##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2011
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM  TO .
 Commission file number 033-80623
 OncoGenex Pharmaceuticals, Inc.
  Delaware
    
    95-4343413(State or Other Jurisdiction of 
Incorporation or Organization)
    
    (I.R.S. Employer Identification Number)
 1522 217 th Place SE, Suite 100, Bothell, Washington 98021
 (425) 686-1500
 Yes þ No o
 Yes o No
o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 Yes o No þ
  Class
    
    Outstanding at May 1, 2011Common Stock, $0.001 par value
    
    9,718,251




---



##### 



OncoGenex Pharmaceuticals, Inc.
Index to Form 10-Q
 PageNumberPart I. Financial InformationItem 1. Item 1. Financial Statements (unaudited)
    
    
    3Consolidated Balance Sheets as of March 31, 2011 (unaudited) and December 31, 2010
    
    
    3Consolidated Statements of Loss (unaudited) for the three months ended March 31,
2011 and March 31, 2010
    
    
    4Consolidated Statements of Cash Flows (unaudited) for the three months ended
March 31, 2011 and March 31, 2010
    
    
    5Notes to Consolidated Financial Statements (unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    29Item 4. Controls and Procedures
    
    
    30Part II. Other InformationItem 1A. Risk Factors
    
    
    31Item 6. Exhibits
    
    
    49Items 1, 2, 3, 4, and 5 are not applicable and therefore have been omitted.Signatures
    
    
    50Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




---



##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1.
    
    Consolidated Financial Statements
 OncoGenex Pharmaceuticals, Inc.
 
 Consolidated Balance Sheets
 (Unaudited)
  March 31,
    
    
    December 31,2011
    
    
    2010$
    
    
    $ASSETSCurrentCash and cash equivalents[note 4]
    
    
    6,998
    
    
    
    23,533Restricted cash
    
    
    502
    
    
    
    502Short-term investments [note 4]
    
    
    74,100
    
    
    
    61,574Amounts receivable
    
    
    1,348
    
    
    
    1,224Prepaid expenses
    
    
    968
    
    
    
    2,485Total current assets
    
    
    83,916
    
    
    
    89,318Property and equipment, net
    
    
    171
    
    
    
    87Other assets
    
    
    510
    
    
    
    513Total assets
    
    
    84,597
    
    
    
    89,918LIABILITIES AND SHAREHOLDERS EQUITYCurrentAccounts payable and accrued liabilities
    
    
    1,166
    
    
    
    893Deferred Collaboration Revenue
    
    
    10,000
    
    
    
    10,000Current portion of long-term obligations [note 6]
    
    
    1,305
    
    
    
    1,314Warrant liability [note 4, note 5]
    
    
    13,141
    
    
    
    15,269Total current liabilities
    
    
    25,612
    
    
    
    27,476Deferred Collaboration Revenue, net of current
    
    
    11,040
    
    
    
    11,622Long-term obligation, less current portion [note 6]
    
    
    6,447
    
    
    
    6,695Total liabilities
    
    
    43,099
    
    
    
    45,793Commitments and contingencies [note 7]Shareholders equity:Common shares [note 5]:$0.001 par value 25,000,000
shares authorized and 9,718,251 issued and outstanding at March 31, 2011 and 9,693,591 issued and
outstanding at December 31, 2010
    
    
    10
    
    
    
    10Additional paid-in capital
    
    
    107,940
    
    
    
    107,579Accumulated deficit
    
    
    (69,114
    )
    
    
    (66,069
    )Accumulated other comprehensive income
    
    
    2,662
    
    
    
    2,605Total shareholders equity
    
    
    41,498
    
    
    
    44,125Total liabilities and shareholders equity
    
    
    84,597
    
    
    
    89,918Subsequent events [note 9]
   3




---



##### Table of Contents



OncoGenex Pharmaceuticals, Inc.
 
 Consolidated Statements of Loss
 (Unaudited)
  Three monthsEnded March 31,2011
    
    
    2010$
    
    
    $COLLABORATION REVENUE
    
    
    1,199
    
    
    
    4,700EXPENSESResearch and development
    
    
    4,853
    
    
    
    6,380General and administrative
    
    
    1,571
    
    
    
    1,350Total expenses
    
    
    6,424
    
    
    
    7,730LOSS FROM OPERATIONS
    
    
    5,225
    
    
    
    3,030OTHER INCOME (EXPENSE)Interest income
    
    
    56
    
    
    
    5Other
    
    
    (4
    )
    
    
    (19
    )Gain (loss) on warrants [note 5]
    
    
    2,128
    
    
    
    Total other income (expense)
    
    
    2,180
    
    
    
    (14
    )Loss for the period before income taxes
    
    
    3,045
    
    
    
    3,044Income taxes
    
    
    
    
    
    
    Net loss
    
    
    3,045
    
    
    
    3,044Basic and diluted loss per common share [note 5(e)]
    
    
    0.31
    
    
    
    0.48Weighted average number of common shares [note 5(e)]
    
    
    9,713,413
    
    
    
    6,333,272
   4




---



##### Table of Contents



OncoGenex Pharmaceuticals, Inc.
 
