EXHIBIT 1



# RENEWAL ANNUAL
INFORMATION FORM

# for the Year Ended
December 31, 2005

# March 2, 2006

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# TABLE OF CONTENTS

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|CORPORATE STRUCTURE                                                    |     
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|GENERAL DEVELOPMENT OF THE BUSINESS                                    |     
|General                                                                |     
|Clinical Trials                                                        |     
|Animal Studies                                                         |     
|Manufacturing                                                          |     
|Financings and Other Distributions                                     |     
|Shareholdings in Other Issuers                                         |     
|Publications and Presentations                                         |     
|Patents                                                                |     
|Recent Developments                                                    |     
|Future Developments                                                    |     
|
|NARRATIVE DESCRIPTION OF THE BUSINESS                                  |     
|Our Business                                                           |     
|Scientific Background                                                  |     
|The Potential Cancer Product                                           |     
|Repayable Grants                                                       |     
|Business Strategy                                                      |     
|Regulatory Requirements                                                |     
|Market and Competition                                                 |     
|Product Marketing Strategy                                             |     
|Third Party Advisor, Collaborators and Scientific Advisory Board       |     
|Intellectual Property Policy                                           |     
|Patent and Patent Application Summary                                  |     
|Acquisition of all of the Shares of Oncolytics Biotech Inc. by SYNSORB |     
|Employees                                                              |     
|Research and Development Expenditures                                  |     
|Dividend Policy                                                        |     
|
|MARKET FOR SECURITIES                                                  |     
|Market for Common Shares                                               |     
|Description of Common Shares                                           |     
|
|DIRECTORS AND OFFICERS                                                 |     
|
|AUDIT COMMITTEE MATTERS                                                |     
|Mandate of the Audit Committee                                         |     
|Composition of the Audit Committee                                     |     
|
|RISK FACTORS                                                           |     
|
|ADDITIONAL INFORMATION                                                 |     
|Legal Proceedings                                                      |     
|Interest of Management and Others in Material Transactions             |     

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|Transfer Agent and Registrar  |     
|Material Contracts            |     
|Interests of Experts          |     
|External Auditor Service Fees |     
|Audit Fees                    |     
|Audit-Related Fees            |     
|Tax Fees                      |     
|All Other Fees                |     
|Other Additional Information  |     
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|GLOSSARY                      |     

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This Annual Information Form
contains forward-looking statements, including statements that may contain words such as
anticipate, estimate, expect, project,
intend, plan, believe and similar expressions and
statements relating to matters that are not historical facts. 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 2006 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.

# CORPORATE STRUCTURE

Oncolytics Biotech Inc. was
incorporated pursuant to the provisions of the ABCA on April 2, 1998 as 779738 Alberta
Ltd. On April 8, 1998, we amended our articles and changed our name to Oncolytics Biotech
Inc. On July 29, 1999, we further amended our articles by removing the private company
restrictions and subdividing our issued and outstanding 2,222,222 common shares to create
6,750,000 common shares. Our head office and principal place of business is located at
210, 1167 Kensington Crescent N.W., Calgary, Alberta T2N 1X7. Our registered office is
located at 4500 Bankers Hall East, 855  2nd Street S.W., Calgary, Alberta
T2P 4K7.

# GENERAL DEVELOPMENT OF
THE BUSINESS

# General

We focus on the discovery and
development of oncolytic viruses for the treatment of cancers that have not been
successfully treated with conventional therapeutics. Recent scientific advances in
oncology, virology, and molecular biology have created opportunities for new approaches to
the treatment of cancer. The product we are presently developing may represent a novel
treatment for Ras mediated cancers which can be used as an alternative to existing
cytotoxic or cytostatic therapies or as an adjuvant therapy to conventional chemotherapy,
radiation therapy, or surgical resections. It could also potentially be used to treat
certain cellular proliferative disorders for which no current therapy exists.

Our technologies are based primarily
on discoveries in the Department of Microbiology and Infectious Diseases at the University
of Calgary in the 1990s. Oncolytics Biotech Inc. was formed in 1998 to explore the
natural oncolytic capability of the reovirus, a virus that preferentially replicates in
cells with an activated Ras pathway.

The lead product being developed by
us may represent a novel treatment for certain tumour types and some cellular
proliferative disorders. Our lead product is a virus that is able to replicate
specifically in, and hence kill, certain tumour cells both in tissue culture as well as in
a number of animal models without damaging normal cells. See Narrative Description of the Business  Our
Business; Scientific Background.

We are also assessing the potential
opportunities for product candidates resulting from issued patents received for Ras
targeted adenovirus and herpes virus.

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# Clinical Trials

On November 14, 2005, we reported
results in conjunction with a poster presentation at the AACR-NCI-EORTC conference in the
U.S. by our principal investigator for our Phase I systemic delivery clinical trial in the
U.K. We reported on 22 patients who made up seven of nine potential cohorts with each
cohort receiving escalating dose levels of REOLSYIN®. Our principal investigator
presented data on 22 patients and reported that REOLYSIN® is well tolerated when
administered intravenously with minimal toxicity observed and that reovirus replication in
tumours has been identified with evidence of tumor necrosis. The principal investigator
also reported that there have been encouraging hints of activity in prostate and
colorectal cancer.

On October 19, 2005, we announced
that we had ended patient treatment in our Canadian Phase I clinical trial investigating
the use of REOLYSIN® to treat patients with recurrent malignant glioma. A total of
twelve patients were treated in the study at dosages of 107, 108, and
109TCID50. A
maximum tolerated dose was not reached over this dosage range and REOLYSIN® appears to
have been well tolerated by the patients. Determination of the safety of REOLYSIN® was
the primary purpose of this Canadian Phase I study. The study examined the use of a
single, intratumoural injection of REOLYSIN®, delivered using imaging-guided surgery,
in patients with malignant gliomas that had recurred despite other treatments, including
surgery and radiation therapy. After treatment with REOLYSIN®, the Phase I patients
are monitored and evaluated for safety for a period of six months.

On April 7, 2005, we announced that
we received clearance from the US Food and Drug Administration (FDA) to begin a Phase I
clinical trial to investigate the systemic delivery of REOLYSIN® as a treatment for
patients with advanced or metastatic solid tumours. This clinical trial is an open-label,
dose-escalation Phase I study in which a single dose of REOLYSIN® will be administered
intravenously to patients diagnosed with selected advanced or metastatic solid tumours
that are refractory (have not responded) to standard therapy or for which no curative
standard therapy exists. The primary objective of the study is to determine the maximum
tolerated dose (MTD), dose limiting toxicity (DLT) and safety
profile of REOLYSIN®. Secondary objectives include the evaluation of viral
replication, immune response to the virus and any evidence of anti-tumour activity. The
enrolment in this study, which commenced on September 28, 2005, is expected to be up to 36
evaluable patients and will depend in part upon the number of cohorts tested.

On February 28, 2005, we announced
that we had received clearance from the US Food and Drug Administration (FDA) to begin a
Phase I/II clinical trial to investigate the use of REOLYSIN® to treat patients with
recurrent malignant gliomas. This clinical trial is an open-label dose escalation Phase
I/II study in which a single dose of REOLYSIN® will be administered by infusion to
patients with recurrent malignant gliomas that are refractory to standard therapy. The
administration involves the stereotactically-guided placement of a needle into the tumour,
through which REOLYSIN® will be administered or infused into the tumour mass and
surrounding tissue using a pump. The primary objective of the study is to determine the
MTD, DLT and safety profile of REOLYSIN®. Secondary objectives include the evaluation
of viral replication, immune response to the virus and any evidence of antitumour
activity. The enrolment in this study is expected to be up to 30 evaluable patients in the
dose escalation phase with up to an additional 14 patients added at the MTD.

On February 18, 2005, we announced
that we received a letter of approval from the U.K. regulatory authorities (Medicines and
Healthcare products Regulatory Agency or MHRA) for our Clinical Trial Application (CTA) to
begin a Phase I clinical trial to evaluate the feasibility, safety and anti-tumour effects
of intratumoural administration of REOLYSIN® in combination with radiation in patients
with advanced cancers. The trial is a Phase I open-label, dose-escalation study of
REOLYSIN® combined with two different radiation dosages/schedules. The enrolment in
this study is expected to be approximately thirty evaluable patients and will depend upon
the number of dose levels tested. Up to an

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additional fifteen patients will also
be treated at the MTD. The primary objective of the study is to determine the MTD, DLT,
and safety profile of REOLYSIN® when administered intratumourally to patients
receiving radiation treatment. A secondary objective is to examine any evidence of
anti-tumour activity. Patients who have 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 will be eligible. Patient enrolment commenced on July 26,
2005.

On February 27, 2004, we announced
that we received approval to commence a Phase I clinical trial to investigate the systemic
delivery of REOLYSIN® as a treatment for patients with advanced or metastatic solid
tumours from the Medicines and Healthcare products Regulatory Authority in the United
Kingdom. The principal investigator for the study is Dr. J. de Bono of the Royal Marsden
Hospital in London, England. This clinical trial is the first to examine the systemic
delivery of REOLYSIN®, which is expected to result in delivery of the virus throughout
the body to both the primary tumour and metastatic disease sites. The trial is an
open-label, dose escalation Phase I study in which REOLYSIN® is administered
intravenously to patients diagnosed with advanced or metastatic solid tumours that are
refractory (have not responded) to standard therapy or for which no curative standard
therapy exists. The primary objective of the study is to determine the maximum tolerated
dose, dose limiting toxicity and safety profile of REOLYSIN®. Secondary objectives
include the evaluation of viral replication, immune response to the virus and any evidence
of antitumour activity. The enrolment in this study is expected to be up to 40 evaluable
patients and will depend upon the number of dose levels tested.

On February 27, 2004, we announced
the final update on our technical clinical study for T2 prostate cancer. On March 23,
2003, we previously reported results from an interim assessment of this clinical trial.
These results were presented by Dr. Don Morris, from the Alberta Cancer Board, the
principal investigator for the trial. Dr. Morris reported that there was evidence of viral
activity in five of six patients and there were no safety concerns, from either a clinical
or histopathological perspective, in all six patients reported upon. The data in four of
the six patients, showed clear histopathological evidence of apoptotic tumour cell death
(one measure of viral activity). In a fifth patient, the PSA level dropped by 53% and the
prostate gland shrunk by 67% from the period of time prior to treatment to the time of
surgical removal. There was no evidence of viral activity in the sixth patient. In all six
patients, there was no histopathological evidence of any viral effect on healthy prostate
tissue. This trial, which was approved by Health Canada on October 11, 2001, was primarily
a technical study designed to allow us to measure overall tumour response and examine
changes or effects inside the tumour and in surrounding normal tissue, as part of a human
clinical trial.

On October 29, 2003, we announced the
approval by the Drug Development Group of the Division of Cancer Treatment and Diagnosis,
U.S. National Cancer Institute (NCI) for multiple clinical trials to evaluate
the efficacy of REOLYSIN® in a range of cancers. The NCI approved REOLYSIN® for
collaborative development after an analysis of preclinical, GLP toxicology and available
clinical data. Oncolytics and NCI plan to collaborate to select cancer indications and
suitable development programs for a number of clinical trials. The NCI is an agency of the
National Institutes of Health, one of eight agencies that comprise the Public Health
Service in the U.S. Department of Health and Human Services. The NCI, established under
the National Cancer Act of 1937, is the U.S. Federal Governments principal agency
for cancer research and training.

# Animal Studies

On February 14, 2003, we announced
successful completion of a primate toxicology study testing the safety of intravenous
infusion of REOLYSIN® over 28 days. At the maximum daily dose used in the study, each
primate received daily from 10 to 100 times the expected maximum single human dose per
unit of body weight. The product was well tolerated and no product-related serious adverse
events were observed.

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# Manufacturing

We engage a toll manufacturer, Cobra
Biomanufacturing Plc for the production of reovirus for human clinical trials and animal
toxicology studies. The product will be produced in compliance with current regulatory
requirements and the manufacturer will confirm biosafety testing. See Risk
Factors  Manufacturing.

On February 6, 2003, we announced the
successful completion of our program for the development of a commercial process for the
manufacturing of REOLYSIN®, and indicated that we had filed selective patent
applications with respect to the process.

# Financings and Other
Distributions

Since the initial public offering, we
have completed 11 offerings for net cash proceeds of $68,930,889. In 2005, on December 29,
2005, we issued 3,200,000 units at $5.15 per unit (each unit consisting of one common
share and one-half of one common share purchase warrant with each full share purchase
warrant exercisable into one common share at an exercise price of $6.15 per share until
December 29, 2008).

# Shareholdings in Other
Issuers

During 2005, we sold 120,000 (2004
 697,945; 2003  1,496,500) common shares of BCY for net cash proceeds of
$7,965 (2004  $133,609; 2003  $450,151) and reported a gain on sale of these
shares of $765 (2004  $34,185, 2003  $264,453). As at December 31, 2005, our
remaining ownership in BCY was 80,000 common shares which were still under escrow.

