##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 (Mark One)
 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: 001-33882
 ONCOTHYREON INC.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    26-0868560(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification Number)2601 Fourth Ave., Suite 500Seattle, Washington
    
    98121(Address of principal executive offices)
    
    (Zip Code)
 (206) 801-2100  (Registrants telephone number, including area code)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



ONCOTHYREON INC.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2011
 INDEX
 PagePart I  Financial Information
    
    
    1Item 1. Financial Statements (unaudited)
    
    
    1Condensed Consolidated Balance Sheets
    
    
    1Condensed Consolidated Statements of Operations
    
    
    2Condensed Consolidated Statements of Cash Flows
    
    
    3Notes to the Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    25Item 4. Controls and Procedures
    
    
    25Part II  Other Information
    
    
    26Item 1. Legal Proceedings
    
    
    26Item 1A. Risk Factors
    
    
    26Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    46Item 6. Exhibits
    
    
    48Signatures
    
    
    49EX-31.1EX-31.2EX-32.1EX-32.2
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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 ONCOTHYREON INC.
 
 Condensed Consolidated Balance Sheets
 (In thousands, except share and per share amounts)
 March 31,
    
    
    December 31,2011
    
    
    2010(Unaudited)ASSETSCurrent:Cash and cash equivalents
    
    $
    11,008
    
    
    $
    5,514Short-term investments
    
    
    17,990
    
    
    
    23,363Government grant receivable
    
    
    
    
    
    
    489Prepaid expenses
    
    
    460
    
    
    
    583Other current assets
    
    
    363
    
    
    
    13129,821
    
    
    
    30,080Property and equipment, net
    
    
    1,888
    
    
    
    1,958Other assets
    
    
    306
    
    
    
    290Goodwill
    
    
    2,117
    
    
    
    2,117Total assets
    
    $
    34,132
    
    
    $
    34,445LIABILITIES AND STOCKHOLDERS EQUITYCurrent:Accounts payable
    
    $
    939
    
    
    $
    624Accrued liabilities
    
    
    865
    
    
    
    533Accrued compensation and related liabilities
    
    
    412
    
    
    
    686Current portion of notes payable
    
    
    758
    
    
    
    Current portion of deferred revenue
    
    
    
    
    
    
    18Total
current liabilities
    
    
    2,974
    
    
    
    1,861Notes payable
    
    
    4,139
    
    
    
    199Noncurrent portion of deferred revenue
    
    
    
    
    
    
    127Deferred rent
    
    
    400
    
    
    
    388Warrant liability
    
    
    14,441
    
    
    
    12,983Class UA preferred stock, 12,500 shares
authorized, 12,500 shares issued and
outstanding
    
    
    30
    
    
    
    30Commitments and contingenciesPreferred stock, $0.0001 par value; 10,000,000
shares authorized, no shares issued or
outstanding
    
    
    
    
    
    
    Common stock, $0.0001 par value; 100,000,000
shares authorized, 30,095,503 and 30,088,628
shares issued and outstanding
    
    
    353,851
    
    
    
    353,850Additional paid-in capital
    
    
    17,784
    
    
    
    17,328Accumulated deficit
    
    
    (354,371
    )
    
    
    (347,255
    )Accumulated other comprehensive loss
    
    
    (5,116
    )
    
    
    (5,066
    )Total
stockholders equity
    
    
    12,148
    
    
    
    18,857Total liabilities and stockholders equity
    
    $
    34,132
    
    
    $
    34,445
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ONCOTHYREON INC.
 
 Condensed Consolidated Statements of Operations
(In thousands, except share and per share amounts)
 Three monthsended March 31,2011
    
    
    2010(Unaudited)RevenueLicensing revenue from collaborative and license agreements
    
    $
    145
    
    
    $
    5Operating expensesResearch and development
    
    
    4,188
    
    
    
    2,606General and administrative
    
    
    1,829
    
    
    
    2,832Total operating expenses
    
    
    6,017
    
    
    
    5,438Loss from operations
    
    
    (5,872
    )
    
    
    (5,433
    )Other income (expenses)Investment and other income (expense), net
    
    
    313
    
    
    
    40Interest expense
    
    
    (99
    )
    
    
    Change in fair value of warrant liability
    
    
    (1,458
    )
    
    
    4,621Total other income (expenses), net
    
    
    (1,244
    )
    
    
    4,661Net loss
    
    $
    (7,116
    )
    
    $
    (772
    )Net loss per share  basic and diluted
    
    $
    (0.24
    )
    
    $
    (0.03
    )Shares
used to compute basic and diluted loss per share
    
    
    30,088,781
    
    
    
    25,753,405
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ONCOTHYREON INC.
 