 Consolidated Statements of Cash Flows
 (Unaudited)
  Three months endedMarch 31,2011
    
    
    2010$
    
    
    $OPERATING ACTIVITIESLoss for the period
    
    
    (3,045
    )
    
    
    (3,044
    )Add items not involving cashDepreciation and amortization
    
    
    19
    
    
    
    12Stock-based compensation [note 5(c)]
    
    
    271
    
    
    
    168Change in value of warrants [note 5]]
    
    
    (2,128
    )
    
    
    Changes in non-cash itemsAmounts receivable
    
    
    (124
    )
    
    
    286Restricted cash
    
    
    
    
    
    
    (3,502
    )Prepaid expenses
    
    
    1,519
    
    
    
    (1,216
    )Accounts payable and accrued liabilities
    
    
    273
    
    
    
    (7,629
    )Lease obligation
    
    
    (247
    )
    
    
    (306
    )Deferred collaboration revenue
    
    
    (581
    )
    
    
    (1,917
    )Cash used in operating activities
    
    
    (4,043
    )
    
    
    (17,148
    )FINANCING ACTIVITIESProceeds from issuance of common stock under stock option and employee purchase plans
    
    
    91
    
    
    
    185Cash provided by financing activities
    
    
    91
    
    
    
    185INVESTING ACTIVITIESProceeds from sale of investments
    
    
    16,088
    
    
    
    400Purchase of investments
    
    
    (28,614
    )
    
    
    Purchase of property and equipment
    
    
    (32
    )
    
    
    (21
    )Cash provided by (used in) investing activities
    
    
    (12,558
    )
    
    
    379Effect of exchange rate changes on cash and cash equivalents
    
    
    25
    
    
    
    8Increase (decrease) in cash and cash equivalents during the period
    
    
    (16,535
    )
    
    
    (16,576
    )Cash and cash equivalents, beginning of the period
    
    
    23,533
    
    
    
    62,051Cash and cash equivalents, end of the period
    
    
    6,998
    
    
    
    45,475Supplemental cash flow informationProperty and equipment acquired under lease obligation
    
    
    71
    
    
    
    
   5




---



##### Table of Contents



OncoGenex Pharmaceuticals, Inc.
 
 Notes to Consolidated Financial Statements
 (Unaudited)
 1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
    2. ACCOUNTING POLICIES
 Recently Adopted Accounting Policies
    6




---



##### Table of Contents



Recent Accounting Pronouncements
  3. COLLABORATION AGREEMENT
       
    
    An ongoing phase 3 clinical trial, referred to as the Prostate Cancer SATURN trial, or
SATURN, to evaluate a durable pain palliation benefit for custirsen in combination with
docetaxel retreatment as second-line chemotherapy in approximately 300 patients with
castrate-resistant prostate cancer, or CRPC.
  7




---



##### Table of Contents




    
    An ongoing phase 3 clinical trial, referred to as the Synergy trial, or SYNERGY, to be
conducted in approximately 125 cancer centers to evaluate a survival benefit for custirsen
in combination with first-line docetaxel treatment in approximately 800 patients with
CRPC.
 
    
    A phase 3 clinical trial to evaluate a survival benefit for custirsen in combination
with first-line chemotherapy in patients with non-small cell lung cancer, or NSCLC, which
is expected to be initiated in 2011 following successful manufacturing of additional
custirsen drug product and completion of drug-drug interaction DDI studies. The trial is
expected to enroll approximately 950 patients. The study protocol will include two
futility assessments and one interim analysis for efficacy. The first-line chemotherapy
regimen has been selected as carboplatin and paclitaxel.
   
    
    The Company will be required to spend $30 million in direct and indirect development
costs, and
 
    
    Teva will fund all other expenses under the Clinical Development Plan.
     8




---



##### Table of Contents



4. FAIR VALUE MEASUREMENTS
   
    
    Level 1  Quoted prices in active markets for identical securities;
 
    
    Level 2  Other significant observable inputs that are observable through
corroboration with market data (including quoted prices in active markets for similar
securities);
 
    
    Level 3  Significant unobservable inputs that reflect managements best estimate of
what market participants would use in pricing the asset or liability.
     Financial Instruments
 Cash
   9




---



##### Table of Contents



Government and Agency Securities
 Government Securities
 U.S. Agency Securities
 Corporate and Other Debt
 Corporate Bonds and Commercial Paper
  (in thousands)
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    2011AssetsCash
    
    $
    2,249
    
    
    $
    
    
    
    $
    
    
    
    $
    2,249Money market securities
    
    $
    3,963
    
    
    $
    
    
    
    $
    
    
    
    $
    3,963Government securities
    
    $
    5,064
    
    
    $
    
    
    
    $
    
    
    
    $
    5,064Corporate bonds and commercial paper
    
    $
    
    
    
    $
    70,324
    
    
    $
    
    
    
    $
    70,324$
    11,276
    
    
    $
    70,324
    
    
    $
    
    
    
    $
    81,600LiabilitiesWarrants
    
    $
    
    
    
    $
    
    
    
    $
    13,141
    
    
    $
    13,141
  10




---



##### Table of Contents



Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Estimated(in thousands)
    