On June 6, 2003, we sold 6,890,000
common shares in the capital of Transition Therapeutics Inc., for net proceeds of
$2,552,695. We acquired these shares on June 18, 2002 in exchange for the issuance of
1,913,889 of our common shares valued at $4,709,380. We recorded a loss on sale with
respect to the sale of these shares of $2,156,685.

# Publications and
Presentations

On November 15, 2005, a poster
entitled Reovirus enhances radiation cytotoxicity in vitro and in
vivo was presented by Dr. Kevin J. Harrington of the Targeted Therapy
Laboratory, The Institute of Cancer Research, Cancer Research UK Centre for Cell and
Molecular Biology, UK.

On April 20, 2005, a poster by
Errington et al. entitled Potential role for reovirus in the treatment of melanoma:
Targeted killing and immune stimulation was presented at the 96th Annual Meeting of
the American Association for Cancer Research in Anaheim, CA. USA. This
research supports the use of reovirus as a targeted therapy for melanomas. The research
also showed that activation of certain classes of immune cells by the reovirus may enable
additional anti-tumour activity beyond that of tumour cell death caused directly by the
reovirus.

On December 15, 2004, Efficacy
and Safety Evaluation of Human Reovirus Type 3 in Immunocompetent Animals was
published in Clinical Cancer Research Vol. 10. This publication concluded that the data
showed the efficacy and safety of reovirus when it is used in the treatment of gliomas in
immunocompetent hosts. As well, inoculation of reovirus into the brain of nonhuman
primates did not produce significant toxicities.

On September 30, 2004, a poster was
presented at the 16th EORTC-NCI-AACR 2004 Symposium on Molecular Targets and Cancer
Therapeutics in Geneva, Switzerland entitled The oncolytic reovirus, Reolysin,
augments the anticancer effects of cytotoxic agents in vitro against the ras-mutated human

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colon cancer cell line HCT 116.
The researchers were able to show that REOLYSIN® enhances the cytotoxicity of
chemotherapeutic agents including 5-FU, gemcitabine, doxorubicin and cisplatin.

On September 23, 2003, we announced
that Dr. Ramon Alemany, one of our collaborators since July 30, 2003, and his colleagues
at the Institut Catala dOncologia in Barcelona, Spain, had published a research
paper in the September 1, 2003 issue of Cancer Research, entitled
Ras-dependent Oncolysis with an adenovirus VAI Mutant. The researchers were
able to show that VAI mutant adenoviruses selectively replicated in and killed pancreatic
cancer cells with a Ras-activated pathway. We currently hold issued U.S. patent number
6,596,268 with claims covering the treatment of Ras-mediated tumours using adenoviruses
modified in the VAI domain.

On March 19, 2003, we announced that
Dr. Don Morris and his research group with the Alberta Cancer Board and the University of
Calgary had published the results of their work with the reovirus for the removal of
contaminating cancer cells from autologous (harvested from the patient themselves) blood
stem cells in model systems. The results showed that reovirus can successfullypurge cancer cells within autografts and were published in the March 13, 2003 issue
of Blood.

# Patents

In 2005, four Canadian patents and
one additional European patent were issued. The new patents in 2005 continued to expand on
previously issued patents in the area of using recombinant reovirus for the treatment of
neoplasia (cancers), non-cancer cellular proliferative diseases, and various methods of
production and processing of the reovirus. In addition, we have a number of other patents
under application, both in the United States, and through filings under the Patent
Cooperation Treaty. See Narrative Description of the Business  Patent and
Patent Application Summary.

# Recent Developments

On January 18, 2006, the U.S. NCI
issued a solicitation for Letters of Intent with respect to the conduct of two human
clinical trials using REOLSYIN®. The first is a Phase II study administering
REOLYSIN® systemically in patients with melanoma. The dosage and dosing regimen to be
used in the study will be determined based on data derived from our ongoing U.K. and U.S.
Phase I systemic administration studies. The second solicitation is for proposals for a
Phase I/II study of REOLYSIN® co-administered both systemically and intraperitoneally
(IP) in patients with ovarian cancer. The purpose of the Phase I portion of
the trial is to determine the Maximum Tolerated Dose of REOLYSIN® given by IP
administration in combination with a constant systemic dose and dosing regimen.

On January 24, 2006, we announced
that an oral presentation of the preliminary results of our Phase I combination
REOLYSIN®/radiation clinical trial is scheduled to be made at the American Association
of Cancer Researchers annual meeting held April 1  5 in Washington D.C. by our
principal investigator Dr. Kevin Harrington.

# Future Developments

We anticipate that many important
activities related to our clinical trial program, our product manufacturing and our
intellectual property development and protection will occur in 2006 and beyond. We
presently intend to continue to focus our clinical trial program on the evaluation of the
effectiveness of REOLYSIN® as a potential treatment for various cancer indications.
This will include continuing our clinical trial program presently underway, expanding into
other areas including utilizing our association with the NCI to broaden our clinical trial
program. We also intend to expand human clinical trials to determine the safety and
effectiveness of systemic delivery of REOLYSIN® as a cancer therapeutic.

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Various forms of cancer are being
assessed and we intend to evaluate and select one or more forms of cancer that appear to
provide the best opportunity for timely approval.

We plan to continue our focus on
establishing strategic relationships with potential partners who can provide expertise in
marketing and distribution, as well as assistance with research and development.

Except for historical information,
this review contains statements which by their nature are forward-looking and which
involve known and unknown risks, delays, uncertainties and other factors not under our
control. Any of these factors may cause our actual results, performance or achievement to
be materially different from the results, performance or expectations implied by these
forward-looking statements. These factors include, but are not limited to, results of
current or pending clinical trials, actions by regulatory authorities such as the Food and
Drug Administration in the United States, the Health Protection Branch in Canada, or MHRA
in the UK as well as those factors detailed in our regulatory filings.

# NARRATIVE DESCRIPTION
OF THE BUSINESS

# Our Business

Our potential product for human use,
REOLYSIN®, is developed from the reovirus. This virus has been demonstrated to
replicate specifically in tumour cells bearing an activated Ras pathway. Activating
mutations of Ras occur in approximately thirty per cent of all human tumours directly, but
considering its central role in signal transduction, activation of the Ras pathway has
been shown to play a role in approximately two-thirds of all tumours.

The functionality of the product is
based upon the finding that tumours bearing an activated Ras pathway are deficient in
their ability to activate the anti-viral response mediated by the host cellular protein,
PKR. Since PKR is responsible for preventing reovirus replication, tumour cells lacking
the activity of PKR are susceptible to reovirus infections. As normal cells do not possess
Ras activations, these cells are able to thwart reovirus infections by the activity of
PKR. In a tumour cell with an activated Ras pathway, reovirus is able to freely replicate
and hence kill the host tumour cell. The result of this replication is progeny viruses
that are then free to infect surrounding cancer cells. This cycle of infection,
replication and cell death is believed to be repeated until there are no longer any tumour
cells carrying an activated Ras pathway available.

The following schematic illustrates
the molecular basis of how the reovirus kills cancer cells.

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# Scientific Background

The Ras protein is a key regulator of
cell growth and differentiation. It transmits signals from the cells surface, via
growth factor receptors, to downstream elements, which are in turn relayed to the nucleus.
This transmission of signals from the cell surface to the cells nucleus is
collectively referred to as signal transduction. The transmission of these
signals results in cell growth, division, and in some instances cellular differentiation.
In normal cells, cell growth occurs only in the presence of factors stimulating the cells
to grow. Mutations in Ras itself, or any of the elements along the Ras pathway, often lead
to activation of the pathway in the absence of the appropriate growth stimuli, leading to
the uncontrolled growth of these cells and ultimately to the development of a cancerous
state. In fact, approximately 30% of all cancers are known to be due to mutations in Ras
itself. The frequency of these Ras mutations, as well as their etiology in a given tumour
is however, tissue specific. Activating mutations in Ras are found in many types of human
malignancies but are highly represented in pancreatic (90%), sporadic colorectal (50%),
lung carcinomas (40%), and myeloid leukemia (30%). Because Ras is a regulator of key
mitogenic signals, aberrant function of upstream elements such as receptor tyrosine
kinases (RTKs) can also result in Ras activation in the absence of mutations in Ras
itself. Indeed, over-expression of these RTKs such as HER2/neu/ErbB2 or the epidermal
growth factor receptor is common in breast cancer (25-30%), and over-expression of the
platelet-derived growth factor receptor (PDGFR) is common in glioblastomas and gliomas,
all of which are tumour types in which Ras mutations are relatively rare. Although
activating mutations of Ras itself is thought to occur in only about 30% of all tumours it
is expected that approximately two-thirds of all tumours have activated Ras signaling
pathways as a result of mutations in genes that lie upstream of Ras. With this in mind,
Ras becomes a significant therapeutic target in oncology.

All available scientific evidence
developed or reviewed by us to date supports the premise that the reovirus only actively
infects and replicates in cells with an activated Ras pathway. This naturally occurring
virus is believed to cause only mild infections of the respiratory and gastrointestinal
tract and in general, reovirus infections in humans are asymptomatic and usually
sub-clinical. Research has indicated this virus replicates in, and therefore kills, only
cancer cells (i.e. cancer cells with an activated Ras pathway), but does not replicate in
normal cells. It has been demonstrated that reovirus replication is restricted in
normal cells due to the activation of the double stranded RNA-activated
protein kinase (PKR). PKR is a crucial element in protecting cells from reovirus infection
and is capable of blocking viral protein translation. Activated Ras (or an activated
element of the Ras pathway) prevents PKR

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activation, and thus allows viral
replication to ensue only in this subset of cancer cells. To prove that reovirus could be
used as a potential cancer therapeutic, a number of animal models were developed.
Experiments using this virus to treat mouse tumours, expanded animal models as well as
human brain, breast, and prostate tumours implanted in immuno-compromised mice have
yielded promising results. In animals where tumour regression was noted, a single
injection of reovirus is often enough to cause complete tumour regression. More
importantly, it was demonstrated that this treatment is effective in causing tumour
regression in immune competent animals. We believe that the nature of this virus, combined
with its selective replication makes it an attractive candidate as a cancer therapy.

We also believe that this research
may have broad utility in the treatment of tumours with an activated Ras pathway as well
as a potential use as an adjuvant therapy following surgical tumour resection or as an
adjuvant therapy to conventional chemotherapeutic or radiation therapies.

# The Potential Cancer
Product

Cancer is a group of related diseases
characterized by the aberrant or uncontrolled growth of cells and the spread of these
cells to other sites in the body. These cancer cells eventually accumulate and form
tumours that can disrupt and impinge on normal tissue and organ function. In many
instances, cells from these tumours can break away from the original tumour and travel
through the body to form new tumours through a process referred to as metastasis.

Our cancer product is a potential
therapeutic for tumours possessing an activated Ras pathway. In tumour cells with this
type of activation, the virus is cytotoxic but may have no effect on the surrounding
normal tissue. Activating mutations of Ras are believed to account for approximately 30%
of all human tumours directly. It is also possible to activate Ras through mutation of
proteins that control its activity rather than through direct mutations of Ras itself.
This suggests that approximately two thirds of tumours may respond to this treatment.

# Repayable Grants

Pursuant to the Technology
Commercialization Agreement with the Alberta Heritage Foundation, we received $150,000 to
offset the REOLYSIN® development costs. Under the Technology Commercialization
Agreement, we agreed to repay the amount of the grant from our gross sales. We agreed to
repay the Alberta Heritage Foundation in annual installments in an amount equal to the
lesser of: (a) 5% of gross sales; or (b) $15,000 per annum until the entire grant has been
paid in full.

In accordance with the Clinical Trial
Agreement with the ACB, we received funding and overhead support from the ACB to offset
the REOLYSIN® clinical trial expenditures. Under the Clinical Trial Agreement, we
agreed to repay the amount of the grant together with a royalty, to a combined maximum
amount of $400,000 plus an overhead repayment of $100,000, upon sales of product. We
agreed to repay the ACB in annual installments from the date of commencement of sales in
an amount equal to the lesser of: (a) 5% of gross sales of REOLYSIN®; or (b) $100,000
per annum.