 Condensed Consolidated Statements of Cash Flows
(In thousands)
 Three monthsended March 31,2011
    
    
    2010(Unaudited)Cash flows from operating activitiesNet loss
    
    $
    (7,116
    )
    
    $
    (772
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    116
    
    
    
    112Amortization of discount on notes payable
    
    
    11
    
    
    
    Stock-based compensation expense
    
    
    314
    
    
    
    225Change in fair value of warrant liability
    
    
    1,458
    
    
    
    (4,621
    )Loss on disposal of property and equipment
    
    
    
    
    
    
    4Extinguishment of debt
    
    
    (199
    )
    
    
    Changes in assets and liabilities:Government grants receivable
    
    
    489
    
    
    
    93Prepaid expenses
    
    
    123
    
    
    
    Other current assets
    
    
    (147
    )
    
    
    (22
    )Other long term assets
    
    
    95
    
    
    
    Accounts payable
    
    
    315
    
    
    
    (280
    )Accrued liabilities
    
    
    332
    
    
    
    1,402Accrued compensation and related liabilities
    
    
    (274
    )
    
    
    (409
    )Noncurrent portion of deferred revenue
    
    
    (145
    )
    
    
    (8
    )Deferred rent
    
    
    12
    
    
    
    24Net cash used in operating activities
    
    
    (4,616
    )
    
    
    (4,252
    )Cash flows from investing activitiesPurchases of short-term investments
    
    
    (4,259
    )
    
    
    (9,342
    )Redemption of short-term investments
    
    
    9,582
    
    
    
    2,363Purchases of property and equipment
    
    
    (46
    )
    
    
    (141
    )Net cash provided by (used in) investing activities
    
    
    5,277
    
    
    
    (7,120
    )Cash flows from financing activitiesProceeds from stock options exercised
    
    
    29
    
    
    
    Proceeds from debt financing, net of issuance cost
    
    
    4,804
    
    
    
    Net cash provided by financing activities
    
    
    4,833
    
    
    
    Increase (decrease) in cash and cash equivalents
    
    
    5,494
    
    
    
    (11,372
    )Cash and cash equivalents, beginning of period
    
    
    5,514
    
    
    
    18,974Cash and cash equivalents, end of period
    
    $
    11,008
    
    
    $
    7,602
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ONCOTHYREON INC.
 
 Notes to the Condensed Consolidated Financial Statements
Three months ended March 31, 2011 and 2010
(Unaudited)
 1. DESCRIPTION OF BUSINESS
  2. BASIS OF PRESENTATION
   Comprehensive Loss
  Revenue
 Licensing Revenue from Collaborative and License Agreements.
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3. RECENT ACCOUNTING PRONOUNCEMENTS
    -5-




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4. FAIR VALUE MEASUREMENTS
  
    
    Level 1  quoted prices in active markets for identical assets or liabilities;
 
    
    Level 2  observable inputs other than Level 1 prices such as quoted prices for
similar assets or liabilities, quoted prices in markets that are not active, or other
inputs that are observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilities; and
 
    
    Level 3  unobservable inputs that are supported by little or no market activity
and that are significant to the fair value of the assets or liabilities.
  March 31, 2011
    
    December 31, 2010Level 1
    
    Level 2
    
    Level 3
    
    Total
    
    Level 1
    
    Level 2
    
    Level 3
    
    TotalCertificates of
deposits (asset)
    
    $
    
    
    
    $
    17,990
    
    
    $
    
    
    
    $
    17,990
    
    
    $
    
    
    
    $
    23,363
    
    
    $
    
    
    
    $
    23,363Warrants (liability)
    
    
    
    
    
    
    
    
    
    
    14,441
    
    
    
    14,441
    
    
    
    
    
    
    
    
    
    
    
    12,983
    
    
    
    12,983
    5. FINANCIAL INSTRUMENTS
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Short-term Investments
   As of March 31,
    