    Cost
    
    
    Gain
    
    
    Loss
    
    
    Fair Value2011Cash
    
    $
    2,249
    
    
    $
    
    
    
    $
    
    
    
    $
    2,249Money market securities
    
    $
    3,461
    
    
    $
    
    
    
    $
    
    
    
    $
    3,461Government securities
    
    $
    1,000
    
    
    $
    
    
    
    $
    
    
    
    $
    1,000Corporate bonds and commercial paper
    
    $
    288
    
    
    $
    
    
    
    $
    
    
    
    $
    288Cash and cash equivalents
    
    $
    6,998
    
    
    $
    
    
    
    $
    
    
    
    $
    6,998Money market securities
    
    $
    502
    
    
    $
    
    
    
    $
    
    
    
    $
    502Restricted cash
    
    $
    502
    
    
    $
    
    
    
    $
    
    
    
    $
    502Government securities
    
    $
    4,002
    
    
    $
    62
    
    
    $
    
    
    
    $
    4,064Corporate bonds and commercial paper
    
    $
    70,076
    
    
    $
    8
    
    
    $
    (48
    )
    
    $
    70,036Short-term investments
    
    $
    74,078
    
    
    $
    70
    
    
    $
    (48
    )
    
    $
    74,100
      11




---



##### Table of Contents



Liability at
    
    
    
    
    
    
    RemainingDecember 31,
    
    
    Gain (loss) on
    
    
    Liability at March(In thousands)
    
    2010
    
    
    warrants
    
    
    31, 2011Warrant liability
    
    $
    15,269
    
    
    $
    2,128
    
    
    $
    13,141
 5. COMMON STOCK
 [a] Authorized
  [b] Issued and Outstanding Shares
  [c] Stock options
 2010 Performance Incentive Plan
  Stock Option Summary
   Numberof
    
    
    WeightedOptioned
    
    
    AverageCommon
    
    
    ExerciseShares
    
    
    Price#
    
    
    $Balance, December 31, 2010
    
    
    744,913
    
    
    
    8.73Option grants
    
    
    40,500
    
    
    
    16.65Option expirations/cancellations
    
    
    (2,000
    )
    
    
    22.28Option exercises
    
    
    (24,660
    )
    
    
    3.67Option forfeitures
    
    
    (8,411
    )
    
    
    11.44Balance, March 31, 2011
    
    
    750,342
    
    
    
    9.26
  12




---



##### Table of Contents



Three months endedMarch 31,2011
    
    
    2010Risk-free interest rates
    
    
    2.74
    %
    
    
    2.44
    %Expected dividend yield
    
    
    0
    %
    
    
    0
    %Expected life
    
    7 years
    
    
    5 yearsExpected volatility
    
    
    75
    %
    
    
    73
    %
   Three Months EndedMarch 31,(In thousands)
    
    2011
    
    
    2010$
    
    
    $Research and development
    
    
    121
    
    
    
    69General and administrative
    
    
    150
    
    
    
    99Total share-based compensation
    
    
    271
    
    
    
    168
   [d] Stock Warrants
   13




---



##### Table of Contents



Three months endedMarch 31,2011
    
    
    2010Risk-free interest rates
    
    
    2.21
    %
    
    
    Expected dividend yield
    
    
    0
    %
    
    
    Expected life
    
    4.6 years
    
    
    
    Expected volatility
    
    
    75
    %
    
    
    
 [e] Loss per Common Share
 Three Months EndedMarch 31,(In thousands except shares and per share amounts)
    
    2011
    
    
    2010NumeratorLoss attributable to common shareholders as reported
    
    $
    3,045
    
    
    $
    3,044DenominatorWeighted average number of common shares outstanding
    
    
    9,713,413
    
    
    
    6,333,272Basic and diluted loss per common share
    
    $
    0.31
    
    
    $
    0.48
  6. RESTRUCTURING ACTIVITIES
    14




---



##### Table of Contents



Remaining
    
    
    Amortization
    
    
    Additional
    
    
    RemainingLiability at
    
    
    of excess
    
    
    Liability
    
    
    Liability(In thousands)
    
    December 31, 2010
    
    
    lease facility
    
    
    Recorded
    
    
    at March 31, 2011Current portion of excess lease facility
    
    $
    1,303
    
    
    $
    23
    
    
    $
    
    
    
    $
    1,280Long-term portion of excess lease facility
    
    $
    6,164
    
    
    $
    315
    
    
    $
    
    
    
    $
    5,849Total
    
    $
    7,467
    
    
    $
    338
    
    
    $
    
    
    
    $
    7,129
 7. COMMITMENTS AND CONTINGENCIES
 Teva Pharmaceutical Industries Ltd.
  Isis Pharmaceuticals Inc. and University of British Columbia
     15




---



##### Table of Contents



Bayer HealthCare LLC
   Lease Arrangements
   CAD2011
    
    $
    802012
    
    $
    1072013
    
    $
    1072014
    
    $
    80Total
    
    $
    374
  16




---



##### Table of Contents



2011
    
    $
    1,5412012
    
    $
    2,1172013
    
    $
    2,1802014
    
    $
    2,2462015
    
    $
    2,313Remainder
    
    $
    4,837Total
    
    $
    15,234
  Guarantees and Indemnifications
     8. COMPREHENSIVE LOSS
 Three Months EndedMarch 31,(In thousands)
    
