Oncolytics Biotech Inc. Announces 2007 Second Quarter Results

July 27, 2007

CALGARY, July 27 /CNW/ - Oncolytics Biotech Inc. ("Oncolytics") (TSX:ONC, NASDAQ:ONCY) today announced its financial results and highlights for the three and six-month periods ended June 30, 2007.Second Quarter Highlights

Announced positive results from a U.S. Phase I systemic

administration trial for patients with advanced cancers;

Commenced patient enrolment in a multi-centre, U.S. Phase II sarcoma

trial;

Commenced patient enrolment in two, multi-centre combination

REOLYSIN® and chemotherapy trials in the U.K.;

Announced that the U.S. National Cancer Institute had filed a

protocol with the U.S. Food and Drug Administration (FDA) for a Phase

II clinical trial for patients with metastatic melanoma;

Successfully completed initial scale up of the REOLYSIN®

manufacturing process to 40-litre batch size;

Secured two additional U.S. patents and an additional Canadian

patent;

Presented encouraging preclinical work at the American Association

for Cancer Research Annual Meeting showing both in vitro and in vivo

synergy using the combination of REOLYSIN® and gemcitabine; and

In July, commenced patient enrolment in a multi-centre combination

REOLYSIN® and docetaxel trial in the U.K."We have entered an exciting phase of development for the Company this year, and particularly in the second quarter," said Dr. Brad Thompson, President and CEO of Oncolytics. "We are now conducting multi-centre Phase II trials in both the U.S. and the U.K., and are executing our clinical trial strategy for REOLYSIN® by expanding the scope and pace of development. We look forward to reporting the results of these and other ongoing trials in the quarters ahead."

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS

OF OPERATIONS

This discussion and analysis should be read in conjunction with the unaudited financial statements of Oncolytics Biotech Inc. as at and for the three and six months ended June 30, 2007 and 2006, and should also be read in conjunction with the audited financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") contained in our annual report for the year ended December 31, 2006. The financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP").

FORWARD-LOOKING STATEMENTS

The following discussion contains forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements, including our belief as to the potential of REOLYSIN® as a cancer therapeutic and our expectations as to the success of our research and development and manufacturing programs in 2007 and beyond, future financial position, business strategy and plans for future operations, and statements that are not historical facts, involve known and unknown risks and uncertainties, which could cause our actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties include, among others, the need for and 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, our ability to successfully commercialize REOLYSIN®, uncertainties related to the research, development and manufacturing of pharmaceuticals, uncertainties related to competition, changes in technology, the regulatory process and general changes to the economic environment. Investors should consult our 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. Forward-looking statements are based on assumptions, projections, estimates and expectations of management at the time such forward-looking statements are made, and such assumptions, projections, estimates and/or expectations could change or prove to be incorrect or inaccurate. Investors are cautioned against placing undue reliance on forward-looking statements. We do not undertake to update these forward-looking statements.

OVERVIEW

Oncolytics Biotech Inc. is a Development Stage Company

Since our inception in April of 1998, Oncolytics Biotech Inc. has been a development stage company and we have focused our research and development efforts on the development of REOLYSIN®, our potential cancer therapeutic. We have not been profitable since our inception and expect to continue to incur substantial losses as we continue research and development efforts. We do not expect to generate significant revenues until, if and when, our cancer product becomes commercially viable.

General Risk Factors

Prospects for biotechnology companies in the research and development stage should generally be regarded as speculative. It is not possible to predict, based upon studies in animals, or early studies in humans, whether a new therapeutic will ultimately prove to be safe and effective in humans, or whether necessary and sufficient data can be developed through the clinical trial process to support a successful product application and approval.

If a product is approved for sale, product manufacturing at a commercial scale and significant sales to end users at a commercially reasonable price may not be successful. There can be no assurance that we will generate adequate funds to continue development, or will ever achieve significant revenues or profitable operations. Many factors (e.g. competition, patent protection, appropriate regulatory approvals) can influence the revenue and product profitability potential.

In developing a pharmaceutical product, we rely upon our employees, contractors, consultants and collaborators and other third party relationships, including our ability to obtain appropriate product liability insurance. There can be no assurance that these reliances and relationships will continue as required.

In addition to developmental and operational considerations, market prices for securities of biotechnology companies generally are volatile, and may or may not move in a manner consistent with the progress being made by Oncolytics.

See also "RISK Factors Affecting Future Performance" in our 2006 MD&A.

REOLYSIN® Development Update for the Second Quarter of 2007

We continue to develop our lead product REOLYSIN® as a potential cancer therapy. Our goal each year is to advance REOLYSIN® through the various steps and stages of development required for potential pharmaceutical products. In order to achieve this goal, we actively manage the development of our clinical trial program, our pre-clinical and collaborative programs, our manufacturing process and supply, and our intellectual property.

Clinical Trial Program

In the second quarter of 2007, we announced positive clinical data from our U.S. Phase I REOLYSIN® systemic administration clinical trial. As well, we expanded our clinical trial program to include eight clinical trials of which seven are being conducted by us and one is being sponsored by the U.S. National Cancer Institute ("NCI").

Clinical Trial Results

In the second quarter of 2007, we announced positive results from our U.S. Phase I clinical trial examining the systemic administration of REOLYSIN® in patients with advanced cancers. The results indicated that REOLYSIN® can be delivered systemically to patients with advanced and metastatic cancers and cause anti-tumour activity.

A total of 18 patients were treated in the escalating dosage trial to a maximum daily dose of 3x10(10) TCID(50) in a one-hour infusion. Of the 18 patients treated, eight demonstrated stable disease or better, as measured by RECIST ("Response Evaluation Criteria in Solid Tumours") including a patient with progressive breast cancer who experienced a 34% shrinkage in tumour volume.

The trial was originally designed to demonstrate the safety of a single, one-hour infusion of REOLYSIN®. During the treatment of the 4th cohort of patients, we applied for and were granted approval to allow subsequent patients to receive repeat monthly treatments of REOLYSIN®. Of the patients eligible for retreatment, three patients received a range of two to seven one-hour infusions of REOLYSIN®. Toxicities possibly related to REOLYSIN® treatment in this trial were generally mild (grade 1 or 2) and included chills, fever and fatigue.