    
    As of December 31,2011
    
    
    2010Amortized cost
    
    $
    18,040
    
    
    $
    23,363Unrealized losses
    
    
    (50
    )
    
    
    Fair value
    
    $
    17,990
    
    
    $
    23,363
 Accounts Receivable, Government Grant Receivable, Accounts Payable and Accrued
Liabilities
  Class UA Preferred Stock
  Notes Payable
  Limitations
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6. NOTES PAYABLE
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2011
    
    $
    303,0302012
    
    
    1,818,1822013
    
    
    1,818,1822014
    
    
    1,060,606Total
    
    $
    5,000,000
  Total Term Loan, including final payment fee (face value)
    
    $
    5,075,000Less: Term Loan discount balance
    
    
    (178,382
    )Total Term Loan carrying value
    
    
    4,896,618Less: current portion of notes payable
    
    
    (757,576
    )Long-term notes payable
    
    $
    4,139,042
  7. LOSS PER SHARE
  As of March 31,2011
    
    2010Director and employee stock options
    
    
    2,066,848
    
    
    
    1,834,991Non-employee director restricted share units
    
    
    217,198
    
    
    
    186,266Warrants
    
    
    6,868,342
    
    
    
    3,838,918
 8. EQUITY BASED TRANSACTIONS
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9. WARRANT LIABILITY
   For the Three Months EndedMarch 31, 2011May 2009
    
    September 2010Warrants
    
    WarrantsExercise price
    
    $
    3.74
    
    
    $
    4.24Market value of stock at end of period
    
    $
    3.87
    
    
    $
    3.87Expected dividend rate
    
    
    0.0
    %
    
    
    0.0
    %Expected volatility
    
    
    88
    %
    
    
    85
    %Risk-free interest rate
    
    
    1.4
    %
    
    
    2.0
    %Expected life (in years)
    
    
    3.16
    
    
    
    4.50
 Three months endedMarch 31, 2010May 2009 WarrantsExercise price
    
    $
    3.92Market value of stock at end of period
    
    $
    3.45Expected dividend rate
    
    
    0.0
    %Expected volatility
    
    
    77
    %Risk-free interest rate
    
    
    2.2
    %Expected life in years
    
    
    4.15
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Warrant liability at January 1, 2011
    
    $
    12,983Change in fair value recorded in earnings
    
    
    1,458Balance at March 31, 2011
    
    $
    14,441
  10. STOCK-BASED COMPENSATION
 Share Option Plan
    Three months ended March 31,2011
    
    2010Weighted average grant-date fair value for stock options granted
    
    $
    2.18
    
    
    
    N/AExpected dividend rate
    
    
    0.00
    %
    
    
    N/AExpected volatility
    
    
    82.35
    %
    
    
    N/ARisk-free interest rate
    
    
    2.32
    %
    
    
    N/AExpected life of options in years
    
    
    6.0
    
    
    
    N/A
  Employee Stock Purchase Plan
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Restricted Share Unit Plan
  11. STOCKHOLDERS EQUITY
  Common Shares IssuedBalance at January 1, 2010
    
    
    25,753,405Common stock issued
    
    
    4,302,791Restricted stock units converted
    
    
    9,498Employee stock purchase plan
    
    
    20,434Stock options exercised
    
    
    2,500Balance at December 31, 2010
    
    
    30,088,628Stock options exercised
    
    
    6,875Balance at March 31, 2011
    
    
    30,095,503
  12. CONTINGENCIES, COMMITMENTS AND GUARANTEES
 Royalties
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Guarantees
    13.
COLLABORATIVE AND LICENCE AGREEMENTS
  14. SUBSEQUENT EVENTS
  