    2010
    
    
    2010$
    
    
    $Loss for the period
    
    
    3,045
    
    
    
    3,044Unrealized gain on cash equivalents and marketable securities
    
    
    70
    
    
    
    Unrealized loss on cash equivalents and marketable securities
    
    
    (48
    )
    
    
    (2
    )Comprehensive loss
    
    
    3,023
    
    
    
    3,042
 9. SUBSEQUENT EVENTS
   17




---



##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 INFORMATION REGARDING FORWARD LOOKING STATEMENTS
  
    
    progress and preliminary and future results of clinical trials conducted by us or our
collaborators;
 
    
    anticipated regulatory filings, requirements and future clinical trials conducted by us
or our collaborators;
 
    
    our anticipated future capital requirements and the terms of any capital financing
agreements;
 
    
    timing and amount of future contractual payments, product revenue and operating
expenses;
 
    
    market acceptance of our products and the estimated potential size of these markets;
and
 
    
    our anticipated future capital requirements and the terms of any capital financing
agreements.
  
    
    uncertainty relating to the timing, feasibility and results of clinical trials;
 
    
    dependence on Tevas ongoing commitment and ability to develop and commercialize
custirsen;
 
    
    dependence on the development and commercialization of our product candidates,
particularly on custirsen;
 
    
    the risk that research or previous clinical trial results may not be indicative of
results in humans or in future studies;
 
    
    uncertainties regarding the safety and effectiveness of our product candidates and
technologies;
 
    
    the timing, expense and uncertainty associated with the development and regulatory
approval process for our product candidates;
 
    
    uncertainties regarding our future operating results, and the risk that our product
candidates will not obtain the requisite regulatory approvals to commercialize or that the
future sales of our product candidates may be less than expected or nil;
 
    
    future capital requirements and uncertainty of obtaining additional funding through
debt or equity financings on terms acceptable to us;
 
    
    acceptance of our products by the medical community;
 
    
    the uncertainty associated with exiting or subleasing our excess office and laboratory
space;
 
    
    our ability to build out our product candidate pipeline through product in-licensing,
acquisition activities, or otherwise;
  18




---



##### Table of Contents




    
    changes in the treatment landscape, general competitive conditions within the drug
development and pharmaceutical industry and new developments or therapies that may not
work in combination with our product candidates;
 
    
    the potential for product liability issues and related litigation;
 
    
    our dependence on key employees;
 
    
    proper management of our operations;
 
    
    the potential inability to successfully protect and enforce our intellectual property
rights;
 
    
    the reliance on third parties who license intellectual property rights to us to comply
with the terms of such agreements and to enforce, prosecute and defend such intellectual
property rights;
 
    
    the reliance on third parties to manufacture and supply our product candidates;
 
    
    the effect of current, pending or future legislation, regulations and legal actions in
the United States, Canada and elsewhere affecting the pharmaceutical and healthcare
industries;
 
    
    volatility in the value of our common stock; and
 
    
    general economic conditions.
   MD&A Overview
  
    
    an overview of our business;
 
    
    results of operations and why those results are different from the prior year; and
 
    
    capital resources we currently have and possible sources of additional funding for
future capital requirements.
 Overview of the Company
    19




---



##### Table of Contents



Product Candidate Custirsen
   
    
    The ongoing phase 3 clinical trial, referred to as the Prostate Cancer SATURN trial, or
SATURN, to evaluate a durable pain palliation benefit for custirsen in combination with
docetaxel retreatment as second-line chemotherapy in approximately 300 patients with CRPC.
 
    
    The ongoing phase clinical trial, referred to as the Synergy trial, or SYNERGY, to be
conducted in approximately 125 cancer centers to evaluate a survival benefit for custirsen
in combination with first-line docetaxel treatment in approximately 800 patients with
CRPC.
 
    
    A phase 3 clinical trial to evaluate a survival benefit for custirsen in combination
with first-line chemotherapy in patients with NSCLC, which is expected to be initiated in
2011 following successful manufacturing of additional custirsen drug product and
completion of DDI studies. The trial is expected to enroll approximately 950 patients. The
study protocol will include two futility assessments and one interim analysis for
efficacy. The first-line chemotherapy regimen has been selected as carboplatin and
paclitaxel.
     
    
    A randomized phase 2 trial evaluating the benefit of combining custirsen with
first-line docetaxel, the final results of which were published in the September 20, 2010
issue of the Journal of Clinical
Oncology. Analyses indicating a survival benefit in patients treated with custirsen in
combination with first-line docetaxel compared to docetaxel alone, the latter being the
current standard of care for patients with advanced, progressive metastatic prostate cancer
requiring initial chemotherapy, are described in our 2010 Annual Report on Form 10-K filed
on March 10, 2011 under the heading BusinessOur Product CandidatesCustirsen Summary
of Final Results of Custirsen Phase 2 Clinical Trial in Patients With CRPC Receiving
Custirsen and Docetaxel as First-Line Chemotherapy. Due to the results of the phase 2
trial, the SYNERGY trial will evaluate the survival benefit of custirsen in patients
treated with first-line chemotherapy.
  20




