UNAUDITED INTERIM BALANCE SHEETS

Q1 QUARTERLY REPORT FIRST QUARTER – FISCAL 2009 PERIOD ENDED MARCH 31, 2009 DISCOVER, DEVELOP, DELIVER ® MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE FIRST QUARTER 2009 Management’s discussion and analysis provides a review of our performance and should be read in conjunction with our unaudited interim financial statements and notes included herewith which have been prepared in accordance with Canadian generally accepted accounting principles (GAAP) for interim financial statements together with our annual audited financial statements and management’s discussion and analysis of financial condition and results of operations (MD&A) for the fiscal year ended December 31, 2008 which can be found at www.sedar.com and on our website at www.methylgene.com. This review was prepared by management from information available as at May 6, 2009. To the extent any statements made in this document contain information that is not historical, these statements are essentially forward-looking and are subject to substantial risks and uncertainties. Actual results, levels of activity, performance, or achievements could differ materially from those projected herein and depend on a number of factors, including the successful and timely completion of research and clinical trials, decisions of our collaborators, the uncertainties related to the regulatory process, and the commercialization of our drug products thereafter. A complete discussion of our risk factors is included in our Annual Information Form (AIF) for December 31, 2008 which can be found on SEDAR at www.sedar.com. Where we say “we”, “us”, “our” or the “Company” we mean MethylGene Inc., unless otherwise indicated. All amounts are presented in thousands of Canadian dollars unless otherwise indicated. All percentages reflected herein are calculated on whole amounts as contained in our financial records and not on the rounded amounts as presented in the financial statements and as disclosed herein. OVERVIEW We are a publicly-traded, clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of novel therapeutics with a focus on cancer. We are currently running two Phase I trials for MGCD265, our multi-targeted (c-Met) kinase inhibitor and Phase I clinical trials in healthy volunteers for MGCD290, our fungal Hos2 (HDAC) inhibitor. In addition, we are working on obtaining the release of the partial clinical hold placed by the U.S. Food and Drug Administration (FDA) on MGCD0103 which has been in multiple clinical trials. The termination of the license and collaboration agreement with Celgene Corporation (“Celgene”) took effect on January 22, 2009. As a result, we reacquired exclusive rights in territories previously licensed to Celgene for our oncology histone deacetylase (HDAC) inhibitors, including MGCD0103, and sirtuin inhibitors. Celgene was responsible for 100% of clinical development costs for MGCD0103 from December 17, 2008 to January 22, 2009, inclusive and we are responsible for any costs going forward. Celgene was responsible for the sirtuin research program to January 22, 2009, inclusive and we have subsequently ended this program in line with our intention to discontinue non-funded discovery research as stated in our December 31, 2008 annual report. Revenues We have not generated any significant revenues from product sales to date and do not expect to do so for a number of years. Revenues to date have been generated substantially from our research contracts and license agreements. 2 CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our critical accounting policies and estimates remain the same as reported in our MD&A as at December 31, 2008 and which is included in our December 31, 2008 annual filings which can be found at www.sedar.com, except as noted below. CHANGE TO ACCOUNTING POLICIES Section 3064, “Goodwill and Intangible Assets” Section 3064, “Goodwill and Intangible Assets” which replaces Section 3062, “Goodwill and Other Intangible Assets” and Section 3450, “Research and Development Costs”, establishes standards for the recognition, measurement, presentation and disclosure of goodwill and intangible assets. The application of this new section had an impact on the Company’s financial results, as the Company will no longer recognize as intangible assets internally generated patents which do not meet the generally accepted accounting criteria for deferral and amortization. The new standard is effective for the Company’s interim and annual financial statements beginning on January 1, 2009 and the new standard has been adopted retroactively with restatement of prior periods. This resulted in an increase of the deficit with a