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The information in this Item 2  Managements Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with our condensed consolidated financial
statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q .
This discussion contains forward-looking statements based on current expectations that involve
risks and uncertainties, such as our plans, objectives, expectations and intentions. These
forward-looking statements include, but are not limited to, the following: our expectations
regarding future expenses and our ability to effectively manage them; clinical and pre-clinical
development activities, including our plans for the pre-clinical development of
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ONT-10 in 2011 and our decision to initiate additional planned Phase 2 trial for PX-866 in
2011; our expectations regarding the timing and results of the Phase 3 trials for Stimuvax; the
outcome of the suspension of the clinical trials of Stimuvax; our ability to secure collaboration
arrangements with pharmaceutical companies to complete the development and commercialization of our
product candidates; our ability to obtain suitable financing to support our operations, clinical
trials and commercialization of our products; and the use and adequacy of cash resources. These
forward-looking statements are subject to certain risks and uncertainties that could cause actual
results to differ materially from those anticipated in the forward-looking statements. Factors
that might cause such a difference include, but are not limited to, those discussed in this
quarterly report in Part II, Item 1A  Risk Factors, and elsewhere in this quarterly report.
These statements, like all statements in this quarterly report, speak only as of their date, and we
undertake no obligation to update or revise these statements in light of future developments.
 Overview
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Key Financial Metrics
 Revenue
 Licensing Revenue from Collaborative and License Agreements.
   Expenses
 Research and Development
  -17-




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General and Administrative
 Investment and Other Income (Expense), net
 Interest Expense.
 Change in Fair Value of Warrants.
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Critical Accounting Policies and Significant Judgments and Estimates
   Results of Operations for the Three Month Periods Ended March 31, 2011 and March 31, 2010
  Overview
 Three months ended March 31,2011
    
    
    2010(in millions, except per shareamounts)Revenue
    
    $
    0.1
    
    
    $
    Expense
    
    
    5.8
    
    
    
    5.4Change in fair value of warrant liability  loss (gain)
    
    
    1.4
    
    
    
    (4.6
    )Net loss
    
    
    (7.1
    )
    
    
    (0.8
    )Loss per share  basic and diluted
    
    
    (0.24
    )
    
    
    (0.03
    )
  Revenue
 Three months ended March 31,2011
    
    
    2010(in millions)Licensing revenues from collaborative and license agreements
    
    $
    0.1
    
    
    $
    
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Research and Development
 Three months ended March 31,2011
    
    
    2010(in millions)Research and development
    
    $
    4.2
    
    
    $
    2.6
   General and Administrative Expense
 Three months ended March 31,2011
    
    
    2010(in millions)General and administrative
    
    $
    1.8
    
    
    $
    2.8
   Investment and other income (expense), net
 Three months ended March 31,2011
    
    
    2010(in millions)Investment and other income , net
    
    $
    0.3
    
    
    $
    
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Interest expense
 Three months ended March 31,2011
    
    
    2010(in millions)Interest expense
    
    $
    0.1
    
    
    $
    
  Change in Fair Value of Warrant Liability
 Three months ended March 31,2011
    
    
    2010(in millions)Change in fair value of warrant liability (loss)/income
    
    $
    (1.5
    )
    
    $
    4.6
  Liquidity and Capital Resources
 Cash, Cash Equivalents, Short-Term Investments and Working Capital
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Cash Flows from Operating Activities
  -22-




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Cash Flows from Investing Activities
  Cash Flows from Financing Activities
  Contractual Obligations and Contingencies
  Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 Years(In thousands)Operating leases
    
    $
    4,530
    
    
    $
    480
    
    
    $
    1,168
    
    
    $
    1,203
    
    
    $
    1,679Notes payable
    
    
    5,075
    
    
    
    758
    
    
    
    4,317
    
    
    
    
    
    
    
    Interest commitment on notes payable
    
    
    1,080
    
    
    
    527
    
    
    
    553
    
    
    
    
    
    
    
    Total
    
    $
    10,685
    
    
    $
    1,765
    
    
    $
    6,038
    
    
    $
    1,203
    
    
    $
    1,679
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Guarantees and Indemnification
  Off-Balance Sheet Arrangements
  Recent Accounting Pronouncements
    -24-