---



##### Table of Contents




    
    Durable pain palliation, defined as pain palliation of 12 weeks or greater, which has
been observed in another phase 2 trial evaluating patients with metastatic CRPC who
progressed while receiving, or within six months of completing, first-line docetaxel
treatment. Of the patients on this trial who had pain or were on opioids for pain control
and were retreated with docetaxel as second-line treatment in combination with custirsen,
approximately 50% had durable pain palliation. This is favorable even when compared to the
35% pain responses of three weeks or greater observed in the phase 3 trial, which
supported the registration of docetaxel as first-line chemotherapy in patients with CRPC,
and when compared to the pain responses for cabazitaxel of 9.2% and for mitoxantrone of
7.7% observed in the Phase 3 TROPIC trial. As of August 13, 2010, the estimated median
over survival duration for the custirsen plus mitoxantrone arm was 11.5 months for the
custirsen plus docetaxel retreatment arm, the median overall survival was estimated at
15.8 months for the 20 randomized patients and 12.8 months for the 45 combined patients
which included 25 additional patients with high serum clusterin levels at enrolment beyond
the 20 randomized patients. Due to the results of our phase 2 trial, the SATURN trial is
evaluating the durable pain palliation benefit of custirsen in patients treated with
second-line docetaxel. We expect the SATURN trial will enroll patients in approximately 50
cancer centers who have previously responded to first-line docetaxel therapy, but who
subsequently experienced disease progression involving prostate cancer-related pain
despite opioid usage.
 
    
    A phase 2 trial evaluating 81 patients with advanced NSCLC who received custirsen in
combination with gemcitabine and a platinum chemotherapy (cisplatin or carboplatin) as
first-line chemotherapy. The median overall survival was 14.1 months and 54% of patients
survived at least one year. Thirty percent of patients who received custirsen with
first-line chemotherapy survived at least two years. For comparison, published studies
using a platinum-based regimen plus gemcitabine as first-line chemotherapy for advanced
NSCLC reported median survivals of 8 to 11 months and one-year survival rates of 33% to
43%. Market approval for Avastin plus paclitaxel and carboplatin chemotherapy for NSCLC
was based on results showing a median survival of 12.3 months compared to 10.3 months for
patients treated with chemotherapy alone. Survival rates for Avastin plus chemotherapy
versus chemotherapy alone were reported as 51% versus 44% at one year and 23% versus 15%
at two years, respectively. The protocol for the custirsen phase 3 registration trial in
advanced, unresectable NSCLC has yet to be finalized. Teva is expected to initiate this
trial in 2011, which will assess overall survival as the primary endpoint.
 Product Candidate OGX-427
   21




---



##### Table of Contents



22




---



##### Table of Contents



Product Candidates OGX-225, CSP-9222 and SN2310
  Collaboration Revenue
  Research and Development Expenses
    23




---



##### Table of Contents



General and Administrative Expenses
  Restructuring Activities
    24




---



##### Table of Contents



Results of Operations for the Three Months Ended March 31, 2011 and 2010
 Revenue
  Research and Development
  Three months endedMarch 31,2011
    
    
    2010Clinical development programs:custirsen
    
    $
    1,010
    
    
    $
    4,703OGX-427
    
    $
    2,246
    
    
    $
    231Other research and development
    
    $
    1,597
    
    
    $
    1,446Total research and development expenses
    
    $
    4,853
    
    
    $
    6,380
   25




---



##### Table of Contents



General and Administrative Expenses
  Net Interest Income (Expense)
  Other Income (Expense)
  Gain (loss) on warrants
  Liquidity and Capital Resources
     26




---



##### Table of Contents



Cash Flows
 Cash Used in Operations
  Cash Provided by Financing Activities
  Cash Used/Provided by Investing Activities
  Operating Capital and Capital Expenditure Requirements
  
    
    completing the SATURN trial, a phase 3 clinical trial that is evaluating a durable pain
palliation benefit for custirsen in combination with docetaxel as second-line chemotherapy
in approximately 300 patients with CRPC;
 
    
    completing the SYNERGY trial, a phase 3 clinical trial that is evaluating a survival
benefit for custirsen in combination with docetaxel as first-line chemotherapy in
approximately 800 patients with CRPC;
 
    
    completing patient accrual in a phase 3 clinical trial that is evaluating a survival
benefit for custirsen in patients with advanced, unresectable NSCLC, which is expected to
be initiated in 2011;
 
    
    completing an investigator-sponsored phase 2 clinical trial evaluating OGX-427
treatment in patients with prostate cancer; and
 
    
    completing a phase 2 clinical trial evaluating OGX-427 in combination with standard
first-line chemotherapy in approximately 180 patients with metastatic bladder cancer.
  27




---



##### Table of Contents




    
    timing, costs and results of clinical trials, preclinical development and regulatory
approvals;
 
    
    success of custirsen and achieving milestones and royalties;
 
    
    maintaining our relationship with Teva and Tevas ongoing level of focus and efforts to
develop custirsen;
 
    
    timing, costs and results of drug discovery and R&D;
 
    
    entering into new collaborative or product license agreements for products in our
pipeline;
 
    
    our ability to obtain additional funding through a partnership or collaboration
agreement with a third party or licenses of certain of our product candidates, or through
private or public offerings of our equity or debt; and
 
    
    costs related to obtaining, defending and enforcing patents.
 Off-Balance Sheet Arrangements
  Inflation
  Contingencies and Commitments
   28