corresponding reduction of intangible assets of $2.0 million as of December 31, 2007 and an increase of $1.9 million of the deficit with a corresponding reduction in intangible assets as of December 31, 2008. Furthermore, this resulted in a reduction of $75 in research and development costs and in net loss for the first quarter of 2008. Net loss per share was not affected. EIC-173, “Credit Risk and the Fair Value of Financial Assets and Financial Liabilities” In January 2009, the CICA issued EIC 173, “Credit Risk and the Fair Value of Financial Assets and Financial Liabilities” The EIC provides guidance on how to take into account credit risk of an entity and counterparty when determining the fair value of financial assets and financial liabilities, including derivative instruments. This EIC is effective for the Company’s fiscal year beginning January 1, 2009. Adoption of this EIC did not have a significant effect on the Company’s unaudited interim financial statements. INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) CONVERSION PLAN The CICA will converge Canadian GAAP with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) over a transition period to end in 2011. The IASB currently has projects underway that are expected to result in new pronouncements that continue to evolve IFRS, and, as a result, IFRS as at the transition date is expected to differ from its current form. As per our IFRS conversion plan, we have identified the differences between IFRS and our current accounting policies and during 2009 we plan to assess the impact of these differences as well as the various accounting alternatives offered pursuant to IFRS. We have and expect to continue to invest in training and resources throughout the transition period to facilitate a timely conversion. We expect our plan will identify and evaluate the impact of the conversion to IFRS on operational elements such as information technology, internal controls over financial reporting (ICFR), disclosure controls and procedures (DC&P), and our current business policies. The impact on our financial reporting cannot be reasonably estimated at this time. 3 Fluctuations in Operating Results We anticipate that our quarterly and annual results of operations may, for the foreseeable future, be impacted by significant fluctuations in any or all of revenues, research and development expenses, foreign exchange, timing of investments in headcount and facilities or advancement of clinical trials. As a result of these fluctuations, we do not believe that the period-to-period comparisons of our operating results are a good indicator of future performance. Three Months Ended March 31, 2009 compared to Three Months Ended March 31, 2008 Revenues Research Collaborations and Contract Revenues Research collaborations and contract revenues in Q1, 2009 of $1.5 million decreased by $1.7 million from Q1, 2008, reflecting the impact of the termination of the license and collaboration agreement with Celgene for MGCD0103 and the sirtuin research program, partially offset by the increase due to the Otsuka research program which was entered into at the end of Q1, 2008. License and Up-front Fees License and up-front fees of $138 in Q1, 2009 were $891 lower than in Q1, 2008 relating primarily to the impact of terminating the license and collaboration agreement with Celgene for MGCD0103. Research and Development Expenses Gross research and development expenses in Q1, 2009 of $7.4 million decreased by $1.4 million or 16.0% versus Q1, 2008. This decrease relates primarily to lower spending in research, as we have discontinued all non-funded discovery research, and lower clinical development expenses for MGCD0103, our HDAC oncology inhibitor program which was partially offset by higher spending on MGCD265, our multi-targeted (c-Met) kinase oncology inhibitor program. Government assistance from current operations of $296 in Q1, 2009, primarily in the form of investment tax credits (ITC) decreased by $67 from Q1, 2008 due to the lower eligible spending. General and Administrative Expenses General and administrative expenses of $1.3 million in Q1, 2009 decreased by $401 as compared to Q1, 2008 primarily due to lower salaries due to the restructuring and lower professional fees, as we had incurred legal and other professional fees relating to the conversion of our agreement with EnVivo Pharmaceuticals and to our collaboration agreement with Otsuka Pharmaceutical Co. Ltd. entered into in Q1, 2008. Corporate and Other Transaction Costs Corporate and other transaction costs of $47 in Q1, 2009 [nil in Q1, 2008] relate to business consulting costs. 