# Business Strategy

Our business strategy is to develop
and market REOLYSIN® in an effective and timely manner, and access additional
technologies at a time and in a manner that we believe is best for our development. We
intend to achieve our business strategy by focusing on these key areas:

| |  | Develop
REOLYSIN® by initiating toxicology and manufacturing programs and progress the
product through a clinical setting to assess its safety and efficacy in human subjects.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  | Establish
collaborations with experts to assist us with scientific and clinical developments of
this new potential pharmaceutical product.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------

| |  | Implement
strategic alliances with selected pharmaceutical and biotechnology companies and selected
laboratories, at a time and in a manner where such alliances may complement and expand
our research and development efforts on the product and provide sales and marketing
capabilities.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Utilize
our broadening patent base and collaborator network as a mechanism to meet our strategic
objectives.
|- |  | ------------------------------------------------------------------------------------------------------------

| |  | Develop
relationships with companies that could be instrumental in assisting us to access other
innovative therapeutics.
|- |  | ------------------------------------------------------------------------------------------------------------------------

Our business strategy is based on
attaining a number of commercial objectives, which, in turn, are supported by a number of
product development goals. Our new product development presently being conducted is
primarily of a research and development nature. In the context of this Annual Information
Form, statements of our belief are based primarily upon our results derived to
date from our research and development program with animals, and early stage human trials,
and upon which we believe that we have a reasonable scientific basis to expect the
particular results to occur. It is not possible to predict, based upon studies in animals,
or early stage human trials, whether a new therapeutic will ultimately prove to be safe
and effective in humans. There are no assurances that the particular result expected by us
will occur. See Risk Factors.

At this time we do not intend to
become a fully integrated pharmaceutical company with substantial in-house research and
development, marketing and distribution or manufacturing capabilities. We are pursuing a
strategy of establishing relationships with larger companies as strategic partners. We
intend to partner or joint venture with larger pharmaceutical companies that have existing
and relevant marketing capability for our products. It is anticipated that future clinical
development into large international or pivotal trials would generally occur in
conjunction with a strategic partner or partners, who would contribute expertise and
financial assistance. In exchange for certain product rights and commitments to market our
products, the strategic partners would be expected to share in gross proceeds from the
sale of our product or products. The proceeds generated from partnering or joint venturing
projects are expected to be distributed on the basis of relative risk taken and resources
contributed by each party to the partnership or joint venture.

# Regulatory Requirements

The development of new
pharmaceuticals is strongly influenced by a countrys regulatory environment. The
drug approval process in Canada is regulated by Health Canada. The primary regulatory body
in the United States is the FDA and in the UK is the MHRA. Similar processes are conducted
in other countries by equivalent regulatory bodies. Regulations in each jurisdiction
require the licensing of manufacturing facilities and mandate strict research and product
testing standards. Companies must establish the safety and efficacy of their products,
comply with Good Manufacturing Practices and submit marketing materials before being
allowed to market pharmaceutical products. While we plan to pursue or support the pursuit
of the approval of our product, success in acquiring regulatory approval for any product
is not assured.

In order to market our pharmaceutical
product in Canada, the United States, Europe and other jurisdictions, we must successfully
meet the requirements of those jurisdictions. The requirements of the Appropriate
Regulatory Authority will generally include the following stages as part of the regulatory
process:

---

-10-

Pre-Pharmacological Studies Pre-Pharmacological studies involve extensive testing on laboratory animals to
determine if a potential therapeutic product has utility in an in vivo disease
model and has any adverse toxicology in a disease model.

Investigational New Drug
Application  An Investigational New Drug (IND)
Submission, or the equivalent, must be submitted to the appropriate regulatory authority
prior to conducting Pharmacological Studies.

Pharmacological Studies(or Phase I Clinical Trials)  Pharmacological studies are designed to assess the
potential harmful or other side effects that an individual receiving the therapeutic
compound may experience. These studies, usually short in duration, are often conducted
with healthy volunteers or actual patients and use up to the maximum expected therapeutic
dose.

Therapeutic Studies(or
Phase II and III Clinical Trials)  Therapeutic studies are designed primarily to
determine the appropriate manner for administering a drug to produce a preventive action
or a significant beneficial effect against a disease process. These studies are conducted
using actual patients with the condition that the therapeutic is designed to remedy.

Prior to initiating these studies,
the organization sponsoring the program is required to satisfy a number of requirements
via the submission of documentation to support the approval for a clinical trial.

New Drug
Submission  After all three phases of a clinical trial have been
completed, the results are submitted with the original IND Submission to the appropriate
regulatory authority for marketing approval. Once marketing approval is granted, the
product is approved for commercial sales.

# Market and Competition

According to estimates for 2005 from
the American Cancer Society, 1.37 million Americans are expected to be diagnosed with
cancer in the year, and 57,000 Americans are forecast to die of cancer. In the United
States cancer accounts for 22.8% of all deaths, second only to cardiovascular disease. In
the United States, the relative lifetime risk of a male developing cancer is 1 in 2, while
for women, this risk is 1 in 3.

The costs of this disease state are
also significant. In the United States, the National Institute of Health estimates that
the overall annual costs for cancer treatment are $189.9 billion. Of this figure, $69.4
billion can be attributed to direct patient costs.

It has been estimated that
approximately 30% of all tumours are a result of activating mutations of Ras itself. Since
Ras can be activated by mechanisms other than direct mutations it is believed that the
number of tumours with activated Ras (either through direct activating mutation or
mutation or over-expression of elements upstream of Ras) is approximately two thirds.

We are aware of large pharmaceutical
companies developing small molecule programs for the development of therapeutics to treat
Ras mediated tumours. In addition, there are numerous companies, both big and small, that
are working in the field of cancer therapeutics including some companies developing other
oncolytic viruses. See Risk Factors.

# Product Marketing
Strategy

The markets for the cancer product
being developed by us may be large and could require substantial sales and marketing
capability. Before or upon successful completion of the development of a cancer product,
we intend to enter into one or more strategic partnerships or other collaborative
arrangements with a pharmaceutical company or other company with marketing and
distribution expertise to address this need. If necessary, we will establish arrangements
with various partners for different geographical

---

-11-

areas or specific applications.  Our
management and consultants have relevant experience with the partnering process.

# Third Party Advisor,
Collaborators and Scientific Advisory Board

We use various third party advisors,
scientific collaborators and our scientific advisory board to assist us with the
advancement of REOLYSIN®. We typically report on the activity of these groups once
their work is completed.

# Scientific Advisory Board

We formed a Scientific Advisory Board
in 2003 to provide us with additional scientific and clinical guidance on the development
of REOLYSIN®. The advisory board is comprised of Ramon Alemany, Ph.D., Richard
Gorlick, M.D., Alan Tuchman, M.D., and Frank Tufaro, Ph.D.

| | Ramon
Alemany, Ph.D., is a recognized expert on the development of antitumoural agents based on
the adenovirus. During an eight year period in the United States he held progressively
more senior positions in gene therapy laboratories at the MD Anderson Cancer Center,
Baxter Healthcare Corporation and the University of Alabama at Birmingham. In 2001, he
was appointed Director of the Gene and Viral Therapy Group at the Institut Catala dOncologia
in Barcelona. Dr. Alemany is currently collaborating with us to develop modified
adenoviruses that are selective for Ras mediated cancers.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Richard
Gorlick, M.D., is the Section Chief of Hematology/Oncology in the department of
pediatrics at the Childrens Hospital at Montefiore in New York. He is actively
involved in the national pediatric cooperative group, the Childrens Oncology Group,
for which he serves as the Chairman of the subcommittee on Bone Tumour Biology. Dr.
Gorlick is known for his research work on molecular pharmacology of antifolate resistance
and developing new therapeutic approaches for osteosarcoma.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Alan
Tuchman, M.D., works in private practice and is Clinical Professor of Neurology at New
York Medical College. He is also the Principal of NeuroPhysics Corporation, a healthcare
and neuroscience consulting firm. From 1997 to 2001 Dr. Tuchman was the Senior Vice
President of Equity Research for Oscar Gruss & Son, where he conducted investment
research and helped develop marketing strategies for healthcare companies. He also held
senior neurology positions at New York Medical College and Lincoln Medical and Mental
Health Center.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Frank
Tufaro, Ph.D., has extensive experience with biotech firms and was one of the founders of
NeuroVir Inc., a Vancouver-based biotech company, which is now merged with MediGene AG to
develop Herpes Simplex virus-based oncolytic vectors for cancer therapy. Under Dr. Tufaros
direction, NeuroVir and then MediGene Inc. were able to initiate and complete the first
Phase I/II U.S. clinical trials of two herpes-based oncolytic viruses for the treatment
of malignant brain tumours, and the treatment of colorectal cancer metastatic to the
liver. He currently serves on scientific advisory boards for several biotech companies.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# Intellectual Property
Policy

At the end of 2005, we have 13
patents issued in the United States (11 of the 13 related to the reovirus technology),
four issued in Canadian and two issued in Europewith additional applications in process.
All potentially valuable intellectual property is identified by the inventory, and
classified by us in terms of its sensitivity. All sensitive documentation related to the
intellectual property is protected and kept in secure areas. All employees execute
agreements containing confidentiality clauses, which assign any new

---

-12-

intellectual property to us.  We
believe that we apply our intellectual property protection policy consistently.

Where appropriate, and consistent
with managements objective, patents are pursued as soon as the concepts have been
validated through appropriate laboratory work. To that end, patents will continue to be
sought on components or concepts that we perceive to be essential.

We believe that one of the best
intellectual property control policies is a strong human resources policy to ensure that
technical leaders with access to proprietary intellectual property do not consider leaving
us for other employment. We intend that all staff be compensated through competitive
salaries and participation in our stock option program.

# Patent and Patent
Application Summary

Where a patent is filed in the United
States there is an option to file a Patent Cooperation Treaty (PCT)
application. The PCT application process is a means for technology patented in one of the
PCT signatory countries to receive protection in other PCT countries. The PCT includes
over 100 countries. Within one year of filing a patent in the United States, the applicant
files for PCT coverage in all PCT countries. Approximately 18 months after the PCT filing,
the applicant must pay individual filing fees in designated PCT countries and at that time
the applicant may wish to restrict coverage to a subset of countries which have potential
for the technology. At the time of filing the PCT application the applicant designates
which of the member countries are to be covered by the application. The PCT application
allows the applicant to defer national filings in the various designated countries for a
period of up to 30 months from the original PCT application filing date. After the PCT
application deferral period, the applicant must file for separate national or regional
patents in one or more designated countries, depending on which specific markets the
applicant intends to target.

The following table sets forth our
patent issuances:

|Title                            | Ownership | Inventors               | Status of Patent
|-------------------------------- | --------- | ----------------------- | ----------------
|
|Patent Number U.S. 6,110,461     |           | Oncolytics Biotech Inc. |                 
|Reovirus for the Treatment of    |           |                         |                 
|Neoplasia                        |           |                         |                 
|
|Patent Number U.S. 6,136,307     |           | Oncolytics Biotech Inc. |                 
|Reovirus for the Treatment of    |           |                         |                 
|cellular proliferative disorders |           |                         |                 
|
|Patent Number U.S. 6,261,555     |           | Oncolytics Biotech Inc. |                 
|Reovirus for the treatment of    |           |                         |                 
|Neoplasia                        |           |                         |                 
|
|Patent Number U.S. 6,344,195     |           | Oncolytics Biotech Inc. |                 
|Reovirus for the treatment of    |           |                         |                 
|Neoplasia                        |           |                         |                 
|
|European Patent Number           |           | Oncolytics Biotech Inc. |                 
|1003534                          |           |                         |                 
|Reovirus for the treatment of    |           |                         |                 
|Neoplasia                        |           |                         |                 
|

---

-13-

|Title                                                        | Ownership | Inventors               | Status of Patent
|------------------------------------------------------------ | --------- | ----------------------- | ----------------
|                                                             |           |                         |                 
|Patent Number U.S. 6,455,038                                 |           | Oncolytics Biotech Inc. |                 
|Reovirus for the treatment of                                |           |                         |                 
|Cellular Proliferative Disorders                             |           |                         |                 
|                                                             |           |                         |                 
|Patent Number U.S. 6,528,305                                 |           | Oncolytics Biotech Inc. |                 
|Method of Producing Infectious 
Reovirus                     |           |                         |                 
|
|Patent Number U.S. 6,565,831                                 |           | Oncolytics Biotech Inc. |                 
|Methods of Preventing Reovirus                               |           |                         |                 
|Recognition for the Treatment for                            |           |                         |                 
|Cellular Proliferative Disorders                             |           |                         |                 
|
|Patent Number U.S. 6,576,234                                 |           | Oncolytics Biotech Inc. |                 
|Reovirus for the Treatment of                                |           |                         |                 
|Neoplasia                                                    |           |                         |                 
|
|Patent Number U.S. 6,596,268                                 |           | Oncolytics Biotech Inc. |                 
|Viruses for the Treatment of                                 |           |                         |                 
|Cellular Proliferative Disorders(1)                          |           |                         |                 
|
|Patent Number U.S. 6,649,157                                 |           | Oncolytics Biotech Inc. |                 
|Viruses for the Treatment of                                 |           |                         |                 
|Cellular Proliferative Disorders(2)                          |           |                         |                 
|
|Patent Number U.S. 6,703,232                                 |           | Oncolytics Biotech Inc. |                 
|Methods of Producing Infectious                              |           |                         |                 
|Reovirus                                                     |           |                         |                 
|
|Patent Number U.S. 6,808,916                                 |           | Oncolytics Biotech Inc. |                 
|Method of Extracting Virus from                              |           |                         |                 
|Cell Culture                                                 |           |                         |                 
|
|Patent Number U.S. 6,811,775                                 |           | Oncolytics Biotech Inc. |                 
|Reovirus for the Treatment of                                |           |                         |                 
|Cellular Proliferative Disorders                             |           |                         |                 
|
|European Patent Number                                       |           | Oncolytics Biotech Inc. |                 
|1,309,672                                                    |           |                         |                 
|Method of Producing Infectious
Reovirus                      |           |                         |                 
|
|Canadian Patent Number                                       |           | Oncolytics Biotech Inc. |                 
|2,374,388                                                    |           |                         |                 
|The use of Ribozymes in the
Detection of Adventitious
Agents |           |                         |                 
|