---



##### Table of Contents



Material Changes in Financial Condition
 March 31,
    
    
    December 31,(In thousands)
    
    2011
    
    
    2010$
    
    
    $Total assets
    
    
    84,597
    
    
    
    89,918Total liabilities
    
    
    43,099
    
    
    
    45,793Shareholders equity
    
    
    41,498
    
    
    
    44,125
  Critical Accounting Policies and Estimates
  New Accounting Standards
  
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
 Interest Rate Risk
  Foreign Currency Exchange Risk
   29




---



##### Table of Contents



Item 4.
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Control Over Financial Reporting
   30




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1A.
    
    Risk Factors
 Risks Related to Our Business
 Investing in our common stock involves a high degree of risk. You should consider carefully the
risks and uncertainties described below, together with all of the other information contained in
this Quarterly Report on Form 10-Q, before deciding to invest in our common stock. If any of the
following risks materialize, our business, financial condition, results of operation and future
prospects will likely be materially and adversely affected. In that event, the market price of our
common stock could decline and you could lose all or part of your investment.
 Risks Related to Our Business
 We have a limited operating history, have incurred losses since inception and anticipate that we
will continue to incur losses for the foreseeable future. We have never had any products available
for commercial sale and we may never achieve or sustain profitability.
  We are highly dependent on the success of our lead product candidate, custirsen, and we cannot give
any assurance that custirsen, or any of our other product candidates, will receive regulatory
approval or will be successfully commercialized.
   31




---



##### Table of Contents



We depend on our collaborative relationship with Teva to further develop and commercialize
custirsen, and if our relationship is not successful or is terminated, we may not be able to
effectively develop and/or commercialize custirsen, which would have a material adverse effect on
our business.
  
    
    adverse decisions by Teva or the Joint Steering Committee regarding the development and
commercialization of custirsen;
 
    
    possible disagreements as to the timing, nature and extent of our development plans,
including clinical trials or regulatory approval strategy;
 
    
    loss of significant rights if we fail to meet our obligations under the Collaboration
Agreement;
 
    
    our limited control over clinical trials of custirsen;
 
    
    changes in key management personnel at Teva that are members of the Joint Steering
Committee; and
 
    
    possible disagreements with Teva regarding the Collaboration Agreement or ownership of
proprietary rights.
   Clinical trials may not demonstrate a clinical benefit of our product candidates.
    32




---



##### Table of Contents



Our clinical trials may be suspended or terminated at any time, including by the FDA, other
regulatory authorities, the IRB overseeing the clinical trial at issue, by a clinical trial site or
investigator, by Teva in the case of custirsen, or by us. Any failure or significant delay in
completing clinical trials for our product candidates could materially harm our financial results
and the commercial prospects for our product candidates.
  
    
    limited number of, and competition for, suitable patients with the particular types of
cancer required for enrollment in our clinical trials;
 
    
    limited number of, and competition for, suitable sites to conduct clinical trials;
 
    
    decrease in Tevas level of focus and efforts to develop custirsen;
 
    
    introduction of new product candidates to the market in therapeutic areas similar to
those that we are developing our product candidates;
 
    
    concurrent evaluation of new investigational product candidates in therapeutic areas
similar to those that we are developing our product candidates;
 
    
    delay or failure to obtain the FDAs or non-U.S. regulatory agencies approval or
agreement to commence a clinical trial, including our phase 3 or registration clinical
trials or amendment of those trials under an SPA;
 
    
    delay or failure to obtain required future additional funding, when needed, through
private or public offerings of our equity securities, debt financings, or the execution of
a licensing, partnership or collaboration agreement with a third party for any of our
product candidates;
 
    
    delay or failure to obtain sufficient manufacturing supply of custirsen;
 
    
    delay or failure to obtain sufficient supplies of the product candidate for our
clinical trials;
 
    
    delay or failure to reach agreement on acceptable clinical trial agreement terms or
clinical trial protocols with prospective sites or investigators; and
 
    
    delay or failure to obtain the approval of the IRB to conduct a clinical trial at a
prospective site.
  
    
    slower than expected rates of patient recruitment and enrollment;
 
    
    failure of patients to complete the clinical trial;
 
    
    unforeseen safety issues;
 
    
    lack of efficacy evidenced during clinical trials;
 
    
    termination of our clinical trials by one or more clinical trial sites or
investigators;
 
    
    inability or unwillingness of patients or medical investigators to follow clinical
trial protocols;
 
    
    inability to monitor patients adequately during or after treatment;
 
    
    introduction of competitive products that may impede our ability to retain patients in
clinical trials;
 
    
    delay or failure to obtain sufficient manufacturing supply of custirsen; and
 
    
    delay or failure to obtain future additional funding through private or public
offerings of our equity securities, debt financings, or the execution of a licensing,
partnership or collaboration agreement with a third party for any of our product
candidates in the event of material unforeseen costs relating to our clinical trials
currently in progress.
   33