4 Interest Income and Realized Foreign Exchange Gain Interest income in Q1, 2009 of $131, was $463 lower than Q1, 2008 reflecting the impact of having both lower average cash balances and lower average interest rates in Q1, 2009 versus Q1, 2008. As a result of the continuing difficult global credit and financial environment we are investing our excess cash into government treasury and bank-guaranteed financial instruments which provide relatively low interest rates. We recorded a realized foreign exchange gain of $645 in Q1, 2009 versus a gain of $169 in Q1, 2008. The gain in Q1, 2009 reflects the realization of foreign exchange gains on our U.S. dollar denominated cash and working capital balances as the U.S. dollar has gained in value in comparison to the Canadian dollar. Other Expenses Other expenses of $18 [$14 in Q1, 2008] include amortization, write-off, and loss on sale of property, plant and equipment, and bank charges. Income Taxes The Company recognized a future income tax expense of $97 in Q1, 2009 [nil in Q1, 2008] resulting from the reduction of a previously recognized income tax benefit due to unrealized gains on available-for-sale cash equivalents and marketable securities in the statement of other comprehensive loss. Loss per Share The loss of $0.17 per share in Q1, 2009 versus the loss of $0.14 per share in Q1, 2008 relates to the lower revenue relating to the termination of the agreement with Celgene, partially offset by lower operating expenses and a larger foreign exchange gain in Q1, 2009 versus Q1, 2008. 5 Selected Quarterly Information 2009 (in thousands of dollars, except per share data) Research collaboration and contract revenues License and up-front fees Total revenue Research and development - gross expenditures Government assistance Research and development - net General and administrative Corporate and other transaction costs Interest income Other expenses Foreign exchange (gain) loss Total expenses Income tax expense (recovery) Net (loss) income Basic and diluted (loss) income per share Other comprehensive (loss) income (net of income taxes) Comprehensive (loss) income Q1 $ 1,527 138 1,665 Q4 $ 2,803 12,352 15,155 2008 Q3 $ 2,994 2,838 5,832 1 2007 Q2 $ 3,192 1,088 4,280 Q1 $ 3,199 1,029 4,228 Q4 $ 3,581 1,069 4,650 Q3 $ 2,640 1,016 3,656 Q2 $ 2,635 1,018 3,653 7,406 (296) 7,110 1,280 47 (131) 18 (645) 7,679 97 (6,111) (0.17) (217) (6,328) 9,133 (375) 8,758 1,227 (309) 125 (1,472) 8,329 (139) 6,965 0.19 192 7,157 8,796 (346) 8,450 1,250 222 (331) 12 (437) 9,166 (3,334) (0.09) 30 (3,304) 10,492 (419) 10,073 1,378 503 (419) 13 126 11,674 (7,394) (0.20) (10) (7,404) 8,815 (363) 8,452 1,681 (594) 14 (169) 9,384 (5,156) (0.14) 195 (4,961) 9,770 (326) 9,444 1,295 (742) 964 693 11,654 (7,004) (0.20) 690 (6,314) 9,197 (695) 8,502 1,185 (773) 52 248 9,214 (5,558) (0.15) (484) (6,042) 8,803 (313) 8,490 1,244 (833) 39 919 9,859 (6,206) (0.17) (69) (6,275) Comprehensive Loss We recorded an unrealized gain of $64 in Q1, 2009 [$131 in Q1, 2008] on cash and cash equivalents and marketable securities through other comprehensive loss and a reversal of $281 relating to the reclassification into income of realized gains [reversal of $64 in Q1, 2008 relating to the reclassification into income of realized losses] on cash and cash equivalents and marketable securities resulting in an overall increase in other comprehensive loss for Q1, 2009 of $217 [income of $195 in Q1, 2008]. LIQUIDITY AND CAPITAL RESOURCES As at March 31, 2009, we had $31.6 million of cash and cash equivalents and marketable securities, a decrease of $7.0 million from December 31, 2008. We recently realigned our operations in order to focus our resources on development of our clinical pipeline and we have discontinued non-funded discovery research. We believe that our current cash and cash equivalents, marketable securities, interest income and projected revenues from our current collaborations, projected timing of clinical trials and refundable investment tax credits will be sufficient to carry out our currently planned research and development plans and operations into the third quarter of 2010. The Company has an investment policy that monitors the safety and preservation of principal and investments, which limits the amount invested in any one company or fund and requires the investments to be made in highly rated companies or funds. The investments, as a result of the on-going global credit and financial environment, are only being made in government treasury or Canadian chartered bank instruments which can be liquidated at any time subject to minor market price variations upon sale. The investments are reviewed quarterly by the Audit Committee. The Company does not have any investments in non-bank sponsored asset-backed commercial paper. As restated to consider Handbook Section 3064, Goodwill and Intangible Assets, which was adopted retroactively with restatement of prior fiscal periods. 