---

-14-

|Title                                                         | Ownership | Inventors               | Status of Patent
|------------------------------------------------------------- | --------- | ----------------------- | ----------------
|
|                                                              |           |                         |                 
|Canadian Patent Number                                        |           | Oncolytics Biotech Inc. |                 
|2,428,206                                                     |           |                         |                 
|Methods for the Treatment of
Cellular Proliferative Disorders |           |                         |                 
|
|Canadian Patent Number                                        |           | Oncolytics Biotech Inc. |                 
|2,283,280                                                     |           |                         |                 
|Reovirus for the Treatment of
Neoplasia                       |           |                         |                 
|
|Canadian Patent Number                                        |           | Oncolytics Biotech Inc. |                 
|2,437,962                                                     |           |                         |                 
|Method of Extracting Virus
From Cell Culture                  |           |                         |                 
|

Notes:

|(1) | Claims
cover the treatment of Ras mediated tumours using modified adenoviruses.
|--- | -------------------------------------------------------------------------------

|(2) | Claims
cover the treatment of Ras mediated tumours using modified herpes viruses.
|--- | ---------------------------------------------------------------------------------

Other patent applications have been
filed by us, but have yet to be published or approved.

# Acquisition of all of
the Shares of Oncolytics Biotech Inc. by SYNSORB

In April 1999, Oncolytics Biotech
Inc., the Vendors and SYNSORB entered into the Share Purchase Agreement whereby SYNSORB
acquired all of our then outstanding common shares for a share and cash exchange valued at
$2,500,000 paid primarily in common shares of SYNSORB, four milestone payments payable to
the Vendors valued, in the aggregate, at up to $4,000,000 and a royalty commitment.
Pursuant to an assignment dated July 29, 1999, the obligation to make the milestone and
certain royalty payments was assigned from SYNSORB to us. We thereby agreed to indemnify
and save harmless SYNSORB from all actions, suits, demands, claims, costs, losses,
expenses, charges and damages brought against SYNSORB in relation to the payment or
non-payment of such obligations; however such assignment did not affect or release SYNSORB
from its liabilities and responsibilities under the terms of the Share Purchase Agreement.
As at the date hereof, we have made three milestone payments totaling $3,000,000. The
final milestone payment is $1.0 million payable within 90 days of the first receipt, in
any country, from the Appropriate Regulatory Authority, for marketing approval to sell
REOLYSIN® to the public or the approval of a new drug application for REOLYSIN®.
In addition to the milestone payments, royalty payments payable to the Vendors will become
due and payable in accordance with the Share Purchase Agreement upon realization of sales
of REOLYSIN®.

In 2004, we reached an agreement that
cancelled a portion of our future contingent obligation for consideration of $400,000
consisting of $250,000 cash and 21,459 common shares valued at $150,000. As a result, our
future contingent obligations were reduced to 11.75% (formerly 14.25%) of royalty payments
or other payments received as a result of entering into partnerships or other arrangements
for the development of the reovirus technology. Alternatively, if we develop the reovirus
treatment to the point where it may be marketed at a commercial level, the payments
referred to in the foregoing sentence will be amended to equal a royalty payment of 2.35%
(formerly 2.85%) of net sales received by us for such products.

---

-15-

# Employees

As of December 31, 2005, we had 10
employees. The majority of our activities are conducted under contract with third party
service providers.

# Research and Development
Expenditures

For the period ended December 31,
2005, we incurred research and development expenditures of $9,308,977 representing
approximately 68.6% of our total expenses for the year. See Managements
Discussion and Analysis  Results of Operations  Research and Development
Expenses.

# Dividend Policy

To date, we have not paid any
dividends on our outstanding common shares. The future payment of dividends will be
dependent upon our financial requirements to fund future growth, our financial condition
and other factors which our Board of Directors may consider appropriate in the
circumstances. It is unlikely that dividends will be paid in the foreseeable future.

# MARKET FOR SECURITIES

# Market for Common Shares

Our outstanding common shares are
listed and posted for trading on the Toronto Stock Exchange under the trading symbol
ONC and on the Nasdaq Capital Market under the trading symbol
ONCY. The following table sets forth the market price ranges and the aggregate
volume of trading of the common shares on the Toronto Stock Exchange and Nasdaq Small Cap
Market for the periods indicated:

|             | Toronto Stock Exchange | Nasdaq Capital Market
|------------ | ---------------------- | ---------------------
|
|
|
|2005
January |                        | 5.75                 
|February     |                        | 6.25                 
|March        |                        | 6.25                 
|April        |                        | 5.39                 
|May          |                        | 5.00                 
|June         |                        | 4.46                 
|July         |                        | 4.30                 
|August       |                        | 3.92                 
|September    |                        | 5.24                 
|October      |                        | 5.89                 
|November     |                        | 6.85                 
|December     |                        | 5.89                 

Description of Common Shares

The holders of our common shares are
entitled to one vote per share at meetings of shareholders, to receive such dividends as
declared by us and to receive our remaining property and assets upon dissolution or wind
up. Our common shares are not subject to any future call or assessment and there are no
pre-emptive, conversion or redemption rights attached to such shares. As at December 31,
2005, we

---

-16-

have outstanding stock options and
common share purchase warrants as set forth in Note 11 and 12 of our audited financial
statements.

# DIRECTORS AND OFFICERS

Our directors are elected by the
shareholders at each Annual General Meeting and typically hold office until the next
Annual General Meeting at which time they may be re-elected or replaced. Casual vacancies
on the board are filled by the remaining directors and the persons filling those vacancies
hold office until the next Annual General Meeting at which time they may be re-elected or
replaced. The officers are appointed by the Board of Directors and hold office
indefinitely at the pleasure of the Board of Directors.

The following table sets forth the
names and municipalities of residence of all our directors and officers as at the date
hereof, as well as the positions and offices held by such persons and their principal
occupations.

|Name and Municipality
     of Residence | Position with the
   Corporation | Principal Occupation | Director of the
Corporation Since
|--------------------------------------- | -------------------------------- | -------------------- | ---------------------------------
|                                       

|Bradley G. Thompson
Ph.D(2) Calgary, Alberta | President, Chief Executive 
Officer and Executive    
Chairman of the
Board | Executive Chairman of the Board, President and Chief
Executive Officer since April 1999. | April 21, 1999
|-------------------------------------------- | --------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- | --------------

|Douglas A. Ball C.A.Calgary, Alberta | Chief Financial  Officer 
and     Director | Chief  Financial  Officer since May 2000.  Mr. Ball was 
Vice President,  Finance and Chief Financial Officer of 
SYNSORB from June 1997 to May 2000.  Prior to this,  he 
was the Vice President,  Finance and Administration and 
Chief  Financial  Officer  of ECL  Group  of  Companies 
Ltd. Mr. Ball held this  position  from  December  1995 
until May 1997.  Prior to ECL,  he was  Controller  and 
then  Vice   President   and   Controller  of  Canadian 
Airlines   International  Ltd.  from  June  1993  until 
August 1995. | April 21, 1999
|------------------------------------ | ------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------

|William A. Cochrane,
OC, M.D. (3) Calgary, Alberta | Director | President of W.A. Cochrane & Associates, Inc. (a      
consulting company) since 1989 and Chairman of        
Resverlogix Corp. (a public biopharmaceutical company)
and University Technologies International Inc. (UTI)  
at the University of Calgary  since 2000 and is a     
director of Pheromone Corp and Medicure Inc.  Dr.     
Cochrane is an Officer of the Order of Canada and a   
2002 recipient of the Queens Golden Jubilee Medal.    
Dr. Cochrane also served as the Deputy Minister of    
Health Services for the Province of Alberta from 1973 
to 1974 and President of the University of Calgary    
from 1974 to 1978. | October 31, 2002
|-------------------------------------------------- | -------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------

|Matthew C. Coffey Ph.D. Calgary, Alberta | Chief Scientific Officer | Chief  Scientific  Officer  of  the  Corporation  since 
December 2004,  Vice-President  of Product  Development 
from July  1999 to  December  2004 and Chief  Financial 
Officer from September 1999 to May 2000. | N/A
|---------------------------------------- | ------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---

---

|Name and Municipality
     of Residence | Position with the
   Corporation | Principal Occupation | Director of the
Corporation Since
|--------------------------------------- | -------------------------------- | -------------------- | ---------------------------------
|                                       

|George M. Gill, M.D. Washington, D.C. | Senior Vice President,
Clinical and Regulatory Affairs | Dr. Gill has been a  consultant  in  clinical  research 
and  regulatory   affairs  to  the  pharmaceutical  and 
biotechnology  industries  since he retired from Ligand 
Pharmaceuticals  in  1999.  During  his 38 years in the 
industry,  he also served in senior executive positions 
with    ICI    Pharmaceuticals    (now    AstraZeneca), 
Bristol-Myers  Squibb,  and Hoffmann-La Roche. Dr. Gill 
holds a B.Sc. in chemistry  from  Dickinson  College in 
Pennsylvania  and an M.D.  from the School of  Medicine 
of the University of Pennsylvania in Philadelphia. | N/A
|------------------------------------- | ------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---

|Antoine A. Noujaim 
Ph.D. (2) Edmonton, Alberta | Director | Currently Honorary Chairman of ViRexx Medical Corp.
Chairman and Chief Executive  Officer of ViRexx Medical
Corp  from February 1, 2005 to November 2005.  Formerly  
Chairman,  CEO &  President   of  ViRexx   Research   Inc.  (a  
public biopharmaceutical  company  which  changed  its name 
to ViRexx  Medical  Corp.)  since  July,  2002.   Formerly
Chairman  of the  Board  of  AltaRex  Corp.  (a  public
biopharmaceutical  company) from February 1998 to July,
2002.    President  and  Chief  Executive   Officer  of
AltaRex Corp.,  from November 1995 to February 1998 and
from  May  2004 to the  present.   Prior  thereto,  Dr.
Noujaim was the President of Biomira  Research  Inc., a
division of Biomira  Inc.  (a public  biopharmaceutical
company)  from 1994 to 1995 and  Senior  Vice-President
of the  Immunoconjugate  Division of Biomira Inc.  from
1989 to November  1995.  Dr.  Noujaim  also served as a
Director of Biomira Inc. from 1985 to 1995. | August 27, 1999
|----------------------------------------------- | -------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------

|Robert B. Schultz, 
F.C.A. (1) Toronto, Ontario | Lead Director | Chairman and Director of Rockwater Capital  Corporation 
formerly  McCarvill  Corporation (a financial  services 
company)   since   June   2001.   Chairman   and  Chief 
Executive  Officer of Merrill  Lynch Canada from August 
1998  until his  retirement  on May 1,  2000.  Prior to 
this  appointment,  Mr.  Schultz  was  Chief  Executive 
Officer at Midland  Walwyn  since 1990.  Since  joining 
the  investment  industry in 1971, Mr. Schultz has held 
a variety of senior positions,  and has participated on 
various    industry-related   boards   and   committees 
including  Director  and  Chairman  of  the  Investment 
Dealers Association of Canada. | June 30, 2000
|----------------------------------------------- | ------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------

|Fred A. Stewart, 
Q.C.(1)(2) Bragg Creek, Alberta | Director | President  of  Fred   Stewart  &  Associates   Inc.  (a
government and corporate relations  consulting company)
since March  1996.  Prior to that,  Mr.  Stewart was an
associate   with   Milner   Fenerty,   Barristers   and
Solicitors  from June 1993 to March 1996.  Mr.  Stewart
served  as Member of the  Legislative  Assembly  of the
Province of Alberta from 1986 to 1993. | August 27, 1999
|------------------------------------------------- | -------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------

|Jim Dinning(1) Calgary, Alberta | Director | Chairman of Western  Financial  Group  since  September 
2004.  Prior  thereto,  Mr.  Dinning was the  Executive 
Vice   President   of  TransAlta   Corporation   (power 
generation and wholesale  marketing  company) from 1997 
to  2004  and  served  as  Member  of  the  Legislative 
Assembly  of the  Province  of  Alberta  from  1986  to 
1997.   Mr.   Dinning   is  a   director   of   Finning 
International Inc. and Shaw Communications Inc. | March 24, 2004
|------------------------------- | -------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------