The primary objective of this trial was to determine the Maximum Tolerated Dose ("MTD"), Dose-Limiting Toxicity ("DLT"), and safety profile of REOLYSIN® when administered systemically to patients. A secondary objective was to examine any evidence of anti-tumour activity. Eligible patients included those who had been diagnosed with advanced or metastatic solid tumours that are refractory ("have not responded") to standard therapy or for which no curative standard therapy exists.

Clinical Trials - Actively Enrolling

During the second quarter of 2007, we continued to enroll patients in our Phase II and Phase Ib combination REOLYSIN®/radiation clinical trials in the U.K. and in our Phase I/II recurrent malignant glioma clinical trial in the U.S. As well, we commenced enrollment in the following studies:

U.S. Phase II Sarcoma Clinical Trial

During the second quarter of 2007, we received approval to commence and initiated patient enrollment in our U.S. Phase II trial to evaluate the intravenous administration of REOLYSIN® in patients with various sarcomas that have metastasized to the lung. Patients are being enrolled at the Montefiore Medical Center/Albert Einstein College of Medicine in the Bronx, New York, the University of Michigan Comprehensive Cancer Center in Ann Arbor, and the Cancer Therapy and Research Center, Institute for Drug Development in San Antonio, Texas.

This trial is a Phase II, open-label, single agent study whose primary objective is to measure tumour responses and duration of response, and to describe any evidence of antitumour activity of intravenous, multiple dose REOLYSIN® in patients with bone and soft tissue sarcomas metastatic to the lung. REOLYSIN® will be given intravenously to patients at a dose of 3x10(10) TCID(50) for five consecutive days. Patients may receive additional five-day cycles of therapy every four weeks for a maximum of eight cycles.

Up to 52 patients will be enrolled in the study. Eligible patients must have a bone or soft tissue sarcoma metastatic to the lung deemed by their physician to be unresponsive to or untreatable by standard therapies.

U.K. Combination REOLYSIN® Paclitaxel and Carboplatin Clinical Trial

This trial has two components. The first is an open-label, dose-escalating, non-randomized study of REOLYSIN® given intravenously with paclitaxel and carboplatin every three weeks. Standard dosages of paclitaxel and carboplatin will be delivered with escalating dosages of REOLYSIN® intravenously. A maximum of three cohorts will be enrolled in the REOLYSIN® dose escalation portion. The second component of the trial will immediately follow and will include the enrolment of a further 12 patients at the maximum dosage of REOLYSIN® in combination with a standard dosage of paclitaxel and carboplatin.

Eligible patients include those who have been diagnosed with advanced or metastatic solid tumours such as head and neck, melanoma, lung and ovarian cancers that are refractory to standard therapy or for which no curative standard therapy exists. The primary objective of the trial is to determine the MTD, DLT, recommended dose and dosing schedule and safety profile of REOLYSIN® when administered in combination with paclitaxel and carboplatin. Secondary objectives include the evaluation of immune response to the drug combination, the body's response to the drug combination compared to chemotherapy alone and any evidence of anti-tumour activity.

U.K. Combination REOLYSIN® Gemcitabine Clinical Trial

In the second quarter of 2007, we commenced patient enrolment in our U.K. clinical trial to evaluate the anti-tumour effects of systemic administration of REOLYSIN® in combination with gemcitabine (Gemzar®) in patients with advanced cancers including pancreatic, lung and ovarian. The combination of reovirus and gemcitabine has been shown in preclinical studies to be more effective than gemcitabine or reovirus alone at killing certain cancer cell lines.

This trial has two components. The first is an open-label, dose-escalating, non-randomized study of REOLYSIN® given intravenously with gemcitabine every three weeks. A standard dosage of gemcitabine will be delivered with escalating dosages of REOLYSIN® intravenously. A maximum of three cohorts will be enrolled in the REOLYSIN® dose escalation portion. The second component of the trial will immediately follow and will include the enrolment of a further 12 patients at the maximum dosage of REOLYSIN® in combination with a standard dosage of gemcitabine.

Eligible patients include those who have been diagnosed with advanced or metastatic solid tumours such as pancreatic, lung and ovarian cancers that are refractory to standard therapy or for which no curative standard therapy exists. The primary objective of the trial is to determine the MTD, DLT, recommended dose and dosing schedule and safety profile of REOLYSIN® when administered in combination with gemcitabine. Secondary objectives include the evaluation of immune response to the drug combination, the body's response to the drug combination compared to chemotherapy alone and any evidence of anti-tumour activity.

U.S. National Cancer Institute Phase II Melanoma Clinical Trial

In the second quarter of 2007, the NCI filed a protocol with the U.S. Food and Drug Administration for a Phase II clinical trial for patients with metastatic melanoma using systemic administration of REOLYSIN®. The NCI is sponsoring the trial under our Clinical Trials Agreement that requires us to provide clinical supplies of REOLYSIN®. The trial is expected to enroll up to 47 patients with metastatic melanoma.

Pre-Clinical Trial and Collaborative Program

During the second quarter of 2007, we announced that a poster by Dr. Maureen E. Lane et al. of Cornell University, New York, entitled "In Vivo Synergy between Oncolytic Reovirus and Gemcitabine in Ras-Mutated Human HCT116 Xenografts" was presented at the American Association for Cancer Research Annual Meeting in Los Angeles, CA.

The researchers found that treatment of human colon cancer cell lines with the combination of REOLYSIN® and gemcitabine resulted in both in vitro and in vivo synergy. There was no toxicity associated with the combined treatment. Tumours treated with the combination were significantly smaller (by area and weight) than tumours in control groups or tumours treated with either agent alone. The researchers concluded that the synergistic combination of REOLYSIN® and gemcitabine is a promising therapeutic regimen for study in clinical trials.

Manufacturing and Process Development

We continued to have REOLYSIN® manufactured in order to supply our current and future clinical trial program. In the second quarter of 2007, we successfully completed initial scale up of our manufacturing process for REOLYSIN®. The process improvements and scale up to 40-litre batch size has resulted in increased total yields which are a result of advancements in the media formulation used in the primary production of REOLYSIN® and in the downstream processing steps required to generate finished product.

Intellectual Property

In the second quarter of 2007, two U.S. and one Canadian patents were issued. At the end of the second quarter of 2007, we had been issued a total of 21 U.S., six Canadian and three European patents as well as issuances in other jurisdictions. We also have other patent applications filed in the U.S., Europe and Canada and other jurisdictions.