1 6 Cash used in operations in the first three months of 2009 of $6.7 million compared to $6.3 million used in the first three months of 2008 relates primarily to the increase in the operating loss. We did not acquire any of property, plant and equipment in the first three months of 2009 as compared with $155 during the first three months of 2008. There was no cash generated from financing activities in the first three months of 2009 and 2008. OTHER CAPITAL RESOURCES Research and development tax credits receivable at March 31, 2009 of $1.8 million was $296 higher than at December 31, 2008 due to an additional accrual for the first three months of 2009. Unbilled revenues at March 31, 2009 of $4.2 million have decreased marginally by $215 from December 31, 2008. Interest receivable of $118 in the first three months of 2009 is $208 lower than as at December 31, 2008 primarily due to reduced interest rates available on the market, lower average cash balances and the impact of making investments over shorter periods of time. Other current assets as at March 31, 2009 of $1.5 million have increased by $489 from December 31, 2008 due primarily to the timing of insurance and other annual service contracts paid in Q1, 2009. Accounts payable and accrued liabilities as at March 31, 2009 of $8.7 million have decreased by $501 from December 31, 2008 to reflect lower compensation related accruals. The current portion of unearned revenues as at March 31, 2009 of $549 has remained unchanged versus December 31, 2008, while longterm unearned revenue of $2.7 million is $137 lower than December 31, 2008 reflecting the current quarter amortization into license and up-front fees. The current and long-term portion of the lease abandonment cost of $191 and $352 respectively as at March 31, 2009 reflect a decrease of $1 and $47, respectively from December 31, 2008 due to the ongoing amortization. OFF-BALANCE SHEET ARRANGEMENTS We do not have any off-balance sheet arrangements except as noted under “Financial Commitments” in the MD&A which was included in our 2008 annual year-end filings, and consists of operating leases, royalty and milestone commitments and guarantees. Other than these commitments, which are considered to be in the ordinary course of business, we do not have any other off-balance sheet arrangements and do not expect to enter into any other such arrangements outside of the ordinary course of our business in the near future. TRANSACTIONS WITH RELATED PARTIES Celgene and Taiho Pharmaceutical Co. Ltd. are related parties as they are shareholders of the Company. We have recorded $1.2 million of contract revenues and license fees in the first three months of 2009 [$4.0 million in the first three months of 2008]. In addition, the balances as at March 31, 2009 related to transactions with related parties amounted to the following: unbilled revenue - $3.8 million [$3.8 million as at December 31, 2008]; current and long term unearned revenue of $1.1 million [$1.2 million as at December 31, 2008] and accounts payable and accrued liabilities - $2.2 million [$2.2 million as at December 31, 2008]. PROPOSED TRANSACTIONS At the Company’s stage of development we pursue collaborations, licensing opportunities and merger and acquisition opportunities as well as various financing alternatives on an ongoing basis. The Company is not party to any undertakings at this time. 7 FINANCIAL INSTRUMENTS Although we carry significant U.S. dollar based investments and do have U.S. dollar payments, we do not use hedging instruments as a policy. FINANCIAL COMMITMENTS Our financial commitments remain essentially the same as those reported in the MD&A for December 31, 2008 and which are included in our December 31, 2008 annual filings which can be found at www. sedar.com. INTERNAL CONTROLS OVER FINANCIAL REPORTING (ICFR) The Company’s President and Chief Executive Officer and the Vice President, Finance and Chief Financial Officer certify that there were no changes in the Company’s ICFR during the first quarter of 2009 that have materially affected, or are reasonably likely to materially affect, the Company’s ICFR. OUTSTANDING SHARE DATA The number of common shares and stock options outstanding as of May 6, 2009 was 36,682,398 and 3,214,085 respectively. There were also 2,206,809 common share purchase warrants with an exercise price of $4.25 which expired on May 3, 2009. 