---

|Name and Municipality
     of Residence | Position with the
   Corporation | Principal Occupation | Director of the
Corporation Since
|--------------------------------------- | -------------------------------- | -------------------- | ---------------------------------
|                                       

|J. Mark Lievonen C.A.(3)Markham, Ontario | Director | President of Sanofi Pasteur Limited, a vaccine        
development, manufacturing and marketing company,     
since October 1998 and holding various positions with 
Sanofi Pasteur Limited and its predecessors since     
1983.  Mr. Lievonen serves on a number of industry and
community boards and councils including BIOTECanada,  
the Ontario Genomics Institute, and the Ontario       
Institute for Cancer Research. | April 5, 2004
|---------------------------------------- | -------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------

|Karl Mettinger, M.D.,
Ph.D Berkeley, CA | Chief Medical Officer | Dr. Mettinger has been involved in clinical and        
regulatory affairs with various pharmaceutical         
companies since 1985. Prior to joining Oncolytics, he  
was Senior Vice President and Chief Medical Officer    
with SuperGen Inc. Prior to that, he was Executive     
Director, Clinical Research at IVAX/Baker Norton,      
which is the new drug subsidiary of IVAX Corporation.  
He began his career in the industry with KABI in       
Sweden. Dr. Mettinger holds an MD from the University  
of Lund in Sweden and a PhD (hematology/stroke) from   
the Karolinska Institute in Stockholm, Sweden. | N/A
|--------------------------------------- | --------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---

Notes:

|(1) | These
persons are members of the Audit Committee.  Mr. Stewart is the Chair of the Audit
Committee.
|--- | ---------------------------------------------------------------------------------------------------

|(2) | These
persons are members of the Compensation Committee.  Dr. Cochrane is the Chair of the
Compensation Committee.
|--- | ------------------------------------------------------------------------------------------------------------------

|(3) | These
persons are members of the Corporate  Governance and Nominating  Committee.  Mr.
 Lievonen is the Chair of the Corporate          Governance and Nominating Committee.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As at the date hereof, the directors
and senior officers as a group beneficially owned, directly or indirectly, 379,500 of our
common shares, representing 1.0% of the issued and outstanding common shares.

Certain of our directors are
associated with other companies, which may give rise to conflicts of interest. In
accordance with the ABCA, directors who have a material interest in any person who is a
party to a material contract or a proposed material contract with us are required, subject
to certain exceptions, to disclose that interest and abstain from voting on any resolution
to approve that contract. In addition, the directors are required to act honestly and in
good faith with a view to the best interests of Oncolytics Biotech Inc.

# AUDIT COMMITTEE MATTERS

Mandate of the Audit
Committee

# 1.    Policy Statement

It is the policy of Oncolytics
Biotech Inc. (the Corporation) to establish and maintain an Audit Committee,
composed entirely of independent directors, to assist the Board of Directors (the
Board) in carrying out their oversight responsibility for the
Corporations internal controls, financial reporting and risk management processes.
The Audit Committee will be provided with resources commensurate with the duties and
responsibilities assigned to it by the Board including administrative support. If
determined necessary by the Audit Committee, it will have the discretion to institute
investigations of improprieties, or suspected improprieties within the scope of its
responsibilities, including the standing authority to retain special counsel or experts.

---

-19-

# 2.    Composition of the
Committee

| | (a) |  | The
Audit Committee shall consist of a minimum of three (3) directors, at least
               half of whom shall be resident Canadians. The Board shall appoint the
members of                the Audit Committee and may seek the advice and assistance of
the Corporate                Governance and Nominating Committee in identifying qualified
candidates. The                Board shall appoint one member of the Audit Committee to
be the Chair of the                Audit Committee, or delegate such authority to appoint
the Chair of the Audit                Committee to the Audit Committee.
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) |  | The
Chair of the Committee shall be responsible for leadership of the Committee,
               including preparing or approving the agenda, presiding over the meetings,
and                making committee assignments.
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) |  | Each
director appointed to the Audit Committee by the Board shall be an outside
               director who is unrelated. An outside, unrelated director is a director
who                meets the requirements of NASDAQ Rule 4200 and Multilaterial
Instrument 52-110.                A director appointed to the audit committee shall also
meet the requirements of                NASDAQ Rule 4350 (d)(2)(A)(ii) and Exchange Act
Rule 10A-3(b)(1). Such director                shall be independent of management and
free from any interest, any business or                other relationship which could, or
could reasonably be perceived, to materially                interfere with the directors
ability to act with a view to the best                interests of the Corporation, other
than interests and relationships arising                from shareholding. In determining
whether a director is independent of                management, the Board shall make
reference to the abovementioned rules and any                applicable revisions
thereto, and any additional relevant then current                legislation, rules,
policies and instruments of applicable regulatory                authorities.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d) |  | Each
member of the Audit Committee shall be financially literate. In order to be
               financially literate, a director must be, at a minimum, able to read and
               understand basic financial statements that present a breadth and level of
               complexity of accounting issues that are generally comparable to the
breadth and                complexity of the issues that can reasonably be expected to be
raised by the                Corporations financial statements. At least one member
shall have                accounting or related financial management expertise, meaning
the ability to                analyze and interpret a full set of financial statements,
including the notes                attached thereto, in accordance with generally
accepted accounting principles.                In determining whether a member of the
Audit Committee is financially literate                or has accounting or related
financial expertise, reference shall be made to the                then current
legislation, rules, policies and instruments of applicable                regulatory
authorities, which for further clarification, shall include but not                be
limited to the definition of financial expert as defined by the
               U.S. Securities and Exchange Commission rule.
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (e) |  | A
director appointed by the Board to the Audit Committee shall be a member of
               the Audit Committee until replaced by the Board or until his or her
resignation.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# 3.    Meetings of the
Committee

| | (a) |  | The
Audit Committee shall convene a minimum of four times each year at such
               times and places as may be designated by the Chair of the Audit Committee
and                whenever a meeting is requested by the Board, a member of the Audit
Committee,                the auditors, or senior management of the Corporation.
Scheduled meetings of the                Audit Committee shall correspond with the review
of the year-end and quarterly                financial statements and management
discussion and analysis.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

-20-

| | (b) |  | Notice
of each meeting of the Audit Committee shall be given to each member of
               the Audit Committee and to the auditors, who shall be entitled to attend
each                meeting of the Audit Committee and shall attend whenever requested to
do so by a                member of the Audit Committee.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) |  | Notice
of a meeting of the Audit Committee shall:
| | --- |  | -------------------------------------------------

| |  | (i) |  | be
in writing, including by electronic communication facilities;
| |  | --- |  | ----------------------------------------------------------------

| |  | (ii) |  | state
the nature of the business to be transacted at the meeting in reasonable
               detail;
| |  | ---- |  | -----------------------------------------------------------------------------------------------------

| |  | (iii) |  | to
the extent practicable, be accompanied by copies of documentation to be
               considered at the meeting; and
| |  | ----- |  | ------------------------------------------------------------------------------------------------------------------------

| |  | (iv) |  | be
given at least two business days prior to the time stipulated for the meeting
               or such shorter period as the members of the Audit Committee may permit.
| |  | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d) |  | A
quorum for the transaction of business at a meeting of the Audit Committee
               shall consist of a majority of the members of the Audit Committee.
However, it                shall be the practice of the Audit Committee to require
review, and, if                necessary, approval of certain important matters by all
members of the Audit                Committee.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (e) |  | A
member or members of the Audit Committee may participate in a meeting of the
               Audit Committee by means of such telephonic, electronic or other
communication                facilities, as permits all persons participating in the
meeting to communicate                adequately with each other. A member participating
in such a meeting by any such                means is deemed to be present at the
meeting.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (f) |  | In
the absence of the Chair of the Audit Committee, the members of the Audit
               Committee shall choose one of the members present to be Chair of the
meeting. In                addition, the members of the Audit Committee shall choose one
of the persons                present to be the Secretary of the meeting.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (g) |  | A
member of the Board, senior management of the Corporation and other parties
               may attend meetings of the Audit Committee; however the Audit Committee
(i)                shall, at each meeting, meet with the external auditors independent of
other                individuals other than the Audit Committee and (ii) may meet
separately with                management.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (h) |  | Minutes
shall be kept of all meetings of the Audit Committee and shall be signed
               by the Chair and the Secretary of the meeting.
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------

# 4.    Duties and
Responsibilities of the Committee

| | (a) |  | The
Audit Committees primary duties and responsibilities are to:
| | --- |  | -----------------------------------------------------------------

| |  | (i) |  | identify
and monitor the management of the principal risks that could impact the
          financial reporting of the Corporation ;
| |  | --- |  | -----------------------------------------------------------------------------------------------------------------------------------

| |  | (ii) |  | monitor
the integrity of the Corporations financial reporting process and
               system of internal controls regarding financial reporting and accounting
               compliance;
| |  | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

-21-

| |  | (iii) |  | monitor
the independence and performance of the Corporations external
               auditors. This will include receipt, review and evaluation, at least
annually,                of a formal written statement from the independent auditors
confirming their                independence, and qualifications, including their
compliance with the                requirements of the relevant oversight boards ;
| |  | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (iv) |  | deal
directly with the external auditors to pre-approve external audit plans,
               other services (if any) and fees;
| |  | ---- |  | ------------------------------------------------------------------------------------------------------------------------------

| |  | (v) |  | directly
oversee the external audit process and results (in addition to items
               described in Section 4(d) below);
| |  | --- |  | ------------------------------------------------------------------------------------------------------------------------------

| |  | (vi) |  | provide
an avenue of communication among the external auditors, management and                the
Board; and
| |  | ---- |  | ------------------------------------------------------------------------------------------------------------

| |  | (vii) |  | carry
out a review designed to ensure that an effective whistle                blowing procedure
exists to permit stakeholders to express any concerns                regarding
accounting, internal controls, auditing matters or financial matters                to an
appropriately independent individual.
| |  | ----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (viii) |  | Pre-approve
any related party transactions to be entered into by the Company,                and
ensure appropriate disclosure thereof.
| |  | ------ |  | ---------------------------------------------------------------------------------------------------------------------------------------

| |  | (ix) |  | Ensure
financial disclosure incorporates inclusion of any material correcting
               adjustments required by the external auditors.
| |  | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------

| |  | (x) |  | Require
and ensure that the external auditors are directly responsible to the
               Audit Committee, to whom they report
| |  | --- |  | ---------------------------------------------------------------------------------------------------------------------------------

| | (b) |  | The
Audit Committee shall have the authority to:
| | --- |  | ------------------------------------------------

| |  | (i) |  | inspect
any and all of the books and records of the Corporation and its
               affiliates;
| |  | --- |  | --------------------------------------------------------------------------------------------------

| |  | (ii) |  | discuss
with the management of the Corporation and its affiliates, any affected
               party and the external auditors, such accounts, records and other matters
as any                member of the Audit Committee considers necessary and appropriate;
| |  | ---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (iii) |  | engage
independent counsel and other advisors as it determines necessary to                carry
out its duties; and
| |  | ----- |  | --------------------------------------------------------------------------------------------------------------------

| |  | (iv) |  | to
set and pay the compensation for any advisors employed by the Audit
               Committee.
| |  | ---- |  | ------------------------------------------------------------------------------------------------

| | (c) |  | The
Audit Committee shall, at the earliest opportunity after each meeting,
               report to the Board the results of its activities and any reviews
undertaken and                make recommendations to the Board as deemed appropriate.
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d) |  | The
Audit Committee shall:
| | --- |  | --------------------------

| |  | (i) |  | review
the audit plan with the Corporations external auditors and with
          management;
| |  | --- |  | ---------------------------------------------------------------------------------------------