Financial Impact

We estimated at the beginning of 2007 that our monthly cash usage would be approximately $1,400,000 for 2007. Our cash usage for the first half of 2007 was $7,618,488 from operating activities and $525,363 for the purchases of intellectual property and capital assets which is in line with our estimate. Our net loss for the first six month of 2007 was $7,792,813.

Cash Resources

We exited the second quarter of 2007 with cash resources totaling $31,533,291 (see "Liquidity and Capital Resources").

Expected REOLYSIN® Development for the Remainder of 2007

We believe that we will commence enrollment in our third co-therapy clinical trial with docetaxel (see "Recent 2007 Progress") and continue to enroll patients in all seven of our clinical trials in 2007. We also believe that the NCI sponsored melanoma clinical trial will receive approval to commence in 2007. We believe we will complete enrollment in our U.K. Phase Ia/Ib and Phase II combination REOLYSIN®/radiation clinical trials by the end of 2007 and complete enrollment in our chemotherapy co-therapy studies in 2008. We expect to produce REOLYSIN® in 2007 to supply our clinical trial program.

Based on our expected activity in 2007, we continue to estimate our average monthly cash usage to be $1,400,000 per month (see "Liquidity and Capital Resources").

Recent 2007 Progress

On July 23, 2007, we commenced patient enrolment in our U.K. clinical trial to evaluate the anti-tumour effects of systemic administration of REOLYSIN® in combination with docetaxel (Taxotere®) in patients with advanced cancers including bladder, prostate, lung and upper gastro-intestinal.

The trial has two components. The first is an open-label, dose-escalating, non-randomized study of REOLYSIN® given intravenously with docetaxel every three weeks. A standard dosage of docetaxel will be delivered with escalating dosages of REOLYSIN® intravenously. A maximum of three cohorts will be enrolled in the REOLYSIN® dose escalation portion. The second component of the trial will immediately follow and will include the enrolment of a further 12 patients at the maximum dosage of REOLYSIN® in combination with a standard dosage of docetaxel.

Eligible patients include those who have been diagnosed with advanced or metastatic solid tumours such as bladder, prostate, lung or upper gastro-intestinal cancers that are refractory to standard therapy or for which no curative standard therapy exists. The primary objective of the trial is to determine the MTD, DLT, recommended dose and dosing schedule and safety profile of REOLYSIN® when administered in combination with docetaxel. Secondary objectives include the evaluation of immune response to the drug combination, the body's response to the drug combination compared to chemotherapy alone and any evidence of anti-tumour activity.

SECOND QUARTER RESULTS OF OPERATIONS

(for the three months ended June 30, 2007 and 2006)

Net loss for the three month period ending June 30, 2007 was $3,679,582 compared to $2,987,714 for the three month period ending June 30, 2006.Research and Development Expenses ("R&D")

2007

2006

-------------------------------------------------------------------------

Manufacturing and related process

development expenses

828,602

648,351

Clinical trial expenses

983,896

685,265

Pre-clinical trial and research

collaboration expenses

331,379

235,302

Other R&D expenses

562,498

391,701

-------------------------------------------------------------------------

Research and development expenses

2,706,375

1,960,619

-------------------------------------------------------------------------

For the second quarter of 2007, R&D increased to $2,706,375 compared to $1,960,619 for the second quarter of 2006. The increase in R&D was due to the following:

Manufacturing & Related Process Development ("M&P")

2007

2006

-------------------------------------------------------------------------

Product manufacturing expenses

774,883

124,110

Technology transfer expenses

273,214

Process development expenses

53,719

251,027

-------------------------------------------------------------------------

Manufacturing and related process

development expenses

828,602

648,351

-------------------------------------------------------------------------

-------------------------------------------------------------------------Our M&P expenses for the second quarter of 2007 increased to $828,602 compared to $648,351 for the second quarter of 2006.

In the second quarter of 2007, our production activity increased compared to the second quarter of 2006 as we completed the production runs scheduled earlier in 2007. In the second quarter of 2006, our production activity was lower as we were focused on completing manufacturing process improvements and transferring changes in our production process to our cGMP manufacturer prior to commencing new production runs. Our process development activity in the second quarter of 2007 focused on completing our 40-litre scale up studies.Clinical Trial Program

2007

2006

-------------------------------------------------------------------------

Direct clinical trial expenses

913,360

643,786

Other clinical trial expenses

70,536

41,479

-------------------------------------------------------------------------

Clinical trial expenses

983,896

685,265

-------------------------------------------------------------------------

During the second quarter of 2007, our direct clinical trial expenses increased to $913,360 compared to $643,786 in the second quarter of 2006. In the second quarter of 2007, we incurred direct patient costs in our six actively enrolling clinical trials compared to only three enrolling clinical trial studies in the second quarter of 2006. As well in the second quarter of 2007, we incurred clinical site start up costs associated with our U.K. co-therapy and U.S. sarcoma clinical trials compared to incurring clinical site start up costs for our U.S. glioma study in the second quarter of 2006.

Pre-Clinical Trial Expenses and Research Collaborations

2007

2006

-------------------------------------------------------------------------

Research collaboration expenses

331,379

235,302

Pre-clinical trial expenses

-------------------------------------------------------------------------

Pre-clinical trial expenses and

research collaborations

331,379

235,302

-------------------------------------------------------------------------

During the second quarter of 2007, our research collaboration expenses were $331,379 compared to $235,302 for the second quarter of 2006. Our research collaboration activity continues to focus on the interaction of the immune system and the reovirus, the use of the reovirus as a co-therapy with existing chemotherapeutics, the use of new RAS active viruses as potential therapeutics, and to investigate new uses of the reovirus as a therapeutic.

Other Research and Development Expenses

2007

2006

-------------------------------------------------------------------------

R&D consulting fees

50,114

31,371

R&D salaries and benefits

395,166

286,767

Other R&D expenses

117,218

73,563

-------------------------------------------------------------------------

Other research and development expenses

562,498

391,701

-------------------------------------------------------------------------

Our R&D salaries and benefits costs were $395,166 in the second quarter of 2007 compared to $286,767 in the second quarter of 2006. The increase is a result of increases in salary and staff levels along with the addition of our Vice President of Intellectual Property in 2007.

Operating Expenses

2007

2006

-------------------------------------------------------------------------

Public company related expenses

753,949

664,917

Office expenses

257,806

240,176

-------------------------------------------------------------------------

Operating expenses

1,011,755

905,093

-------------------------------------------------------------------------

During the second quarter of 2007, our public company related expenses increased to $753,949 compared to $664,917 for the second quarter of 2006. In the second quarter of 2007, we increased our investor relations activity in the United States and Europe compared to the second quarter of 2006.