8       Unaudited Interim Financial Statements MethylGene Inc. March 31, 2009 9 MethylGene Inc. Notice of Disclosure of Non-Auditor Review of Interim Financial Statements for the Three Months Ended March 31, 2009 Pursuant to National Instrument 51-102, Part 4, subsection 4.3(3)(a) issued by the Canadian Securities Administrators, if an auditor has not performed a review of the interim financial statements, the interim financial statements must be accompanied by a notice indicating that they have not been reviewed by the auditor. The accompanying unaudited interim financial statements of the Company for the interim periods ended March 31, 2009 and 2008, have been prepared in accordance with Canadian generally accepted accounting principles and are the responsibility of the Company's management. The Company's independent auditors, Ernst & Young LLP, have not performed a review of these financial statements in accordance with the standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statements by an entity's auditor. Dated this 6th day of May 2009. (signed) Klaus B. Kepper Klaus B. Kepper Vice President Finance and Chief Financial Officer (signed) Donald F. Corcoran Donald F. Corcoran President and Chief Executive Officer 10 MethylGene Inc. Incorporated under the Quebec Companies Act UNAUDITED INTERIM BALANCE SHEETS [In thousands of Canadian dollars] March 31, 2009 $ December 31, 2008 $ [Restated - Note 3] ASSETS Current Cash and cash equivalents Marketable securities Research and development tax credits receivable Unbilled revenue [note 6] Interest receivable Other current assets Total current assets Security deposits Property, plant and equipment LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable and accrued liabilities [note 6] Current portion of unearned revenue [note 6] Current portion of lease abandonment cost Total current liabilities Unearned revenue [note 6] Lease abandonment cost Total liabilities Shareholders’ equity Capital stock [note 5] Contributed surplus Deficit Accumulated other comprehensive (loss) income[note 8] Total shareholders’ equity See accompanying notes On behalf of the Board: (signed) Colin Mallet Director (signed) Louis Lacasse Director 19,653 11,919 1,769 4,220 118 1,523 39,202 325 1,859 41,386 5,947 32,659 1,473 4,435 326 1,034 45,874 325 2,131 48,330 8,691 549 191 9,431 2,722 352 12,505 118,095 8,925 (98,233) 94 28,881 41,386 9,192 549 192 9,933 2,859 399 13,191 118,095 8,855 (92,122) 311 35,139 48,330 11 MethylGene Inc. UNAUDITED INTERIM STATEMENTS OF OPERATIONS AND DEFICIT [In thousands of Canadian dollars, except for share and per share amounts] Three-month periods ended March 31, 2009 2008 $ $ [Restated - Note 3] REVENUES [note 7] Research collaborations and contract revenues License and up-front fees 1,527 138 1,665 3,199 1,029 4,228 EXPENSES Research and development Government assistance Net current research and development General and administrative Interest income Amortization and write-off of property, plant and equipment Loss on sale of property, plant and equipment Corporate and other transaction costs Bank charges and interest Foreign exchange gain Loss for the period before income tax Future income tax expense Net loss for the period Deficit, beginning of period, as previously reported Change in accounting policy [note 3] Deficit, beginning of period, as adjusted Deficit, end of period Basic and diluted loss per share [note 5] Weighted average number of common shares See accompanying notes 7,406 (296) 7,110 1,280 (131) 6 4 47 8 (645) 7,679 (6,014) 97 (6,111) (90,175) (1,947) (92,122) (98,233) (0.17) 36,682,398 8,815 (363) 8,452 1,681 (594) 4 — — 10 (169) 9,384 (5,156) — (5,156) (81,196) (2,007) (83,203) (88,359) (0.14) 36,682,398 12 MethylGene Inc. UNAUDITED INTERIM STATEMENTS OF COMPREHENSIVE LOSS [In thousands of Canadian dollars] Three-month periods ended March 31, 2009 $ 2008 $ [Restated - Note 3] Net loss for the period Other comprehensive loss [note 8] Change in unrealized gains on cash equivalents and marketable securities, net of income tax expense of $28 [2008-nil] Reclassification adjustment to net loss of realized (gains) losses on cash equivalents and marketable securities, net of income tax recovery of $125 [2008-nil] Comprehensive loss for the period (6,111) (5,156) 64 (281) (217) (6,328) 131 64 195 (4,961) See accompanying notes 13 MethylGene Inc. UNAUDITED INTERIM STATEMENTS OF CASH FLOWS [In thousands of Canadian dollars] Three-month periods ended March 31, 2009 $ 2008 $ [Restated - Note 3] OPERATING ACTIVITIES Net loss for the period Items not affecting cash: Amortization of property, plant and equipment Write-off of property, plant and equipment Loss on sale of property, plant and equipment Future income tax expense Stock-based compensation expense [note 