---



##### Table of Contents



If our competitors develop and market products that are more effective, safer or less expensive
than our future product candidates, our clinical trials and commercial opportunities will be
negatively affected.
  We rely, in part, on third parties to conduct clinical trials for our product candidates and plan
to rely on third parties to conduct future clinical trials. If these third parties do not
successfully carry out their contractual duties or meet expected deadlines, we may be unable to
obtain regulatory approval for or commercialize our current and future product candidates.
  We rely on third parties to manufacture and supply our product candidates.
   34




---



##### Table of Contents



35




---



##### Table of Contents



If new therapies become broadly used, we may need to conduct clinical trials of our product
candidates in combination with these new therapies to demonstrate safety and efficacy of the
combination. Additional trials will delay the development of our product candidates and increase
our costs. The failure of certain of our product candidates to work in combination with these new
therapies would have an adverse effect on our business.
   Our product candidates may cause undesirable and potentially serious side effects during clinical
trials that could delay or prevent their regulatory approval or commercialization.
      36




---



##### Table of Contents




    
    Teva may elect to terminate the ongoing clinical trials and cease development of
custirsen;
 
    
    regulatory authorities may withdraw their approval of the product;
 
    
    we may be required to recall the product, change the way the product is administered,
conduct additional clinical trials or change the labeling of the product;
 
    
    a product may become less competitive and product sales may decrease; and
 
    
    our reputation may suffer.
  Because we depend on financing from third parties for our operations, our business may fail if such
financing becomes unavailable or is not available on commercially reasonable terms.
  
    
    maintaining our partnership with Teva and Tevas ongoing commitment to develop
custirsen in a timely manner;
 
    
    whether we experience delays in our pre-clinical and clinical development programs, or
slower-than-anticipated product development;
 
    
    the scope and results of our pre-clinical studies and clinical trials;
 
    
    whether opportunities to acquire additional product candidates arise and the costs of
acquiring and developing those product candidates;
 
    
    whether we are able to enter into additional third-party collaborative partnerships to
develop and/or commercialize any of our other product candidates on terms that are
acceptable to us;
 
    
    the timing and requirements of, and the costs involved in, conducting studies required
to obtain regulatory approvals for our product candidates from the FDA and comparable
foreign regulatory agencies;
 
    
    the availability of third parties to perform the key development tasks for our product
candidates, including conducting pre-clinical studies and clinical trials and
manufacturing our product candidates to be tested in those studies and trials and the
associated costs of those services; and
 
    
    the costs involved in preparing, filing, prosecuting, maintaining, defending the
validity of and enforcing patent claims and other costs related to patent rights and other
intellectual property rights, including litigation costs and the results of such
litigation.
  37




---



##### Table of Contents



Even if we or Teva receive regulatory approval to market our product candidates, the market may not
be receptive to our products.
  
    
    timing of market introduction of competitive products;
 
    
    safety and efficacy of our products;
 
    
    prevalence and severity of any side effects;
 
    
    potential advantages or disadvantages over alternative treatments;
 
    
    strength of marketing and distribution support;
 
    
    price of our products, both in absolute terms and relative to alternative treatments;
and
 
    
    availability of coverage and reimbursement from government and other third-party
payors.
  Although we have entered into a Collaboration Agreement with Teva for custirsen, we have not yet
partnered with third-party collaborators with respect to any of our other product candidates, and
we cannot control whether we will be able to do so on favorable terms, if at all.
  If we were to be successfully sued related to our products or operations, we could face substantial
liabilities that may exceed our resources.
   38




---



##### Table of Contents



If we fail to acquire and develop products or product candidates at all or on commercially
reasonable terms, we may be unable to grow our business.
    We will need to retain additional personnel and expand our other resources in order to promote
custirsen in the event we exercise our co-promotion option and develop our other product
candidates. If we fail to effectively expand our operations, including attracting and retaining key
management and scientific personnel, we may be unable to successfully develop or commercialize our
product candidates and our business may be materially adversely affected.
   39




---



##### Table of Contents



We may encounter difficulties in managing our expected growth and in expanding our operations
successfully.
     40




---



##### Table of Contents



We may be adversely affected if our controls over external financial reporting fail or are
circumvented.
  Risks Related to Our Intellectual Property
 Our proprietary rights may not adequately protect our technologies and product candidates.
   
    
    we or our licensors were the first to make the inventions covered by each of our issued
patents and pending patent applications;
 
    
    we or our licensors were the first to file patent applications for these inventions;
 
    
    others will not independently develop similar or alternative technologies or duplicate
any of our technologies;
 
    
    any of our or our licensors pending patent applications will result in issued patents;
 
    
    any of our or our licensors patents will be valid or enforceable;
 
    
    any patents issued to us or our licensors and collaboration partners will provide us
with any competitive advantages, or will not be challenged by third parties; and
 
    
    we will develop additional proprietary technologies that are patentable, or the patents
of others will not have an adverse effect on our business.
   41




---



##### Table of Contents



We and our collaborators, including Teva, may not be able to protect our intellectual property
rights throughout the world.
   The intellectual property protection for our product candidates depends on third parties.
    42