Stock Based Compensation

2007

2006

-------------------------------------------------------------------------

Stock based compensation

82,573

222,376

-------------------------------------------------------------------------

-------------------------------------------------------------------------Stock based compensation for the second quarter of 2007 was $82,573 compared to $222,376 in the second quarter of 2006. In the second quarter of 2007, we incurred stock based compensation associated with the vesting of previously granted stock options. In the second quarter of 2006, we incurred stock based compensation associated with the issue and immediate vesting of stock options to our two newly appointed directors and the vesting of previously granted options.

YEAR TO DATE RESULTS OF OPERATIONS

(for the six months ended June 30, 2007 and 2006)

Net loss for the six month period ending June 30, 2007 was $7,792,813 compared to $5,982,250 for the six month period ending June 30, 2006.Research and Development Expenses ("R&D")

2007

2006

-------------------------------------------------------------------------

Manufacturing and related process

development expenses

2,666,795

1,491,490

Clinical trial expenses

1,705,513

1,232,033

Pre-clinical trial and research

collaboration expenses

437,660

390,388

Other R&D expenses

1,114,643

763,030

-------------------------------------------------------------------------

Research and development expenses

5,924,611

3,876,941

-------------------------------------------------------------------------

For the six month period ending June 30, 2007, R&D increased to $5,924,611 compared to $3,876,941 for the six month period ending June 30, 2006. The increase in R&D was due to the following:

Manufacturing & Related Process Development ("M&P")

2007

2006

-------------------------------------------------------------------------

Product manufacturing expenses

2,523,301

767,532

Technology transfer expenses

273,214

Process development expenses

143,494

450,744

-------------------------------------------------------------------------

Manufacturing and related process

development expenses

2,666,795

1,491,490

-------------------------------------------------------------------------

-------------------------------------------------------------------------For the six month period ending June 30, 2007, our production and vial filling activity increased compared to 2006. During the first half of 2007, we completed production runs that commenced in 2006 and initiated additional production runs to manufacture REOLYSIN® at the beginning of 2007. As well, we incurred costs associated with vial filling and packaging of these production runs.

For the six month period ending June 30, 2006, we completed the production runs that were ongoing at the end of 2005 for our Phase I trials. At the same time, our process development activity helped improve the virus yields from our manufacturing process. These improvements were then transferred to our cGMP manufacturer in the second quarter of 2006.

Our process development expenses for the six month period ending June 30, 2007 were $143,494 compared to $450,744 for the six month period ending June 30, 2006. During the six month period ending June 30, 2007, our main process development focus was on our scale up to 40-litre studies which were completed in the second quarter of 2007. During the six month period ending June 30, 2006, our process development activity included scale up studies and the validation of the fill process used in our manufacturing process.

We now expect that our overall manufacturing and related process development expenses for 2007 will be in line with 2006. We expect to complete the vial filling of our planned 2007 production runs in the third quarter of 2007. We also expect that our process development activity will begin to examine the commercial formulation of REOLYSIN®.

We are also examining ways to reduce our economic dependence resulting from having only a single cGMP manufacturer. This might include building up a level of inventory, increasing the scale of each production run, engaging another cGMP manufacturer or manufacturing REOLYSIN® ourselves. Depending on how we mitigate our risk of economic dependence our expectation of our 2007 M&P expenses may change.Clinical Trial Program

2007

2006

-------------------------------------------------------------------------

Direct clinical trial expenses

1,596,467

1,143,420

Other clinical trial expenses

109,046

88,613

-------------------------------------------------------------------------

Clinical trial expenses

1,705,513

1,232,033

-------------------------------------------------------------------------

-------------------------------------------------------------------------During the six month period ending June 30, 2007, our direct clinical trial expenses were $1,705,513 compared to $1,145,420 for the six month period ending June 30, 2006. In the first half of 2007, we incurred direct patient costs in our six ongoing clinical trials. As well, we incurred clinical site start up costs for our three co-therapy trials in the U.K. and our Phase II sarcoma clinical trial in the U.S. which were recently approved to commence. In the first half of 2006, we incurred direct patient costs in three ongoing clinical trials along with clinical site start up costs associated with our U.S. recurrent malignant glioma trial.

We expect our clinical trial expenses will continue to increase for the remainder of 2007 compared to 2006. We expect that our third U.K. co-therapy clinical trial will commence enrollment in the third quarter of 2007 increasing the number of ongoing clinical trials to seven.Pre-Clinical Trial Expenses and Research Collaborations

2007

2006

-------------------------------------------------------------------------

Research collaboration expenses

400,530

381,738

Pre-clinical trial expenses

37,130

8,650

-------------------------------------------------------------------------

Pre-clinical trial expenses and

research collaborations

437,660

390,388

-------------------------------------------------------------------------

-------------------------------------------------------------------------During the six month period ending June 30, 2007, our research collaboration expenses were $400,530 compared to $381,738 for the six month period ending June 30, 2006. Our research collaboration activity continues to focus on the interaction of the immune system and the reovirus, the use of the reovirus as a co-therapy with existing chemotherapeutics, the use of new RAS active viruses as potential therapeutics, and to investigate new uses of the reovirus as a therapeutic.

During the six month period ending June 30, 2007, our pre-clinical trial expenses were $37,130 compared to $8,650 for the six month period ending June 30, 2006. The frequency of our pre-clinical trial expenses change from period to period as we move through our clinical trial program. As well, we may increase our pre-clinical activity depending on the results of our research collaborations.

For the remainder of 2007, we still expect that pre-clinical trial expenses and research collaborations will decline compared to 2006. We expect to continue with our various collaborations in order to provide support for our expanding clinical trial program. As well, we may expand our collaborative activities to include other viruses.Other Research and Development Expenses

2007

2006

-------------------------------------------------------------------------

R&D consulting fees

141,891

64,326

R&D salaries and benefits

767,553

607,892

Quebec scientific research and

experimental development refund

(15,927)

(52,344)

Other R&D expenses

221,126

143,156

-------------------------------------------------------------------------

Other research and development expenses

1,114,643

763,030

-------------------------------------------------------------------------

-------------------------------------------------------------------------During the six month period ending June 30, 2007, our R&D consulting fees were $141,891 compared to $64,326 for the six month period ending 2006. In the first half of 2007, we incurred consulting activity associated with our ongoing clinical trials and assistance with our clinical trial applications. In the first half of 2006, our consulting activity related to our ongoing clinical trials.