---

-22-

| |  | (ii) |  | Review
with the independent auditors the matters required to be discussed
               relating to the conduct of the audit, including (a) the proposed scope of
their                examination, with emphasis on accounting and financial areas where
the                Committee, the independent auditors or management believes special
attention                should be directed; (b) the results of their audit, including
their audit                findings report and resulting letter, if any, of
recommendations for management;                (c) their evaluation of the adequacy and
effectiveness of the Companys                internal controls over financial
reporting; (d) significant areas of                disagreement, if any, with management;
(e) co-operation received from management                in the conduct of the audit; (f)
significant accounting, reporting, regulatory                or industry developments
affecting the Company; and (g) review any proposed                changes in major
accounting policies or principles proposed or contemplated by                the
independent auditors or management, the presentation and impact of material
               risks and uncertainties and key estimates and judgements of management
that may                be material to financial reporting;
| |  | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (iii) |  | review
with management and with the external auditors material financial
               reporting issues arising during the most recent fiscal period and the
resolution                or proposed resolution of such issues;
| |  | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (iv) |  | review
any problems experienced or concerns expressed by the external auditors                in
performing an audit, including any restrictions imposed by management or
               material accounting issues on which there was a disagreement with
management;
| |  | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (v) |  | review
with senior management the process of identifying, monitoring and
               reporting the principal risks affecting financial reporting;
| |  | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (vi) |  | review
audited annual financial statements (including management discussion and
               analysis) and related documents in conjunction with the report of the
external                auditors and obtain an explanation from management of all
material variances                between comparative reporting periods. Without
restricting the generality of the                foregoing, the committee will discuss
with management and the independent                auditors to the extent required, any
issues and disclosure requirements                regarding (a) the use of pro forma or
adjusted non-GAAP                information, as well as financial
information and earnings guidance provided to                analysts and rating
agencies, (b) any off balance sheet arrangements, and (c)                any going
concern qualification.
| |  | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (vii) |  | consider
and review with management, the internal control memorandum or                management
letter containing the recommendations of the external auditors and
               managements response, if any, including an evaluation of the
adequacy and                effectiveness of the internal financial controls of the
Corporation and                subsequent follow-up to any identified weaknesses;
| |  | ----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (viii) |  | review
with financial management and the external auditors the quarterly
               unaudited financial statements and management discussion and analysis
before                release to the public;
| |  | ------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (ix) |  | before
release, review and if appropriate, recommend for approval by the Board,
               all public disclosure documents containing audited or unaudited financial
               information, including any prospectuses, annual reports, annual
information                forms, management discussion and analysis and press releases;
and
| |  | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

-23-

| |  | (x) |  | oversee,
any of the financial affairs of the Corporation or its affiliates, and,                if
deemed appropriate, make recommendations to the Board, external auditors or
               management.
| |  | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (e) |  | The
Audit Committee shall:
| | --- |  | --------------------------

| |  | (i) |  | evaluate
the independence and performance of the external auditors and annually
               recommend to the Board the appointment of the external auditor or the
discharge                of the external auditor when circumstances are warranted and
monitor the audit                partners rotation as required by law.;
| |  | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (ii) |  | consider
the recommendations of management in respect of the appointment of the
               external auditors;
| |  | ---- |  | -----------------------------------------------------------------------------------------------------------------

| |  | (iii) |  | pre-approve
all non-audit services to be provided to the Corporation or its                subsidiary
entities by its external auditors, or the external auditors of
               affiliates of the Corporation subject to the over-riding principle that
the                external auditors not being permitted to be retained by the
Corporation to                perform specifically listed categories of non-audit
services as set forth by the                Securities and Exchange Commission as well as
internal audit outsourcing                services, financial information systems work
and expert services.                Notwithstanding, the foregoing the pre-approval of
non-audit services may be                delegated to a member of the Audit Committee,
with any decisions of the member                with the delegated authority reporting to
the Audit Committee at the next                scheduled meeting;
| |  | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (iv) |  | approve
the engagement letter for non-audit services to be provided by the
               external auditors or affiliates, together with estimated fees, and
considering                the potential impact of such services on the independence of
the external                auditors;
| |  | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (v) |  | when
there is to be a change of external auditors, review all issues and provide
               documentation related to the change, including the information to be
included in                the Notice of Change of Auditors and documentation required
pursuant to the then                current legislation, rules, policies and instruments
of applicable regulatory                authorities and the planned steps for an orderly
transition period; and
| |  | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (vi) |  | review
all reportable events, including disagreements, unresolved issues and
               consultations, as defined by applicable securities policies, on a routine
basis,                whether or not there is to be a change of external auditors.
| |  | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (f) |  | The
Audit Committee shall enquire into and determine the appropriate resolution
               of any conflict of interest in respect of audit or financial matters,
which are                directed to the Audit Committee by any member of the Board, a
shareholder of the                Corporation, the external auditors, or senior
management.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (g) |  | The
Audit Committee shall periodically review with management the need for an
          internal audit function.
| | --- |  | ----------------------------------------------------------------------------------------------------------------

| | (h) |  | The
Audit Committee shall review the Corporations accounting and reporting           of
costs, liabilities and contingencies.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------

---

-24-

| | (i) |  | The
Audit Committee shall establish and maintain procedures for:
| | --- |  | ----------------------------------------------------------------

| |  | (i) |  | the
receipt, retention and treatment of complaints received by the Corporation
               regarding accounting controls, or auditing matters; and
| |  | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (ii) |  | the
confidential, anonymous submission by employees of the Corporation or
               concerns regarding questionable accounting or auditing matters.
| |  | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------

| | (j) |  | The
Audit Committee shall review and approve the Corporations hiring
               policies regarding employees and former employees of the present and
former                external auditors.
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (k) |  | The
Audit Committee shall review with the Corporations legal counsel, on
               no less than an annual basis, any legal matter that could have a material
impact                on the Corporations financial statements, and any enquiries
received from                regulators, or government agencies.
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (l) |  | The
Audit Committee shall assess, on an annual basis, the adequacy of this
               Mandate and the performance of the Audit Committee.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------

# 5.    Date of Mandate

This Mandate was initially approved
by the Board on September 3, 1999. Subsequent to that date, the Board has amended and
restated this Mandate on each of December 13, 2002 April 23, 2003, March 5, 2004 and
December 8, 2004. This Mandate is effective from and after December 13, 2005.

---

-25-

Composition of the Audit
Committee

The following table sets forth the
name of each of the current members of the Audit Committee, whether such member is
independent, whether such member is financially literate and the relevant education and
experience of such member.

|Name | Independent | Financially
Literate | Relevant Education and Experience
|---- | ----------- | -------------------- | ---------------------------------
|    

|Fred A. Stewart, Q.C.
(Chairman) | Yes | Yes | Mr. Stewart graduated with Bachelor of Commerce           
(Saskatchewan) and Bachelor of Law (Toronto) and is a     
Barrister and Solicitor (Queens Counsel).  Mr. Stewart    
served as a Member of Cabinet in the Legislative Assembly 
of the Province of Alberta.  Mr. Stewart has acquired     
significant financial experience and exposure to          
accounting and financial issues as a founding partner of  
his law firm,  as a Member of the Treasury Board of the   
Government of Alberta and while serving as a director and 
audit committee member of both private and public         
companies.
|-------------------------------- | --- | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Robert B. Schultz F.C.A. | Yes | Yes | Mr. Schultz is a Fellow of the Chartered Accountants and   
is currently Chairman and Director of Rockwater Capital    
Corporation (a financial services company).  Mr. Schultz   
has served as Chairman and Chief Executive Officer of      
Merrill Lynch Canada (a public financial services company) 
and as Chief Executive Officer of Midland Walwyn. Through  
his various roles as Chairman and Chief Executive Officer, 
Mr. Schultz has supervised the individual engaged in       
preparing, analyzing or evaluating financial statements.   
Mr. Schultz has also served as a director with several     
other public companies.
|------------------------ | --- | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Jim Dinning | Yes | Yes | Mr. Dinning is currently Chairman of the Board of Western   
 Financial Group.  He graduated with a bachelor of commerce  
 honours degree and a master's degree in public              
 administration from Queen's University.  Mr. Dinning        
 served as a Member of the Legislative Assembly of the       
 Province of Alberta from 1986 to 1997.  Mr. Dinning has     
 acquired significant financial experience and exposure to   
 accounting and financial issues while serving as a          
 director and audit committee member for other publicly      
 traded companies and as Minister of Finance for the         
 Alberta Provincial Government.
|----------- | --- | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# RISK FACTORS

All of our potential products,
including REOLYSIN®, are in the research and development stage and will require
further development and testing before they can be marketed commercially.

Prospects for companies in the
biotechnology industry generally may be regarded as uncertain given the nature of the
industry and, accordingly, investments in biotechnology companies should be regarded as
speculative. We are currently in the research and development stage on one product,
REOLYSIN®, for human application, the riskiest stage for a company in the
biotechnology industry. It is not possible to predict, based upon studies in animals and
early stage human clinical trials whether REOLYSIN® will prove to be safe and
effective in humans. REOLYSIN® will require additional research and

---

-26-

development, including extensive
additional clinical testing, before we will be able to obtain the approvals of the
relevant regulatory authorities in applicable countries to market REOLYSIN®
commercially. There can be no assurance that the research and development programs
conducted by us will result in REOLYSIN® or any other products becoming commercially
viable products, and in the event that any product or products result from the research
and development program, it is unlikely they will be commercially available for a number
of years.

To achieve profitable operations
Oncolytics Biotech Inc., alone or with others, must successfully develop, introduce and
market our products. To obtain regulatory approvals for products being developed for human
use, and to achieve commercial success, human clinical trials must demonstrate that the
product is safe for human use and that the product shows efficacy. Unsatisfactory results
obtained from a particular study relating to a program may cause us to abandon our
commitment to that program or the product being tested. No assurances can be provided that
any current or future animal or human test, if undertaken, will yield favourable results.
If we are unable to establish that REOLYSIN® is a safe, effective treatment for
cancer, we may be required to abandon further development of the product and develop a new
business strategy.

# There are inherent risks
in pharmaceutical research and development

Pharmaceutical research and
development is highly speculative and involves a high and significant degree of risk. The
marketability of any product developed by us will be affected by numerous factors beyond
our control, including:

| |  |  | the
discovery of unexpected toxicities or lack of sufficient efficacy of products which make
them unattractive or unsuitable for human use;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | preliminary
results as seen in animal and/or limited human testing may not be substantiated in larger
controlled clinical trials;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------

| |  |  | manufacturing
 costs  or  other  production  factors  may  make  manufacturing  of  products
  ineffective,   impractical  and                   non-competitive;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | proprietary
rights of third parties or competing products or technologies may preclude
commercialization;
| | - |  | ---------------------------------------------------------------------------------------------------------

| |  |  | requisite
regulatory approvals for the commercial distribution of products may not be obtained; and
| | - |  | ---------------------------------------------------------------------------------------------------

| |  |  | other
factors may become apparent during the course of research, up-scaling or manufacturing
which may result in the discontinuation of research and other critical projects.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our product under development has
never been manufactured on a commercial scale, and there can be no assurance that such
products can be manufactured at a cost or in a quantity to render such products
commercially viable. Production and utilization of our products may require the
development of new manufacturing technologies and expertise. The impact on our business in
the event that new manufacturing technologies and expertise are required to be developed
is uncertain. There can be no assurance that we will successfully meet any of these
technological challenges, or others that may arise in the course of development.

---

-27-

# Pharmaceutical products
are subject to intense regulatory approval processes

The regulatory process for
pharmaceuticals, which includes preclinical studies and clinical trials of each compound
to establish its safety and efficacy, takes many years and requires the expenditure of
substantial resources. Moreover, if regulatory approval of a drug is granted, such
approval may entail limitations on the indicated uses for which it may be marketed.
Failure to comply with applicable regulatory requirements can, among other things, result
in suspension of regulatory approvals, product recalls, seizure of products, operating
restrictions and criminal prosecution. Further, government policy may change, and
additional government regulations may be established that could prevent or delay
regulatory approvals for our products. In addition, a marketed drug and its manufacturer
are subject to continual review. Later discovery of previously unknown problems with the
product or manufacturer may result in restrictions on such product or manufacturer,
including withdrawal of the product from the market.

The FDA in the United States and
similar regulatory authorities in other countries may deny approval of a NDA or NDS if
required regulatory criteria are not satisfied, or may require additional testing. Product
approvals may be withdrawn if compliance with regulatory standards is not maintained or if
problems occur after the product reaches the market. The FDA and similar regulatory
authorities in other countries may require further testing and surveillance programs to
monitor the pharmaceutical product that has been commercialized. Non-compliance with
applicable requirements can result in fines and other judicially imposed sanctions,
including product withdrawals, product seizures, injunction actions and criminal
prosecutions.

In addition to our own
pharmaceuticals, we may supply active pharmaceutical ingredients and advanced
pharmaceutical intermediates for use in our customers drug products. The final drug
products in which the pharmaceutical ingredients and advanced pharmaceutical intermediates
are used, however, are subject to regulation for safety and efficacy by the FDA and other
jurisdictions, as the case may be. Such products must be approved by such agencies before
they can be commercially marketed. The process of obtaining regulatory clearance for
marketing is uncertain, costly and time consuming. We cannot predict how long the
necessary regulatory approvals will take or whether our customers will ever obtain such
approval for their products. To the extent that our customers do not obtain the necessary
regulatory approvals for marketing new products, our product sales could be adversely
affected.