---



##### Table of Contents



We may become involved in disputes with Teva or potential future collaborators over intellectual
property ownership, and publications by our research collaborators and scientific advisors could
impair our ability to obtain patent protection or protect our proprietary information, which, in
either case, could have a significant effect on our business.
  The patent protection for our product candidates or products may expire before we are able to
maximize their commercial value, which may subject us to increased competition and reduce or
eliminate our opportunity to generate product revenue.
   We may incur substantial costs as a result of litigation or other proceedings relating to patent
and other intellectual property rights and we may be unable to protect our rights to, or use of,
our technology.
   43




---



##### Table of Contents




    
    patent infringement and other intellectual property claims, which would be costly and
time consuming to defend, whether or not the claims have merit, and which could delay the
regulatory approval process and divert managements attention from our business;
 
    
    substantial damages for past infringement, which we may have to pay if a court
determines that our product candidates or technologies infringe a competitors patent or
other proprietary rights;
 
    
    a court prohibiting us from selling or licensing our technologies or future drugs
unless the third party licenses its patents or other proprietary rights to us on
commercially reasonable terms, which it is not required to do; and
 
    
    if a license is available from a third party, we may have to pay substantial royalties
or lump-sum payments or grant cross licenses to our patents or other proprietary rights to
obtain that license.
      44




---



##### Table of Contents



If we breach any of the agreements under which we license rights to our product candidates or
technology from third parties, we could lose license rights that are important to our business.
Certain of our license agreements may not provide an adequate remedy for a breach by the licensor.
   We may be subject to damages resulting from claims that we, or our employees or consultants, have
wrongfully used or disclosed alleged trade secrets of third parties.
  Risks Related to our Common Stock and Other Securities
 If we raise additional financing, the terms of such transactions may cause dilution to existing
stockholders or contain terms that are not favorable to us.
   45




---



##### Table of Contents



The price for our common stock is volatile.
   We are at risk of securities class action litigation.
  Anti-takeover provisions in our stockholder rights plan, our charter documents and under Delaware
law could make a third-party acquisition of us difficult.
   46




---



##### Table of Contents



Risks Related to Our Industry
 The regulatory approval process is expensive, time consuming and uncertain and may prevent us from
obtaining approvals for the commercialization of some or all of our product candidates.
  
    
    restrictions on the products, manufacturers or manufacturing process;
 
    
    warning letters;
 
    
    civil and criminal penalties;
 
    
    injunctions;
 
    
    suspension or withdrawal of regulatory approvals;
 
    
    product seizures, detentions or import bans;
 
    
    voluntary or mandatory product recalls and publicity requirements;
 
    
    total or partial suspension of production;
 
    
    imposition of restrictions on operations, including costly new manufacturing
requirements; and
 
    
    refusal to approve pending NDAs or supplements to approved NDAs.
  
    
    a drug candidate may not be deemed safe or effective;
 
    
    the FDA may not find the data from pre-clinical studies and clinical trials sufficient;
 
    
    the FDA might not approve our third-party manufacturers processes or facilities;
 
    
    the FDA may change its approval policies or adopt new regulations; and
 
    
    third-party products may enter the market and change approval requirements.
 Even if we obtain regulatory approvals for our product candidates, the terms of approvals and
ongoing regulation of our product candidates may limit how we manufacture and market our product
candidates, which could materially affect our ability to generate revenue.
  
    
    restrictions on the products, manufacturers or manufacturing process;
 
    
    warning letters;
 
    
    civil or criminal penalties or fines;
 
    
    injunctions;
  47




---



##### Table of Contents




    
    product seizures, detentions or import bans;
 
    
    voluntary or mandatory product recalls and publicity requirements;
 
    
    suspension or withdrawal of regulatory approvals;
 
    
    total or partial suspension of production;
 
    
    imposition of restrictions on operations, including costly new manufacturing
requirements; and
 
    
    refusal to approve pending NDAs or supplements to approved NDAs.
  There is a high risk that our drug development activities will not result in commercial products.
  If government and third-party payors fail to provide coverage and adequate reimbursement rates for
our product candidates, our revenue and potential for profitability will be reduced.
    48




---



##### Table of Contents



Failure to obtain regulatory approval outside the United States would prevent us or Teva from
marketing our product candidates abroad.
  
 Item 6.
    
    Exhibits
 ExhibitNumber
    
    Description31.1
    
    
    Certification of President and Chief Executive Officer
pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 200231.2
    
    
    Certification of Chief Financial Officer pursuant to Rule
13a-14(a) or 15d-14(a) of the Securities Exchange Act of
1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1
    
    
    Certification of President and Chief Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
  49




---



##### Table of Contents



SIGNATURES
  ONCOGENEX PHARMACEUTICALS, INC.Date:   May 9, 2011
    By:
    /s/ Michelle BurrisMichelle BurrisChief Financial Officer

(Principal Financial Officer)  50




---



##### Table of Contents



ExhibitNumber
    
    Description31.1
    
    
    Certification of President and Chief Executive Officer
pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 200231.2
    
    
    Certification of Chief Financial Officer pursuant to Rule
13a-14(a) or 15d-14(a) of the Securities Exchange Act of
1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1
    
    
    Certification of President and Chief Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
  51