Our R&D salaries and benefits costs were $767,553 for the first half of 2007 compared to $607,892 for the first half of 2006. The increase is a result of increases in salary and staff levels along with the addition of our Vice President of Intellectual Property in 2007.

We now expect that our other research and development expenses for the remainder of 2007 will increase compared to 2006. We expect that salaries and benefits will increase to reflect increased compensation levels and the salary and benefit costs for our Vice President of Intellectual Property. Our R&D consulting fees are expected to remain consistent with 2006. However, we may choose to engage additional consultants to assist us in the development of protocols and regulatory filings for our additional combination therapy and phase II clinical trial studies, possibly causing our R&D consulting expenses to increase.Operating Expenses

2007

2006

-------------------------------------------------------------------------

Public company related expenses

1,335,826

1,499,636

Office expenses

582,646

523,393

-------------------------------------------------------------------------

Operating expenses

1,918,472

2,023,029

-------------------------------------------------------------------------

-------------------------------------------------------------------------During the six month period ending June 30, 2007, our public company related expenses were $1,335,826 compared to $1,499,636 for the six month period ending June 30, 2006. In the first half of 2007, our financial advisory expenses decreased compared to the first half of 2006. This decrease was offset by an increase in expenses associated with our investor relations activity in the U.S. and Europe and professional fees during the six month period ending June 30, 2007 compared to 2006.

In the first half of 2007, our office expenses were $582,646 compared to $523,393 in the first half of 2006. Our office expense activity has remained consistent in 2007 to date compared to 2006 with increases mainly due to increased compensation levels and a general increase in office costs.Stock Based Compensation

2007

2006

-------------------------------------------------------------------------

Stock based compensation

103,969

259,209

-------------------------------------------------------------------------

-------------------------------------------------------------------------Stock based compensation for the six month period ending June 30, 2007 was $103,969 compared to $259,209 for the six month period ending June 30, 2006. In the first half of 2007, we incurred stock based compensation associated with the vesting of options granted previously. In the first half of 2006, we incurred stock based compensation associated with the issue and immediate vesting of stock options to our two newly appointed directors and the vesting of previously granted options.

Commitments

As at June 30, 2007, we are committed to payments totaling $1,021,000 during the remainder of 2007 for activities related to clinical trial activity and collaborations. All of these committed payments are considered to be part of our normal course of business.SUMMARY OF QUARTERLY RESULTS

The following unaudited quarterly information is presented in thousands of dollars except for per share amounts:

-------------------------------------------------------------------------

2007

2006

2005

-------------------------------------------------------------------------

June

March

Dec.

Sept.

June

March

Dec.

Sept.

-------------------------------------------------------------------------

Revenue

-------------------------------------------------------------------------

Interest

income

359

268

286

320

335

292

160

211

-------------------------------------------------------------------------

Net

loss(3),

3,680

4,156

4,890

3,425

2,988

2,995

3,941

3,510

-------------------------------------------------------------------------

Basic and

diluted

loss per

common

share(3)

$0.09

$0.11

$0.13

$0.09

$0.08

$0.12

$0.11

-------------------------------------------------------------------------

Total

assets

(1),(4)

37,670

41,775

33,566

37,980

40,828

43,660

46,294

34,538

-------------------------------------------------------------------------

Total

cash

(2),(4)

31,533

35,681

27,614

31,495

34,501

37,687

40,406

28,206

-------------------------------------------------------------------------

Total

long-term

debt(5)

150

-------------------------------------------------------------------------

Cash

dividends

declared

(6)

Nil

-------------------------------------------------------------------------

(1) Subsequent to the acquisition of Oncolytics Biotech Inc. by SYNSORB

in April 1999, we applied push down accounting. See note 2 to the

audited financial statements for 2006.

(2) Included in total cash are cash and cash equivalents plus short-term

investments.

(3) Included in net loss and loss per common share between June 2007 and

July 2005 are quarterly stock based compensation expenses of $82,573,

$21,396, $109,670, $34,671, $222,376, $36,833, $38,152, and $4,173,

respectively.

(4) We issued 4,600,000 common shares for net cash proceeds of

$12,063,394 during 2007 (2006 - 284,000 common shares for cash

proceeds of $241,400; 2005 - 4,321,252 common shares for cash

proceeds of $18,789,596).

(5) The long-term debt recorded represents repayable loans from the

Alberta Heritage Foundation. On January 1, 2007, in conjunction with

the adoption of the CICA Handbook section 3855 "Financial

Instruments", this loan was recorded at fair value (see note 1 of the

June 30, 2007 interim financial statements).

(6) We have not declared or paid any dividends since incorporation.LIQUIDITY AND CAPITAL RESOURCES

Liquidity

As at June 30, 2007, we had cash and cash equivalents (including short-term investments) and working capital positions of $31,533,291 and $30,002,209, respectively compared to $27,613,748 and $25,719,870, respectively for December 31, 2006. The increase in 2007 reflects the cash inflow from financing activities of $12,063,394 offset by cash usage from operating activities and additions to our intellectual property of $7,618,488 and $487,058, respectively.

We desire to maintain adequate cash and short-term investment reserves to support our planned activities which include our clinical trial program, product manufacturing, administrative costs, and our intellectual property expansion and protection. For the remainder of 2007, we are expecting to commence patient enrollment in our third co-therapy trial and to continue to enroll patients in our existing trials throughout 2007. We also expect to continue to expand our clinical trial program. As well, we expect to continue with our collaborative studies pursuing support for our future clinical trial program. We will therefore need to ensure that we have enough REOLYSIN® to supply our clinical trial and collaborative programs. We continue to expect our cash usage in 2007 to be $1,400,000 per month and we believe our existing capital resources are adequate to fund our current plans for research and development activities well into 2009. Factors that will affect our anticipated monthly burn rate include, but are not limited to, the number of manufacturing runs required to supply our clinical trial program and the cost of each run, additional activities reducing our economic dependence on a single supplier, the number of clinical trials ultimately approved, the timing of patient enrollment in the approved clinical trials, the actual costs incurred to support each clinical trial, the number of treatments each patient will receive, the timing of the NCI's R&D activity, and the level of pre-clinical activity undertaken.