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Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Interest Rate Sensitivity
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes
in Internal Control Over Financial Reporting
  Inherent Limitation on the Effectiveness of Internal Controls
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PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
 Set forth below and elsewhere in this report, and in other documents we file with the SEC are
descriptions of risks and uncertainties that could cause actual results to differ materially from
the results contemplated by the forward-looking statements contained in this report. Because of
the following factors, as well as other variables affecting our operating results, past financial
performance should not be considered a reliable indicator of future performance and investors
should not use historical trends to anticipate results or trends in future periods. The risks and
uncertainties described below are not the only ones facing us. Other events that we do not
currently anticipate or that we currently deem immaterial also affect our results of operations and
financial condition.
 Risks Relating to our Business
 Our near-term success is highly dependent on the success of our lead product candidate,
Stimuvax, and we cannot be certain that it will be successfully developed or receive regulatory
approval or be successfully commercialized.
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Stimuvax and ONT-10 are based on novel technologies, which may raise new regulatory issues
that could delay or make FDA approval more difficult.
   The suspension of Mercks clinical development program for Stimuvax could severely harm our
business.
  ®
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The terms of our secured debt facility may restrict our current and future operations,
particularly our ability to respond to changes or to take some actions, and our failure to comply
with such covenants, whether due to events beyond our control or otherwise, could result in an
event of default which could materially and adversely affect our operating results and our
financial condition.
  Our ability to continue with our planned operations is dependent on our success at raising
additional capital sufficient to meet our obligations on a timely basis. If we fail to obtain
additional financing when needed, we may be unable to complete the development, regulatory approval
and commercialization of our product candidates.
  
    
    activities and arrangements related to the commercialization of our
product candidates;
 
    
    the progress of our research and development programs;
 
    
    the progress of pre-clinical and clinical testing of our product candidates;
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
    
    the time and cost involved in obtaining regulatory approvals for our product
candidates;
 
    
    the cost of filing, prosecuting, defending and enforcing any patent claims and other
intellectual property rights with respect to our intellectual property;
 
    
    the effect of competing technological and market developments;
 
    
    the effect of changes and developments in our existing licensing and other
relationships; and
 
    
    the terms of any new collaborative, licensing and other arrangements that we may
establish.
  We have a history of net losses, we anticipate additional losses and we may never become
profitable.
  There is no assurance that we will be granted regulatory approval for any of our product
candidates.
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We are dependent upon Merck KGaA to develop and commercialize our lead product candidate,
Stimuvax.
  We and Merck KGaA currently rely on third party manufacturers to supply our product
candidates, which could delay or prevent the clinical development and commercialization of our
product candidates.
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Any failure or delay in commencing or completing clinical trials for our product candidates
could severely harm our business.
  
    
    safety issues or side effects;
 
    
    delays in patient enrollment and variability in the number and types of
patients available for clinical trials;
 
    
    poor effectiveness of product candidates during clinical trials;
 
    
    governmental or regulatory delays and changes in regulatory requirements, policy and
guidelines;
 
    
    our or our collaborators ability to obtain regulatory approval to commence a
clinical trial;
 
    
    our or our collaborators ability to manufacture or obtain from third parties
materials sufficient for use in pre-clinical studies and clinical trials; and
 
    
    varying interpretation of data by the FDA and similar foreign regulatory agencies.
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The failure to enroll patients for clinical trials may cause delays in developing our product
candidates.
    Even if regulatory approval is received for our product candidates, the later discovery of
previously unknown problems with a product, manufacturer or facility may result in restrictions,
including withdrawal of the product from the market.
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
    
    warning letters;
 
    
    fines;
 
    
    product recalls;
 
    
    withdrawal of regulatory approval;
 
    
    operating restrictions;
 
    
    disgorgement of profits;
 
    
    injunctions; and
 
    
    criminal prosecution.
  Failure to obtain regulatory approval in foreign jurisdictions would prevent us from marketing
our products internationally.
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Our product candidates may never achieve market acceptance even if we obtain regulatory
approvals.
  
    
    our ability to provide acceptable evidence of safety and efficacy;
 
    
    the prevalence and severity of adverse side effects;
 
    
    availability, relative cost and relative efficacy of alternative and competing
treatments;
 
    
    the effectiveness of our marketing and distribution strategy;
 
    
    publicity concerning our products or competing products and treatments; and
 
    
    our ability to obtain sufficient third party insurance coverage or
reimbursement.
  If we are unable to obtain, maintain and enforce our proprietary rights, we may not be able to
compete effectively or operate profitably.
  