The FDA and other governmental
regulators have increased requirements for drug purity and have increased environmental
burdens upon the pharmaceutical industry. Because pharmaceutical drug manufacturing is a
highly regulated industry, requiring significant documentation and validation of
manufacturing processes and quality control assurance prior to approval of the facility to
manufacture a specific drug, there can be considerable transition time between the
initiation of a contract to manufacture a product and the actual initiation of manufacture
of that product. Any lag time in the initiation of a contract to manufacture product and
the actual initiation of manufacture could cause us to lose profits or incur liabilities.

The pharmaceutical regulatory regime
in Europe and other countries is, by and large, generally similar to that of the United
States. We could face similar risks in these other jurisdictions, as the risks described
above.

Our operations and products may be
subject to other government manufacturing and testing regulations

Securing regulatory approval for the
marketing of therapeutics by the FDA in the United States and similar regulatory agencies
in other countries is a long and expensive process, which can delay or prevent

---

-28-

product development and marketing.
 Approval to market products may be for limited applications or may not be received at
all.

The products we anticipate
manufacturing will have to comply with the FDAs current Good Manufacturing Practices
(cGMP) and other FDA, and local government guidelines and regulations,
including other international regulatory requirements and guidelines. Additionally,
certain of our customers may require the manufacturing facilities contracted by us to
adhere to additional manufacturing standards, even if not required by the FDA. Compliance
with cGMP regulations requires manufacturers to expend time, money and effort in
production, and to maintain precise records and quality control to ensure that the product
meets applicable specifications and other requirements. The FDA and other regulatory
bodies periodically inspect drug-manufacturing facilities to ensure compliance with
applicable cGMP requirements. If the manufacturing facilities contracted by us fail to
comply with the cGMP requirements, the facilities may become subject to possible FDA or
other regulatory action and manufacturing at the facility could consequently be suspended.
We may not be able to contract suitable alternative or back-up manufacturing facilities on
terms acceptable to us or at all.

The FDA or other regulatory agencies
may also require the submission of any lot of a particular product for inspection. If the
lot product fails to meet the FDA requirements, then the FDA could take any of the
following actions: (i) restrict the release of the product; (ii) suspend manufacturing of
the specific lot of the product; (iii) order a recall of the lot of the product; or (iv)
order a seizure of the lot of the product.

We are subject to regulation by
governments in many jurisdictions and, if we do not comply with healthcare, drug,
manufacturing and environmental regulations, among others, our existing and future
operations may be curtailed, and we could be subject to liability.

In addition to the regulatory
approval process, we may be subject to regulations under local, provincial, state, federal
and foreign law, including requirements regarding occupational health, safety, laboratory
practices, environmental protection and hazardous substance control, and may be subject to
other present and future local, provincial, state, federal and foreign regulations.

The biotechnology industry is
extremely competitive and we must successfully compete with larger companies with
substantially greater resources

Technological competition in the
pharmaceutical industry is intense and we expect competition to increase. Other companies
are conducting research on therapeutics involving the Ras pathway as well as other novel
treatments or therapeutics for the treatment of cancer which may compete with our product.
Many of these competitors are more established, benefit from greater name recognition and
have substantially greater financial, technical and marketing resources than us. In
addition, many of these competitors have significantly greater experience in undertaking
research, preclinical studies and human clinical trials of new pharmaceutical products,
obtaining regulatory approvals and manufacturing and marketing such products. In addition,
there are several other companies and products with which we may compete from time to
time, and which may have significantly better and larger resources than us. Accordingly,
our competitors may succeed in manufacturing and/or commercializing products more rapidly
or effectively, which could have a material adverse effect on our business, financial
condition or results of operations.

We anticipate that we will face
increased competition in the future as new products enter the market and advanced
technologies become available. There can be no assurance that existing products or new
products developed by our competitors will not be more effective, or be more effectively
manufactured, marketed and sold, than any that may be developed or sold by us. Competitive
products may render our products obsolete and uncompetitive prior to recovering research,
development or commercialization expenses incurred with respect to any such products.

---

-29-

# We rely on patents and
proprietary rights to protect our technology

Our success will depend, in part, on
our ability to obtain patents, maintain trade secret protection and operate without
infringing the rights of third parties. We have patents in the United States, Canada and
Europe and have filed applications for patents in the United States and under the PCT,
allowing us to file in other jurisdictions. See Narrative Description 
Patent and Patent Application Summary. Our success will depend, in part, on our
ability to obtain, enforce and maintain patent protection for our technology in Canada,
the United States and other countries. We cannot be assured that patents will issue from
any pending applications or that claims now or in the future, if any, allowed under issued
patents will be sufficiently broad to protect our technology. In addition, no assurance
can be given that any patents issued to or licensed by us will not be challenged,
invalidated, infringed or circumvented, or that the rights granted thereunder will provide
continuing competitive advantages to us.

The patent positions of
pharmaceutical and biotechnology firms, including us, are generally uncertain and involve
complex legal and factual questions. In addition, it is not known whether any of our
current research endeavours will result in the issuance of patents in Canada, the United
States, or elsewhere, or if any patents already issued will provide significant
proprietary protection or will be circumvented or invalidated. Since patent applications
in the United States and Canada are maintained in secrecy until at least 18 months after
filing of the original priority application, and since publication of discoveries in the
scientific or patent literature tends to lag behind actual discoveries by several months,
we cannot be certain that we or any licensor were the first to create inventions claimed
by pending patent applications or that it was the first to file patent applications for
such inventions. Loss of patent protection could lead to generic competition for these
products, and others in the future, which would materially and adversely affect our
financial prospects for these products.

Similarly, since patent applications
filed before October 2000 in the United States are maintained in secrecy until the patents
issue or foreign counterparts, if any, publish, we cannot be certain that we or any
licensor were the first creator of inventions covered by pending patent applications or
that we or such licensor were the first to file patent applications for such inventions.
There is no assurance that our patents, if issued, would be held valid or enforceable by a
court or that a competitors technology or product would be found to infringe such
patents.

Accordingly, we may not be able to
obtain and enforce effective patents to protect our proprietary rights from use by
competitors, and the patents of other parties could require us to stop using or pay to use
certain intellectual property, and as such, our competitive position and profitability
could suffer as a result.

In addition, we may be required to
obtain licenses under patents or other proprietary rights of third parties. No assurance
can be given that any licenses required under such patents or proprietary rights will be
available on terms acceptable to us. If we do not obtain such licenses, we could encounter
delays in introducing one or more of our products to the market while we attempt to design
around such patents, or could find that the development, manufacture or sale of products
requiring such licenses could be foreclosed. In addition, we could incur substantial costs
in defending ourselves in suits brought against us on such patents or in suits in which
our attempts to enforce our own patents against other parties.

Our products may fail or cause
harm, subjecting us to product liability claims, which are uninsured

The sale and use of our products
entail risk of product liability. We currently do not have any product liability
insurance. There can be no assurance that we will be able to obtain appropriate levels of
product liability insurance prior to any sale of our pharmaceutical products. An inability
to obtain insurance on economically feasible terms or to otherwise protect against
potential product liability claims could inhibit or prevent the commercialization of
products developed by us. The obligation to pay any product liability

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claim or a recall of a product could
have a material adverse effect on our business, financial condition and future prospects.

We have limited manufacturing
experience and intend to rely on third parties to commercially manufacture our products,
if and when developed.

To date, we have relied upon a sole
contract manufacturer to manufacture small quantities of REOLYSIN®. The manufacturer
may encounter difficulties in scaling up production, including production yields, quality
control and quality assurance. Only a limited number of manufacturers can supply
therapeutic viruses and failure by the manufacturer to deliver the required quantities of
REOLYSIN® on a timely basis at a commercially reasonable price may have a material
adverse affect on us. We have completed a program for the development of a commercial
process for manufacturing REOLYSIN® and have filed a number of patent applications
related to the process. There can be no assurance that we will successfully obtain
sufficient patent protection related to our manufacturing process.

# New products may not be
accepted by the medical community or consumers.

Our primary activity to date has been
research and development and we have no experience in marketing or commercializing
products. We will likely rely on third parties to market our products, assuming that they
receive regulatory approvals. If we rely on third parties to market our products, the
commercial success of such product may be outside of our control. Moreover, there can be
no assurance that physicians, patients or the medical community will accept our product
even if it proves to be safe and effective and is approved for marketing by Health Canada,
the FDA and other regulatory authorities. A failure to successfully market our product
would have a material adverse affect on our revenue.

# Our technologies may
become obsolete

The pharmaceutical industry is
characterized by rapidly changing markets, technology, emerging industry standards and
frequent introduction of new products. The introduction of new products embodying new
technologies, including new manufacturing processes, and the emergence of new industry
standards may render our products obsolete, less competitive or less marketable. The
process of developing our products is extremely complex and requires significant
continuing development efforts and third party commitments. Our failure to develop new
technologies and products and the obsolescence of existing technologies could adversely
affect our business.

We may be unable to anticipate
changes in our potential customer requirements that could make our existing technology
obsolete. Our success will depend, in part, on our ability to continue to enhance our
existing technologies, develop new technology that addresses the increasing sophistication
and varied needs of the market, and respond to technological advances and emerging
industry standards and practices on a timely and cost-effective basis. The development of
our proprietary technology entails significant technical and business risks. We may not be
successful in using our new technologies or exploiting our niche markets effectively or
adapting our businesses to evolving customer or medical requirements or preferences or
emerging industry standards.

We are highly dependent on third
party relationships for research and clinical trials

We rely upon third party
relationships for assistance in the conduct of research efforts, pre-clinical development
and clinical trials, and manufacturing. In addition, we expect to rely on third parties to
seek regulatory approvals for and to market our product. Although we believe that our
collaborative partners will have an economic motivation to commercialize our product
included in any collaborative agreement,

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the amount and timing of resources
diverted to these activities generally is expected to be controlled by the third party.
Furthermore, if we cannot maintain these relationships, our business may suffer.

# We have no operating
revenues and a history of losses.

To date, we have not generated
sufficient revenues to offset our research and development costs and accordingly have not
generated positive cash flow or made an operating profit. As of December 31, 2005, we had
an accumulated deficit of $51.0 million. We have incurred net losses of $13.0 million,
$13.0 million, and $8.5 million for the years ended December 31, 2005, 2004, and 2003,
respectively. We anticipate that we will continue to incur significant losses during 2006
and in the foreseeable future. We will not reach profitability until after successful
commercialization of one or more of our products. Even if one or more of our products are
profitably commercialized, the initial losses incurred by us may never be recovered.

We may need additional financing
in the future to fund the research and development of our products and to meet our ongoing
capital requirements.

As of December 31, 2005, we had cash
and cash equivalents (including short-term investments) of $40.4 million and working
capital of approximately $39.3 million. We anticipate that we may need additional
financing in the future to fund research and development and to meet our ongoing capital
requirements. The amount of future capital requirements will depend on many factors,
including continued scientific progress in our drug discovery and development programs,
progress in our pre-clinical and clinical evaluation of drug candidates, time and expense
associated with filing, prosecuting and enforcing our patent claims and costs associated
with obtaining regulatory approvals. In order to meet such capital requirements, we will
consider contract fees, collaborative research and development arrangements, and
additional public or private financings (including the incurrence of debt and the issuance
of additional equity securities) to fund all or a part of particular programs as well as
potential partnering or licensing opportunities. There can be no assurance that additional
funding will be available or, if available, that it will be available on acceptable terms.
If adequate funds are not available on terms favorable to us, we may have to reduce
substantially or eliminate expenditures for research and development, testing, production
and marketing of our proposed product, or obtain funds through arrangements with corporate
partners that require us to relinquish rights to certain of our technologies or product.
There can be no assurance that we will be able to raise additional capital if our current
capital resources are exhausted.

The cost of director and officer
liability insurance may increase substantially and may affect our ability to retain
quality directors and officers

We carry liability insurance on
behalf of our directors and officers. Given a number of large director and officer
liability insurance claims in the U.S. equity markets, director and officer liability
insurance has become increasingly more expense with increased restrictions. Consequently,
there is no assurance that we will continue to be offered this insurance or be able to
obtain adequate coverage. The inability to acquire the appropriate insurance coverage will
limit our ability to attract and maintain directors and officers as required to conduct
our business.

# We are dependent on our
key employees and collaborators

Our ability to develop the product
will depend, to a great extent, on our ability to attract and retain highly qualified
scientific personnel and to develop and maintain relationships with leading research
institutions. Competition for such personnel and relationships is intense. We are highly
dependent on the principal members of our management staff, Dr. Thompson, Dr. Coffey, Mr.
Ball, Dr. Gill and Dr. Mettinger, as well as our advisors and collaborators, the loss of
whose services might impede the achievement of development objectives. The persons working
with us are affected by a number of influences outside of

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our control.  The loss of key
employees and/or key collaborators may affect the speed and success of product
development.