In the event that we choose to seek additional capital, we will look to fund additional capital requirements primarily through the issue of additional equity. We recognize the challenges and uncertainty inherent in the capital markets and the potential difficulties we might face in raising additional capital. Market prices and market demand for securities in biotechnology companies are volatile and there are no assurances that we will have the ability to raise funds when required.

Capital Expenditures

We spent $487,058 on intellectual property in the first half of 2007 compared to $365,036 in the first half of 2006. The change in intellectual property expenditures reflects the timing of filing costs associated with our expanded patent base. As well, we have benefited from a stronger Canadian dollar as our patent costs are typically incurred in U.S. currency. In the second quarter of 2007, two U.S. patents and one Canadian patent were issued bringing our total patents issued to 21 in the U.S., six in Canada and three in Europe.

Investing Activities

Under our Investment Policy, we are permitted to invest in short-term instruments with a rating no less than R-1 (DBRS) with terms less than two years. We have $24,356,007 invested under this policy and we are currently earning interest at an effective rate of 4.14% (2006 - 3.86%).

OTHER MD&A REQUIREMENTS

We have 41,120,748 common shares outstanding at July 26, 2007. If all of our warrants (4,972,000) and options (3,497,950) were exercised we would have 49,590,698 common shares outstanding.

Additional information relating to Oncolytics Biotech Inc. is available on SEDAR at www.sedar.com.Oncolytics Biotech Inc.

BALANCE SHEETS

(unaudited)

As at,

June 30,

December 31,

2007

2006

-------------------------------------------------------------------------

ASSETS

Current

Cash and cash equivalents

6,923,889

3,491,511

Short-term investments (note 7)

24,609,402

24,122,237

Accounts receivable

46,717

84,003

Prepaid expenses

798,191

638,540

-------------------------------------------------------------------------

32,378,199

28,336,291

Property and equipment

168,037

149,596

Intellectual property

5,153,575

5,079,805

-------------------------------------------------------------------------

37,699,811

33,565,692

-------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

Current

Accounts payable and accrued liabilities

2,375,990

2,616,421

-------------------------------------------------------------------------

Alberta Heritage Foundation loan

(notes 1 and 8)

150,000

-------------------------------------------------------------------------

Shareholders' equity

Share capital (note 2)

Authorized: unlimited number of

common shares

Issued: 41,120,748 (December 31, 2006

- 36,520,748)

92,708,665

83,083,271

Warrants (note 2)

6,654,740

4,216,740

Contributed surplus (note 4)

8,633,295

8,529,326

Deficit (notes 1 and 5)

(72,672,879) (65,030,066)

-------------------------------------------------------------------------

35,323,821

30,799,271

-------------------------------------------------------------------------

37,699,811

33,565,692

-------------------------------------------------------------------------

See accompanying notes

Oncolytics Biotech Inc.

STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

(unaudited)

Cumulative

from

Six Month

Three Month Three Month

inception

Period

on April 2,

Ending

1998 to

June 30,

2007

2006

2007

2006

2007

-------------------------------------------------------------------------

Revenue

Rights revenue

310,000

-------------------------------------------------------------------------

310,000

-------------------------------------------------------------------------

Expenses

Research and

development

5,924,611

3,876,941

2,706,375

1,960,619

49,145,805

Operating

1,918,472

2,023,029

1,011,755

905,093

18,689,053

Stock based

compensation

(note 3)

103,969

259,209

82,573

222,376

4,269,618

Foreign

exchange

loss/gain

(16,088)

(7,832)

(10,855)

2,219

632,760

Amortization -

intellectual

property

469,588

427,119

238,596

216,679

4,506,422

Amortization -

property and

equipment

19,864

30,694

10,009

15,416

427,547

-------------------------------------------------------------------------

8,420,416

6,609,160

4,038,453

3,322,402

77,671,205

-------------------------------------------------------------------------

Loss before

the

following:

8,420,416

6,609,160

4,038,453

3,322,402

77,361,205

Interest

income

(627,603)

(626,910)

(358,871)

(334,688) (5,430,608)

Gain on sale

of BCY

LifeSciences

Inc.

(299,403)

Loss on sale of

Transition

Therapeutics

Inc.

2,156,685

-------------------------------------------------------------------------

Loss before

taxes

7,792,813

5,982,250

3,679,582

2,987,714

73,787,879

Future income

tax recovery

(1,115,000)

-------------------------------------------------------------------------

Net loss and

comprehensive

loss for

the period

7,792,813

5,982,250

3,679,582

2,987,714

72,672,879

-------------------------------------------------------------------------

Basic and

diluted loss

per share

0.20

0.16

0.09

0.08

-------------------------------------------------------------

Weighted

average

number of

(basic and

diluted)

39,701,859

36,250,836

41,120,748

36,264,770

-------------------------------------------------------------

See accompanying notes

Oncolytics Biotech Inc.

STATEMENTS OF CASH FLOWS

(unaudited)

Cumulative

from

Six Month

Three Month

inception

Period

on April 2,

Ending

1998 to

June 30,

2007

2006

2007

2006

2007

-------------------------------------------------------------------------

OPERATING

ACTIVITIES

Net loss

for the

period

(7,792,813)

(5,982,250)

(3,679,582)

(2,987,714) (72,672,879)

Deduct

non-cash

items

Amortization

- intell-

ectual

property

469,588

427,119

238,596

216,679

4,506,422

Amortization

- property

and

equipment

19,864

30,694

10,009

15,416

427,547

Stock based

compen-

sation

103,969

259,209

82,573

222,376

4,269,618

Other

non-cash

items

(note 6)

1,383,537

Net changes

in non-cash

working

capital

(note 6)

(419,096)

(296,360)

(522,374)

(567,132)

1,485,825

-------------------------------------------------------------------------

(7,618,488)

(5,561,588)

(3,870,778)

(3,100,375) (60,599,930)

-------------------------------------------------------------------------

INVESTING

ACTIVITIES

Intellectual

property

(487,058)

(365,036)

(268,881)

(134,088)

(5,986,338)

Other

capital

assets

(38,305)

(21,048)

(3,558)

6,333

(661,653)

Purchase of

short-term

invest-

ments

(487,165)

(539,878)

(253,395)

(290,435) (48,606,632)

Redemption

of short-

term

invest-

ments

10,158,000

4,258,000

23,578,746

Investment

in BCY

LifeSciences

Inc.

464,602

Investment in

Transition

Therapeutics

Inc.