    
    obtain patent and other proprietary protection for our technology, processes and
product candidates;
 
    
    defend patents once issued;
 
    
    preserve trade secrets; and
 
    
    operate without infringing the patents and proprietary rights of third
parties.
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
    
    we might not have been the first to make the inventions covered by any of our
patents, if issued, or our pending patent applications;
 
    
    we might not have been the first to file patent applications for these inventions;
 
    
    others may independently develop similar or alternative technologies or products
and/or duplicate any of our technologies and/or products;
 
    
    it is possible that none of our pending patent applications will result in issued
patents or, if issued, these patents may not be sufficient to protect our technology or
provide us with a basis for commercially-viable products and may not provide us with
any competitive advantages;
 
    
    if our pending applications issue as patents, they may be challenged by third
parties as infringed, invalid or unenforceable under U.S. or foreign laws;
 
    
    if issued, the patents under which we hold rights may not be valid or enforceable;
or
 
    
    we may develop additional proprietary technologies that are not patentable and which
may not be adequately protected through trade secrets, if for example a competitor were
to independently develop duplicative, similar or alternative technologies.
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If any products we develop become subject to unfavorable pricing regulations, third party
reimbursement practices or healthcare reform initiatives, our ability to successfully commercialize
our products will be impaired.
  Governments often impose strict price controls, which may adversely affect our future
profitability.
  We face potential product liability exposure, and if successful claims are brought against us,
we may incur substantial liability for a product candidate and may have to limit its
commercialization.
  
    
    decreased demand for our product candidates;
 
    
    impairment of our business reputation;
 
    
    withdrawal of clinical trial participants;
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
    
    costs of related litigation;
 
    
    substantial monetary awards to patients or other claimants;
 
    
    loss of revenues; and
 
    
    the inability to commercialize our product candidates.
  We face substantial competition, which may result in others discovering, developing or
commercializing products before, or more successfully, than we do.
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
    
    design and develop products that are superior to other products in the market;
 
    
    attract qualified scientific, medical, sales and marketing and commercial personnel;
 
    
    obtain patent and/or other proprietary protection for our processes and product
candidates;
 
    
    obtain required regulatory approvals; and
 
    
    successfully collaborate with others in the design, development and
commercialization of new products.
  If we are unable to enter into agreements with partners to perform sales and marketing
functions, or build these functions ourselves, we will not be able to commercialize our product
candidates.
  
    
    our inability to recruit and retain adequate numbers of effective sales and
marketing personnel;
 
    
    the inability of sales personnel to obtain access to or persuade adequate numbers of
physicians to prescribe our products;
 
    
    the lack of complementary products to be offered by sales personnel, which may put
us at a competitive disadvantage relative to companies with more extensive product
lines; and
 
    
    unforeseen costs and expenses associated with creating a sales and
marketing organization.
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If we lose key personnel, or we are unable to attract and retain highly-qualified personnel on
a cost-effective basis, it would be more difficult for us to manage our existing business
operations and to identify and pursue new growth opportunities.
   Our business is subject to increasingly complex environmental legislation that has increased
both our costs and the risk of noncompliance.
  If we fail to establish and maintain proper and effective internal controls, our ability to
produce accurate financial statements on a timely basis could be impaired, which would adversely
affect our consolidated operating results, our ability to operate our business, and our stock
price.
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If we are required to redeem the shares of our Class UA preferred stock, our financial
condition may be adversely affected.
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We may expand our business through the acquisition of companies or businesses or in-licensing
product candidates that could disrupt our business and harm our financial condition.
  
    
    substantial cash expenditures;
 
    
    potentially dilutive issuance of equity securities;
 
    
    incurrence of debt and contingent liabilities, some of which may be difficult or
impossible to identify at the time of acquisition;
 
    
    difficulties in assimilating the operations of the acquired companies;
 
    
    diverting our managements attention away from other business concerns;
 
    
    entering markets in which we have limited or no direct experience; and
 
    
    potential loss of our key employees or key employees of the acquired
companies or businesses.
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Risks Related to the Ownership of Our Common Stock
 Our common stock may become ineligible for listing on The NASDAQ Stock Market, which would
materially adversely affect the liquidity and price of our common stock.
   The trading price of our common stock may be volatile.
  