5] (6,111) 265 2 4 97 70 (5,673) (5,156) 314 — — — 162 (4,680) Net change in non-cash working capital balances related to operations Change in long-term portion of unearned revenue Cash flows related to operating activities INVESTING ACTIVITIES Acquisitions of property, plant and equipment Purchases of marketable securities Proceeds from maturities of marketable securities Proceeds from disposition of property, plant and equipment Cash flows related to investing activities Foreign exchange on cash equivalents held in foreign currency Increase in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period Cash and cash equivalents consist of: Cash Cash equivalents (911) (137) (6,721) (2,347) 773 (6,254) — (10,539) (10 539) 30,855 1 20,317 110 13,706 5,947 19,653 (155) (26,002) (26 002) 52,014 — 25,857 141 19,744 3,208 22,952 3,390 16,263 16 263 19,653 1,239 21,713 21 713 22,952 See accompanying notes 14 MethylGene Inc. NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS March 31, 2009 [In thousands of Canadian dollars, except share and per share amounts] 1. DESCRIPTION OF BUSINESS MethylGene Inc. [the “Company”] was incorporated on December 13, 1995 under the Quebec Companies Act and is a biopharmaceutical company operating in one business segment focused on the discovery, development and commercialization of novel therapeutics with a focus on cancer. On June 29, 2004, the Company’s shares were listed on the Toronto Stock Exchange. To date, the Company has not generated any revenue from product sales and has met its cash requirements primarily through share issuances, collaborative research agreements, government assistance programs including investment tax credits and government grants, and interest income. Until the Company attains profitability it will be necessary to raise additional funds for the continuing development and commercialization of its programs. 2. INTERIM FINANCIAL STATEMENTS These unaudited interim financial statements have been prepared by the Company in accordance with Canadian generally accepted accounting principles [GAAP] applicable to interim financial statements and follow the same accounting policies and methods applicable as the most recent annual audited financial statements, except for the changes to accounting policies stated in Note 3. In the opinion of management, all adjustments necessary for a fair presentation are reflected in the unaudited interim financial statements. Such adjustments are of a normal and recurring nature. The results of operations for the interim periods are not necessarily indicative of the operating results for the full year. The unaudited interim financial statements do not include all the disclosures required according to Canadian GAAP for annual financial statements, and should therefore be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2008 found on SEDAR at www.sedar.com. 3. CHANGES IN ACCOUNTING POLICIES The following Handbook Section, released by the Canadian Institute of Chartered Accountants [CICA], was adopted by the Company on January 1, 2009: Section 3064, “Goodwill and Intangible Assets” replaces Section 3062, “Goodwill and Other Intangible Assets” and Section 3450, “Research and Development Costs”, establishes standards for the recognition, measurement, presentation and disclosure of goodwill and intangible assets. The application of this new section had an impact on the Company’s financial results, as the Company will no longer recognize as intangible assets internally generated patents which do not meet the generally accepted accounting criteria for deferral and amortization. 15 MethylGene Inc. NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS March 31, 2009 [In thousands of Canadian dollars, except share and per share amounts] 3. CHANGES IN ACCOUNTING POLICIES [Cont’d] The new standard is effective for the Company’s interim and annual financial statements beginning on January 1, 2009 and the new standard has been adopted retroactively with restatement of prior periods. This resulted in an increase of the deficit with a corresponding reduction of intangible assets of $2.0 million as of December 31, 2007 and an increase of $1.9 million of the deficit with a corresponding reduction in intangible assets as of December 31, 2008. Furthermore, this resulted in a reduction of $75 in research and development costs and in net loss for the first quarter of 2008. Net loss per share was not affected. In January 2009, the CICA issued EIC 173, “Credit Risk and the Fair Value of Financial Assets and Financial Liabilities” The EIC provides guidance on how to take into account credit risk of an entity and counterparty when determining the fair value of financial assets and financial liabilities, including derivative instruments. This EIC is effective for the Company’s fiscal year beginning January 1, 2009. Adoption of this EIC did not have a significant effect on the Company’s unaudited interim financial statements. 