00 per

unit, for gross proceeds of up to $6.9 million. The financing is

expected to close the week of May 11, 2009.

intellectual property portfolio continues to grow. We now have more than 200

issued patients worldwide, including 31 U.S. patents, and 10 Canadian

near future, we expect to finalize plans for our Phase III clinical trial using

REOLYSIN in combination with paclitaxel and carboplatin for patients with

platinum-failed head and neck cancers. We also anticipate announcing additional

results from our nine active clinical trials, and the trials sponsored by our