    
    public concern as to the safety of products developed by us or others;
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
    
    the results of pre-clinical testing and clinical trials by us, our collaborators,
our competitors and/or companies that are developing products that are similar to ours
(regardless of whether such products are potentially competitive with ours);
 
    
    technological innovations or new therapeutic products;
 
    
    governmental regulations;
 
    
    developments in patent or other proprietary rights;
 
    
    litigation;
 
    
    comments by securities analysts;
 
    
    the issuance of additional shares of common stock, or securities convertible into,
or exercisable or exchangeable for, shares of our common stock in connection with
financings, acquisitions or otherwise;
 
    
    the perception that shares of our common stock may be delisted from The NASDAQ Stock
Market;
 
    
    the incurrence of debt;
 
    
    general market conditions in our industry or in the economy as a whole; and
 
    
    political instability, natural disasters, war and/or events of terrorism.
  Because we do not expect to pay dividends on our common stock, stockholders will benefit from
an investment in our common stock only if it appreciates in value.
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We expect that we will seek to raise additional capital in the future; however, such capital
may not be available to us on reasonable terms, if at all, when or as we require additional
funding. If we issue additional shares of our common stock or other securities that may be
convertible into, or exercisable or exchangeable for, our common stock, our existing stockholders
would experience further dilution.
  If we sell shares of our common stock under our existing committed equity line financing
facility, our existing stockholders will experience immediate dilution and, as a result, our stock
price may go down.
  Our management will have broad discretion over the use of proceeds from the sale of securities
to SCBV and may not use such proceeds in ways that increase the value of our stock price.
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We can issue shares of preferred stock that may adversely affect the rights of a stockholder
of our common stock.
  
    
    adversely affect the voting power of the holders of our common stock;
 
    
    make it more difficult for a third party to gain control of us;
 
    
    discourage bids for our common stock at a premium;
 
    
    limit or eliminate any payments that the holders of our common stock could expect to
receive upon our liquidation; or
 
    
    otherwise adversely affect the market price or our common stock.
  We expect our quarterly operating results to fluctuate in future periods, which may cause our
stock price to fluctuate or decline.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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Item 6. Exhibits
 ExhibitNumber
    
    Description10.1
    
    
    Loan and Security Agreement between Oncothyreon Inc. and
General Electric Capital Corporation dated February 8, 2011
(incorporated by reference from Exhibit 10.1 to Current Report
on Form 8-K filed on February 9, 2011).10.2
    
    
    Promissory Note issued by Oncothyreon Inc. to General Electric
Capital Corporation dated February 8, 2011 (incorporated by
reference from Exhibit 10.2 to Current Report on Form 8-K
filed on February 9, 2011).10.3
    
    
    Form of Warrant to Purchase Common Stock issued by Oncothyreon
Inc. to the Lenders pursuant to the terms of the Loan and
Security Agreement (incorporated by reference from Exhibit
10.3 to Current Report on Form 8-K filed on February 9, 2011).31.1
    
    
    Certification of Robert L. Kirkman, M.D., President and Chief
Executive Officer, pursuant to Exchange Act Rules 13a-14(a)
and 15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of Julia M. Eastland, Chief Financial Officer,
pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.32.1
    
    
    Certification of Robert L. Kirkman, M.D., 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
2002.32.2
    
    
    Certification of Julia M. Eastland, Chief Financial Officer,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
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SIGNATURES
  ONCOTHYREON INC.Date:  May 10, 2011
    /s/   Julia M. EastlandChief Financial Officer -49-




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INDEX OF EXHIBITS
 ExhibitNumber
    
    Description10.1
    
    
    Loan and Security Agreement between Oncothyreon Inc. and
General Electric Capital Corporation dated February 8, 2011
(incorporated by reference from Exhibit 10.1 to Current Report
on Form 8-K filed on February 9, 2011).10.2
    
    
    Promissory Note issued by Oncothyreon Inc. to General Electric
Capital Corporation dated February 8, 2011 (incorporated by
reference from Exhibit 10.2 to Current Report on Form 8-K
filed on February 9, 2011).10.3
    
    
    Form of Warrant to Purchase Common Stock issued by Oncothyreon
Inc. to the Lenders pursuant to the terms of the Loan and
Security Agreement (incorporated by reference from Exhibit
10.3 to Current Report on Form 8-K filed on February 9, 2011).31.1
    
    
    Certification of Robert L. Kirkman, M.D., President and Chief
Executive Officer, pursuant to Exchange Act Rules 13a-14(a)
and 15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of Julia M. Eastland, Chief Financial Officer,
pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.32.1
    
    
    Certification of Robert L. Kirkman, M.D., 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
2002.32.2
    
    
    Certification of Julia M. Eastland, Chief Financial Officer,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 -50-