2,532,343

-------------------------------------------------------------------------

(1,012,528)

9,232,038

(525,834)

3,839,810

(28,678,932)

-------------------------------------------------------------------------

FINANCING

ACTIVITIES

Proceeds from

exercise of

warrants

and stock

options

42,500

15,208,468

Proceeds from

private

placements

38,137,385

Proceeds from

public

offerings

(note 2) 12,063,394

(4,778)

42,856,898

-------------------------------------------------------------------------

12,063,394

42,500

(4,778)

42,500

96,202,751

-------------------------------------------------------------------------

Increase

(decrease)

in cash

and cash

equivalents

during

the

period

3,432,378

3,712,950

4,401,390

781,935

6,923,889

Cash and

cash

equivalents,

beginning

the

period

3,491,511

3,511,357

11,325,279

6,442,372

-------------------------------------------------------------------------

Cash and

cash

equivalents,

end of

the

period

6,923,889

7,224,307

6,923,889

7,224,307

6,923,889

-------------------------------------------------------------------------

See accompanying notes

Oncolytics Biotech Inc.

NOTES TO FINANCIAL STATEMENTS

June 30, 2007 (unaudited)

ACCOUNTING POLICIES

These unaudited interim financial statements have been prepared in

accordance with Canadian generally accepted accounting principles. The

notes presented in these unaudited interim financial statements include

only significant events and transactions occurring since the Company's

last fiscal year end and are not fully inclusive of all matters required

to be disclosed in the Company's annual audited financial statements.

Accordingly, these unaudited interim financial statements should be read

in conjunction with the Company's most recent annual financial

statements. The information as at and for the year ended December 31,

2006 has been derived from the Company's audited financial statements.

The accounting policies used in the preparation of these unaudited

interim financial statements conform with those used in the Company's

most recent annual financial statements except the following:

Adoption of New Accounting Policy

Financial Instruments

On January 1, 2007, the Company prospectively adopted, without

restatement, CICA Handbook section 3855 "Financial Instruments -

Recognition and Measurement" and section 1530 "Other Comprehensive

Income". Pursuant to the transitional provisions of Section 3855, the

Company classified its short-term investments as held-to-maturity fixed

income securities and recorded its Alberta Heritage Foundation interest

free loan at fair value. As a result, there were no adjustments made to

short-term investments or other comprehensive income and there was a

decrease in the Alberta Heritage Foundation loan of $150,000 with a

corresponding decrease of $150,000 in the Company's deficit.

Financial Assets

Financial assets are comprised of cash and cash equivalents, accounts

receivable (mainly goods and service tax receivable), and short-term

investments.

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and interest bearing

deposits with the Company's bank.

Short-term investments

The Company determines the appropriate classification of its short-term

investments at the time of purchase and reevaluates such designation as

of each balance sheet date. Short-term investments can be classified as

held-for-trading, available-for-sale or held-to-maturity. Currently, the

Company has classified all of its short-term investments as held-to-

maturity as it has the positive intent and ability to hold the securities

to maturity. Held-to-maturity securities are stated at original cost,

adjusted for amortization of premiums and accretion of discounts to

maturity computed under the effective interest rate method. Such

amortization and interest on securities classified as held-to-maturity

are included in interest income.

Financial Liabilities

Financial liabilities are comprised of trade accounts payable and accrued

liabilities.

SHARE CAPITAL

Authorized:

Unlimited number of common shares

Issued:

Warrants

-------------------------------------------------------------------------

Amount

Number

-------------------------------------------------------------------------

Balance, December 31,

2005

36,236,748

82,841,871

2,784,800

4,429,932

Exercise of options

284,000

241,400

Expired warrants

(112,800)

(213,192)

-------------------------------------------------------------------------

Balance, December 31,

2006

36,520,748

83,083,271

2,672,000

4,216,740

Issued for cash pursuant

to February 22, 2007

public offering(a)

4,600,000

11,362,000

2,300,000

2,438,000

Share issue costs

(1,736,606)

-------------------------------------------------------------------------

Balance, June 30, 2007

41,120,748

92,708,665

4,972,000

6,654,740

-------------------------------------------------------------------------

(a) Pursuant to a public offering, 4,600,000 units were issued at an

issue price of $3.00 per unit for gross proceeds of $13,800,000. Each

unit included one common share (ascribed value of $2.47) and one-half

of one common share purchase warrant (ascribed value of $0.53) for a

total of 2,300,000 warrants. The ascribed value was determined using

the relative fair value method. Each whole common share purchase

warrant entitles the holder to acquire one common share in the

capital of the Company upon payment of $3.50 per share until

February 22, 2010. Share issue costs for this offering were

$1,736,606.

The following table summarizes the weighted average assumptions used in

the Black Scholes Model with respect to the valuation of warrants:

2007

-------------------------------------------------------------------------

Risk-free interest rate

4.08%

Expected hold period to exercise

3 years

Volatility in the price of the Company's shares

62.8%

Dividend yield

-------------------------------------------------------------------------

There were no warrants issued during the six month period ending

June 30, 2006.

The following table summarizes the Company's outstanding warrants as at

June 30, 2007:

Weighted

Average

Remaining

Outstanding, Granted

Exercised

Expired

Contrac-

Beginning

During

Outstanding,

tual

Exercise

of the

the

End of

Life

Price

Period

(years)

-------------------------------------------------------------------------

$3.50

2,300,000

2.65

$5.65

320,000

1.50

$6.15

1,600,000

1.50

$8.00

752,000

0.40

-------------------------------------------------------------------------

2,672,000

2,300,000

4,972,000

1.87

-------------------------------------------------------------------------

STOCK BASED COMPENSATION

Stock Option Plan

The Company has issued stock options to acquire common stock through its

stock option plan of which the following are outstanding:

2007

2006

-------------------------------------------------------------------------

Weighted

Average

Stock

Price

Stock

Price

Options

-------------------------------------------------------------------------

Outstanding, January 1

3,537,950

4.88

3,634,550

4.66

Granted during period

100,000

3.28

100,000

3.85

Exercised during period

(50,000)

0.85

----------------------------------------

-----------

Outstanding, June 30

3,637,950

4.84

3,684,550

4.69

----------------------------------------

-----------

----------------------------------------

-----------

Options exercisable,

June 30, 2007

3,380,450

4.96

3,452,050

4.79

----------------------------------------

-----------

----------------------------------------

-----------

The following table summarizes information about the stock options

outstanding and exercisable at June 30, 2007:

Weighted

Average

Weighted

Remaining

Average

Range of

Contractual

Exercise

Number

Life

Price

Number

Price

Prices

Outstanding

(years)

Exercisable

-------------------------------------------------------------------------

$0.75 - $1.00

348,550

2.3

0.85

348,550

0.85

$1.65 - $2.37

368,400

6.4

1.95

348,400

1.95

$2.70 - $3.50

828,750

6.9

3.15

603,750

3.13

$4.00 - $5.00

1,240,750

7.3

4.86

1,228,250

4.86

$6.77 - $9.76

708,500

4.7

8.66

708,500

8.66

$12.15 - $13.50

143,000

3.3

12.63

143,000

12.63

-------------------------------------------------------------------------

3,637,950

6.0

4.84

3,380,450

4.96

-------------------------------------------------------------------------

Options granted vest immediately or annually over one, three or four

years at the discretion of the Board. The outstanding options vest

annually or after the completion of certain milestones. The Company has

reserved 4,052,075 common shares for issuance relating to outstanding

stock options.

As the Company is following the fair value based method of accounting for

stock options, the Company recorded compensation expense of $82,573 and

$103,969 for the three and six month periods ending June 30, 2007,

respectively (June 30, 2006 $222,376 and $259,209, respectively) with

respect to the granting of options in the period and vesting of options

issued in prior periods with an offsetting credit to contributed surplus.

The estimated fair value of stock options issued during the six month

period ending June 30, 2007 was determined using the Black-Scholes model

using the following weighted average assumptions and fair value of

options:

2007

2006

-------------------------------------------------------------------------

Risk-free interest rate

4.11%

4.24%

Expected hold period to exercise

3.5 years

Volatility in the price of the Company's shares

63%

64%

Dividend yield

Zero

Weighted average fair value of options

$1.56

$1.86

-------------------------------------------------------------------------

CONTRIBUTED SURPLUS

Amount

-------------------------------------------------------------------------

Balance, December 31, 2005

7,912,584

Expired warrants

213,192

Stock based compensation

403,550

Exercise of stock options

-------------------------------------------------------------------------

Balance, December 31, 2006

8,529,326

Stock based compensation

103,969

-------------------------------------------------------------------------

Balance, June 30, 2007

8,633,295

-------------------------------------------------------------------------

DEFICIT

Amount

-------------------------------------------------------------------------

Balance, December 31, 2005

50,732,542

Net loss for the year

14,297,524

-------------------------------------------------------------------------

Balance, December 31, 2006

65,030,066

Adjustment - Alberta Heritage Foundation loan (note 1)

(150,000)

Net loss and comprehensive loss, June 30, 2007

7,792,813

-------------------------------------------------------------------------

Balance, June 30, 2007

72,672,879

-------------------------------------------------------------------------

ADDITIONAL CASH FLOW DISCLOSURE

Net Change In Non-Cash Working Capital

For the periods ending:

Cumulative

from

Six Month

Three Month Three Month

inception

Period

on April 2,

Ending

1998 to

June 30,

2007

2006

2007

2006

2007

-------------------------------------------------------------------------

Change in:

Accounts

receivable

37,286

(6,757)

4,231

63,164

(46,717)

Prepaid

expenses

(159,651)

(457,410)

(16,234)

(470,182)

(798,191)

Accounts

payable and

accrued

liabilities

(240,431)

214,240

(473,371)

(109,214)

2,375,990

-------------------------------------------------------------------------

Change in

non-cash

working

capital

(362,796)

(249,927)

(485,374)

(516,232)

1,531,082

Less portion

related to

investing

activities

(56,300)

(46,433)

(37,000)

(50,900)

45,257

-------------------------------------------------------------------------

Net change

associated

with operating

activities

(419,096)

(296,360)

(522,374)

(567,132)

1,485,825

-------------------------------------------------------------------------

Other Non-Cash Items

Cumulative

from

Six Month

Three Month Three Month

inception

Period

on April 2,

Ending

1998 to

June 30,

2007

2006

2007

2006

2007

-------------------------------------------------------------------------

Foreign

exchange

loss

425,186

Donation of

medical

equipment

66,069

Loss on sale of

Transition

Therapeutics Inc.

2,156,685

Gain on sale

of BCY

LifeSciences Inc.

(299,403)

Cancellation of

contingent

payment

obligation

settled in

common shares

150,000

Future income

tax recovery

(1,115,000)

-------------------------------------------------------------------------

1,383,537

-------------------------------------------------------------------------

SHORT-TERM INVESTMENTS

Short-term investments, mainly consisting of government of Canada

treasury bills, are liquid investments that are readily convertible to

known amounts of cash and are subject to an insignificant risk of changes

in value. The objectives for holding short-term investments are to invest

the Company's excess cash resources in investment vehicles that provide a

better rate of return compared to the Company's interest bearing bank

account with limited risk to the principal invested. The Company also

intends to match the maturities of these short-term investments with the

cash requirements of the Company's activities.

Effective

Original

Accrued

Carrying

Interest

Cost

Interest

Value

Fair Value

Rate

-------------------------------------------------------------------------

June 30, 2007

Short-term

investments

24,287,868

321,534

24,609,402

24,574,467

4.14%

-------------------------------------------------------------------------

December 31,

2006

Short-term

investments

23,672,719

449,518

24,122,237

24,124,810

3.95%

-------------------------------------------------------------------------

Fair value is determined by using published market prices provided by the

Company's investment advisor.

ALBERTA HERITAGE LOAN

The Company received an interest free loan of $150,000 from the Alberta

Heritage Foundation for Medical Research. Pursuant to the terms of the

agreement, the Company is required to repay this amount in annual

installments from the date of commencement of sales in an amount equal to

the lesser of: (a) 5% of the gross sales generated by the Company; or (b)

$15,000 per annum until the entire loan has been paid in full.

COMPARATIVE FIGURES

Certain comparative figures have been reclassified to conform with the

current period's presentation.About Oncolytics Biotech Inc.

Oncolytics is a Calgary-based biotechnology company focused on the development of oncolytic viruses as potential cancer therapeutics. Oncolytics' clinical program includes a variety of Phase I and Phase II human trials using REOLYSIN®, its proprietary formulation of the human reovirus, alone and in combination with radiation or chemotherapy. For further information about Oncolytics, please visit www.oncolyticsbiotech.com.

%SEDAR: 00013081E

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