4. PROPERTY, PLANT AND EQUIPMENT During the quarter ended March 31, 2009, the Company determined that certain of its property, plant and equipment were no longer being used in its operations. Consequently, the Company wrote-off laboratory equipment with a carrying value of $2 [2008 – nil] net of accumulated amortization of $212 [2008 – nil] and also disposed of, for an amount of $1, laboratory equipment with a carrying value of $5 [2008 – nil] and accumulated amortization of $2 [2008 – nil]. 5. CAPITAL STOCK Authorized An unlimited number of voting common shares without par value. Issued and outstanding – Common Shares The Company had 36,682,398 common shares issued as at March 31, 2009 and December 31, 2008. 16 MethylGene Inc. NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS March 31, 2009 [In thousands of Canadian dollars, except share and per share amounts] 5. CAPITAL STOCK [Cont’d] Stock-based compensation plan The changes to the number of stock options granted by the Company and their weighted average exercise price are as follows: Three-month periods ended March 31, 2008 2009 # $ # $ Balance, beginning of period Granted Forfeited Exercised Balance, end of period Options exercisable, end of period 3,595,748 535,000 (760,063) — 3,370,685 2,620,982 3.25 0.36 3.72 — 2.68 3.07 3,082,073 350,900 (46,575) — 3,386,398 2,652,658 3.77 2.24 3.83 — 3.61 3.83 The Company recorded an expense of $70 during the quarter ended March 31, 2009 [2008 - $162] related to stock option awards with a credit to contributed surplus for the same amount. The fair value of option grants awarded in the three-month periods ended March 31, 2009 and 2008 estimated at the date of grant using the Black-Scholes option pricing model and the following assumptions: Three-month periods ended March 31, Weighted average Risk-free interest rate Dividend yield Volatility factor Expected life 2009 1.50% — 81.80% 5 years 2008 2.99% — 42.70% 5 years 17 MethylGene Inc. NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS March 31, 2009 [In thousands of Canadian dollars, except share and per share amounts] 5. CAPITAL STOCK [Cont’d] The estimated fair value of the options is amortized to expense over the option’s vesting period. The weighted average fair value of stock options granted during the three-month period ended March 31, 2009 under the Black-Scholes option pricing model, and above assumptions was $0.24 [2008 - $0.93]. Loss per share There were no adjustments to the weighted average number of shares outstanding for the purpose of calculating diluted loss per share, because to do so would be anti-dilutive. 6. RELATED PARTY TRANSACTIONS The Company engaged in transactions with its corporate partners, who are also current shareholders. These transactions as well as the related balances have been recorded at exchange amounts. Significant transactions during the periods between corporate partners are as follows: Three-month periods ended March 31, 2008 2009 $ $ Contract revenue and licensing fees 1,195 3,997 Balances with the corporate partners recorded in the balance sheets are as follows: March 31, 2009 $ December 31, 2008 $ Unbilled revenue Accounts payable and accrued liabilities Current and long-term portions of unearned revenue 3,814 2,226 1,132 3,795 2,225 1,198 18 MethylGene Inc. NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS March 31, 2009 [In thousands of Canadian dollars, except share and per share amounts] 7. SEGMENTED INFORMATION The Company operates in a single business segment focused on the discovery, development and commercialization of novel therapeutics with a focus on cancer. In addition, the Company earns interest income from the investment of its excess cash. The Company operates out of its facilities in Canada and all of its assets are located in Canada. The Company’s contract revenues and license fees were derived as follows: Three-month periods ended March 31, 2009 $ 2008 $ United States Japan 1,150 515 1,665 4,120 108 4,228 8. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) March 31, 2009 $ December 31, 2008 $ Balance, beginning of period 311 (96) Variation of gain (loss) on cash equivalents Variation of gain (loss) on marketable securities Balance, end of period 76 (293) (217) 94 (63) 470 407 311 9. COMPARATIVE FIGURES Certain comparative figures of the previous year have been reclassified to conform to the presentation adopted in the current year. 19