We presently carry key man insurance
in the amounts of $1,500,000,  $1,000,000 and $500,000 for Dr. Thompson,  Dr. Coffey and
Mr. Ball, respectively.

# Our share price may be
highly volatile

Market prices for securities of
biotechnology companies generally are volatile. This increases the risk of securities
litigation. Factors such as announcements (publicly made or at scientific conferences) of
technological innovations, new commercial products, patents, the development of
proprietary rights, results of clinical trials, regulatory actions, publications,
quarterly financial results, our financial position, public concern over the safety of
biotechnology, future sales of shares by us or our current shareholders and other factors
could have a significant effect on the market price and volatility of the common shares.

We incur some of our expenses in
foreign currencies and therefore we are exposed to foreign currency exchange rate
fluctuations

We incur some of our manufacturing,
clinical and consulting expenses in foreign currencies (to date mainly in the U.S. and the
UK). Over the past year the Canadian dollar has appreciated relative to these currencies
thereby decreasing the Canadian dollar equivalent. However, if this trend reverses, our
Canadian dollar equivalent costs will increase.

Also, as we expand to other foreign
jurisdictions there may be an increase in our foreign exchange exposure.

We earn interest income on our
excess cash reserves and is exposed to changes in interest rates

We invest our excess cash reserves in
investment vehicles that provide a rate of return with little risk to principal. As
interest rates change the amount of interest income we earn will be directly impacted.

We believe we are a passive
foreign investment company, which may have a material affect on U.S. holders.

We believe we are a passive
foreign investment company (PFIC), which may have a material affect on
U.S. holders. United States income tax legislation contains rules governing PFICs, which
can have significant tax effects on U.S. holders of foreign corporations. A U.S. holders
who holds stock in a foreign corporation during any year in which such corporation
qualifies as a PFIC is subject to United States federal income taxation under one of two
alternative tax regimes at the election of each such U.S. holders. The U.S. federal income
tax consequences to a U.S. holder of the acquisition, ownership, and disposition of Common
Shares will depend on whether such U.S. holder makes an election to treat the Company as a
qualified electing fund or QEF under Section 1295 of the Code
(a QEF Election) or a mark-to-market election under Section 1296 of the
Code (a Mark-to-Market Election). You should consult your tax advisor as to
the consequences of acquiring, owning or disposing of our Common Shares.

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# ADDITIONAL INFORMATION

# Legal Proceedings

We are not aware of any material
legal proceedings nor are we aware of any such proceedings being contemplated.

# Interest of Management
and Others in Material Transactions

Other than as discussed herein, there
are no material interests, direct or indirect, of directors, executive officers, senior
officers, or any direct or indirect shareholder of ours who beneficially owns, or who
exercises control over, more than 10% of our outstanding common shares or any known
associate or affiliate of such persons, in any transaction within the three most recently
completed financial years or during the current financial year that has materially
affected or will materially affect us.

# Transfer Agent and
Registrar

The transfer agent and registrar for
our common shares is Computershare Trust Company of Canada at its principal offices in
Calgary, Alberta and Toronto, Ontario.

# Material Contracts

Other than as discussed herein, there
are no material contracts, other than contracts entered into in the ordinary course of
business, that are material to us that were entered into within the most recently
completed financial year, or before the most recently completed financial year but are
still in effect.

# Interests of Experts

Ernst & Young LLP, Chartered
Accountants, have audited our financial statements for the year ended December 31, 2005,
as set forth in our Annual Report.

As at the date hereof, the partners
and associates of Ernst & Young LLP, Chartered Accountants, our independent auditors,
as a group did not beneficially own any of our outstanding common shares.

# External Auditor Service
Fees

During the financial years ended
December 31, 2005, 2004 and 2003, Ernst & Young LLP received the following fees:

|                               | December 31,
|------------------------------ | ------------
|
|                              
|Audit fees                     |             
|Audit-related fees (1),(3),(4) |             
|Tax fees (2)                   |             
|All other fees                 |             
|                              

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# Notes:

|(1) |  | Includes
review of interim financial statements, accounting consultations and subscription to
on-line accounting.
|--- |  | -----------------------------------------------------------------------------------------------------------------

|(2) |  | Comprised
of tax return preparation, scientific research and development return and other tax
consultation fees.
|--- |  | ----------------------------------------------------------------------------------------------------------------

|(3) |  | Includes
fees associated with matters relating to the prospectus offerings in 2004 and 2003.
|--- |  | --------------------------------------------------------------------------------------------

|(4) |  | Includes
fees associated with preliminary internal control work for Sarbanes Oxley Section 404.
|--- |  | -----------------------------------------------------------------------------------------------

Audit Fees

Audit fees were for professional
services rendered by Ernst & Young, LLP for the audit of our annual financial
statements and services provided in connection with statutory and regulatory filings or
engagements.

Audit-Related Fees

Audit-related fees were for assurance
and related services reasonably related to the performance of the audit or review of the
annual statements and are not reported under the heading Audit Fees above. These services
consisted of accounting consultations, assistance with prospectus filings and assistance
with preparations for compliance with section 404 of the Sarbanes-Oxley Act of
2002.

Tax Fees

Tax fees were for tax compliance and
professional tax consultations.

All Other Fees

There were no fees paid to Ernst
& Young, LLP that would be considered All Other Fees in 2004 or 2003. Fees to be
disclosed under this category would be for products and services other than those
described under the headings Audit Fees, Audit-Related Fees and Tax Fees above.

# Other Additional
Information

Additional information, including
information as to our directors and officers remuneration and indebtedness,
principal holders of our securities, options to purchase securities and interests of
insiders in material transactions is contained in our Information Circular for our most
recent annual meeting of shareholders that involved the election of directors, which is
incorporated herein by reference and forms an integral part of this Annual Information
Form.

Additional financial information is
contained in our financial statements for the year ended December 31, 2005 and under the
heading Managements Discussion and Analysis of Financial Conditions and
Results of Operations in our 2005 Annual Report, which are incorporated herein by
reference and form an integral part of this Annual Information Form.

The documents referred to above as
well as additional information relating to us is available through the Internet on the
Canadian System for Electronic Document Analysis and Retrieval (SEDAR) at
www.sedar.com.

Alternatively, a request for any
documents referred to above may be made to the Chief Financial Officer, Oncolytics Biotech
Inc., Suite 210, 1167 Kensington Crescent N.W., Calgary, Alberta, Canada, T2N 1X7 or by
telecopier at (403) 283-0858.

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# GLOSSARY

In this Annual Information Form,
unless the context otherwise requires, the following words and phrases shall have the
meaning set forth below:

ABCA Business
Corporations Act (Alberta), as amended.

ACB Alberta Cancer
Board.

Activating mutations a
type of genetic mutation that results in a particular protein being active in the absence
of an appropriate stimuli. This type of mutation typically leads to the development of a
cancerous transformation of a cell.

Adjuvant therapy a form
of therapy that is to be used in conjunction with one or more addition therapies.

Alberta Heritage Foundation the Alberta Heritage Foundation for Medical Research.

Animal model a human
disease given to an animal which exhibits similar or identical characteristics to this
disease in humans.

Appropriate Regulatory Authority  means (a) Health Canada, (b) the Food and Drug Administration in the United
States, or (c) the comparable authorities in the following countries or areas: United
Kingdom, France, Germany, Japan, Benelux.

Asymptomatic without
any signs or symptoms.

Cancer a heterogeneous
group of diseases that is characterized by the uncontrolled or aberrant growth of cells.
In addition to the uncontrolled growth of these tumour cells, these cells are able to
invade and colonize other sites in the body; by definition these tumours are malignant.

Carcinomas a type of
cancer that arises from epithelial tissue.

Cellular proliferative disorder
a heterogeneous group of disease characterized by the uncontrolled or aberrant growth of
cells; is distinct from cancer in that it does not necessarily imply a malignant state.

Clinical Trial Agreement the agreement among Oncolytics Biotech Inc., Dr. Don Morris and the ACB dated
May 1, 1999, providing for, among other things, a repayable grant of $200,000 to us to
offset the future REOLYSIN® clinical trial expenditures.

Cytostatic any drug or
agent that is capable of preventing a cells growth and division.

Cytotoxic any drug or
agent that is capable of causing cell death.

Differentiation a form
of growth; a process whereby a cell develops different or more advanced processes than
were possessed by the cell before.

Epidermal growth factor
a compound that promotes the growth of cells.

Epidermal growth factor receptor the cellular receptor that interacts with the epidermal growth factor; a
particular family of receptor tyrosine kinase.

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Epithelial the tissue
that forms the outer layer of the body surface or the tissue that lines the gut or other
hollow structure.

Etiology the reason or
causation of an illness, disease or disorder.

FDA the Food and
Drug Administration

Gastrointestinal tract
within the digestive system including the stomach, intestine, and all accessory organs.

Glioblastoma a specific
form of cancer derived from brain tissue.

Gliomas a specific form of
cancer derived from brain tissue.

Good Manufacturing Practices the current regulatory requirements and standards regarding quality assurance
procedures to be adhered to in the manufacturing of therapeutic products established and
monitored by various governments including Canada and the United States.

Growth factor receptor
a form of receptor that interacts with growth factors.

HER2/neu/ErbB2 a form
of receptor tyrosine kinase that is frequently overexpressed in breast cancers.

Immune competent an
animal with a fully functional immune system; an animal that can mount a response to a
foreign or infectious agent.

Immuno-compromised an
animal that is lacking an immune system.

Investigational New Drug
Submission (or IND) documentation filed with government agencies responsible
for evaluating and licensing pharmaceutical drugs. This documentation is necessary for the
initiation of clinical trials.

In Vivo in the
living body.

Lesion a morbid change
in the functioning or texture of an organ or tissue.

Metastasis the process whereby
a tumour cell is able to leave the original tumour mass and spread to secondary sites in
the body forming additional tumour sites.

Mitogenic a drug or
agent that promotes cellular division or growth.

Neoplasia  a group of
diseases characterized by uncontrolled cell growth, including, but not limited to, cancer.

Nucleus an organelle in
the cell that contains genetic material.

Oncology the study and
treatment of cancer and tumours.

Patent Cooperation Treaty or PCT an international patent treaty, of which Canada is a signatory, whereby a
single international patent application can be filed in the applicants or
inventors home country for possible protection of intellectual property in over 100
PCT member countries.

PKR (or double stranded RNA
dependent protein kinase)  a host protein that plays a key role in mediating the
cells antiviral activity.

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Platelet-derived growth factor
receptor (PDGFR) the cellular receptor that interacts with the platelet-derived
growth factor; a particular family of receptor tyrosine kinase.

Ras a cellular protein
that is a key relay in the transmission of growth signals from the outside of the cell to
the cells nucleus. In a noncancerous cell, Ras is activated in the presence of an
appropriate growth signal.

Receptor a cellular
structure, usually found on the cell surface, that can interact with a certain compound to
elicit a specific type of cellular response.

Receptor tyrosine kinase (RTK) a type of host receptor that uses a particular residue for cellular signaling
to the nucleus. Mutation or overexpression of this type of receptor is frequently seen in
the development of a variety of cancers.

REOLYSIN® is our
trademark for the human reovirus for the treatment of a specific disease.

Reovirus a double
stranded RNA virus first identified in 1959. The name is an acronym for Respiratory
Enteric Orphan virus. The virus is given the designate of orphan virus since it is not
associated with a known disease state. For the purpose of this document, all reference to
reovirus is to reovirus type III Dearing.

Research Contract an
agreement between Oncolytics Biotech Inc. and the Governors of the University of Calgary,
providing for the aggregate sum of $102,000 to be paid by us for a research project under
the direction and supervision of Dr. Patrick Lee.

Share Purchase Agreement the share purchase agreement among the Vendors, SYNSORB and Oncolytics Biotech
Inc. dated April 21, 1999 providing for the purchase by SYNSORB of all of our issued and
outstanding shares.

Signal Transduction The
transmission of signals from the cell surface to the cells nucleus.

SYNSORB  SYNSORB Biotech Inc.
(now Iteration Energy Ltd. by name change formerly Hawker Resources Inc.), a
public Company incorporated under the ABCA.

Technology Commercialization
Agreement the agreement between Oncolytics Biotech Inc. and the Alberta
Heritage Foundation dated February 9, 1999 providing for a repayable grant of $150,000 to
us to offset reovirus clinical trial expenditures.

TCID50 a measure of
viral particle concentration.

Toxicology the
scientific determination of the quantity of a substance that is required to act adversely
in the body.

Tumour an abnormal
growth of tissue whether benign or malignant.

Vendors  Dr. Patrick
Lee, Dr. James Strong, Dr. Matthew Coffey, Dr. Bradley Thompson and University
Technologies International Inc.

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