##### 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, 2010
 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 
incorporation or organization)
    
    (I.R.S. Employer
Identification Number)2601 Fourth Ave., Suite 500
Seattle, Washington
    
    98121(Address of principal executive offices)
    
    (Zip Code)
 (206) 801-2100  (Registrants telephone number, including area code)
 o þ
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer
(Do not check if a smaller reporting company)
    
    Smaller reporting companyo
 o þ




---



##### 



ONCOTHYREON INC.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2010
 INDEX
 PagePart I  Financial Information
    
    
    1Item 1. Financial Statements (unaudited)
    
    
    1Condensed Consolidated Balance Sheets
    
    
    1Condensed Consolidated Statements of Operations and Comprehensive Loss
    
    
    2Condensed Consolidated Statements of Stockholders Equity
    
    
    3Condensed Consolidated Statements of Cash Flows
    
    
    4Notes to the Condensed Consolidated Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    10Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    19Item 4. Controls and Procedures
    
    
    19Part II  Other Information
    
    
    21Item 1. Legal Proceedings
    
    
    21Item 1A. Risk Factors
    
    
    21Item 6. Exhibits
    
    
    41Signatures
    
    
    42EX-10.1EX-31.1EX-31.2EX-32.1EX-32.2
   -i-




---



##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 ONCOTHYREON INC.
Condensed Consolidated Balance Sheets
(in thousands, except share amounts)
(unaudited)
 March 31,
    
    
    December 31,2010
    
    
    2009ASSETSCurrentCash and cash equivalents
    
    $
    7,602
    
    
    $
    18,974Short-term investments
    
    
    21,223
    
    
    
    14,244Accounts receivable
    
    
    61
    
    
    
    41Notes receivable from employees
    
    
    38
    
    
    
    36Prepaid expenses
    
    
    140
    
    
    
    23329,064
    
    
    
    33,528Plant and equipment, net
    
    
    2,139
    
    
    
    2,076Lease deposits
    
    
    354
    
    
    
    354Notes receivable from employees
    
    
    150
    
    
    
    150Goodwill
    
    
    2,117
    
    
    
    2,117Total assets
    
    $
    33,824
    
    
    $
    38,225LIABILITIESCurrentAccounts payable
    
    $
    358
    
    
    $
    600Accrued liabilities
    
    
    2,055
    
    
    
    653Accrued compensation and related liabilities
    
    
    395
    
    
    
    804Current portion of deferred revenue
    
    
    18
    
    
    
    182,826
    
    
    
    2,075Notes payable
    
    
    199
    
    
    
    199Deferred revenue
    
    
    141
    
    
    
    149Deferred rent
    
    
    319
    
    
    
    295Warrant liability
    
    
    5,438
    
    
    
    10,059Class UA preferred stock, 12,500 shares authorized,
12,500 shares issued and outstanding in 2010 and 2009
    
    
    30
    
    
    
    308,953
    
    
    
    12,807Contingencies, commitments, and guarantees (See Note 10)STOCKHOLDERS EQUITYPreferred stock, $0.0001 par value; 10,000,000 shares
authorized, no shares issued and outstanding in 2010
and 2009
    
    
    
    
    
    
    Common stock, $0.0001 par value; 100,000,000 shares
authorized, 25,753,405 and 19,492,432 shares issued
and outstanding
    
    
    345,836
    
    
    
    345,836Additional paid-in capital
    
    
    16,510
    
    
    
    16,285Accumulated deficit
    
    
    (332,409
    )
    
    
    (331,637
    )Accumulated other comprehensive loss
    
    
    (5,066
    )
    
    
    (5,066
    )24,871
    
    
    
    25,418Total liabilities and equity
    
    $
    33,824
    
    
    $
    38,225
  -1-




---



##### Table of Contents



ONCOTHYREON INC.
 
 Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share amounts)
(unaudited)
 Three monthsended March 31,2010
    
    
    2009RevenueLicensing revenue from collaborative and license agreements
    
    
    5
    
    
    
    4ExpensesResearch and development
    
    
    2,519
    
    
    
    680General and administrative
    
    
    2,807
    
    
    
    1,751Depreciation
    
    
    112
    
    
    
    65Investment and other income, net
    
    
    (40
    )
    
    
    (20
    )Change in fair value of warrants
    
    
    (4,621
    )
    
    
    777
    
    
    
    2,476Net loss
    
    $
    (772
    )
    
    $
    (2,472
    )Basic and diluted loss per share
    
    $
    (0.03
    )
    
    $
    (0.13
    )Weighted average number of common shares outstanding
    
    
    25,753,405
    
    
    
    19,492,432
  -2-




---



##### Table of Contents



ONCOTHYREON INC.
 
 Condensed Consolidated Statements of Stockholders Equity
(in thousands, except share amounts)
(unaudited)
 AccumulatedAdditional
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Paid-in
    
    
    Accumulated
    
    
    ComprehensiveNumber
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    LossBalance at January 1, 2009
    
    
    19,492,432
    
    
    $
    325,043
    
    
    $
    15,094
    
    
    $
    (314,418
    )
    
    $
    (5,066
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    1,266
    
    
    
    
    
    
    
    Issuance of common stock
    
    
    6,159,553
    
    
    
    20,050Warrant exercises
    
    
    91,500
    
    
    
    668Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,219
    )
    
    
    Conversion of restricted share units
    
    
    9,920
    
    
    
    75
    
    
    
    (75
    )
    
    
    
    
    
    
    Balance
at December 31, 2009
    
    
    25,753,405
    
    
    
    345,836
    
    
    
    16,285
    
    
    
    (331,637
    )
    
    $
    (5,066
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    225
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (772
    )
    
    
    Balance at March 31, 2010
    
    
    25,753,405
    
    
    $
    345,836
    
    
    $
    16,510
    
    
    $
    (332,409
    )
    
    $
    (5,066
    )
  -3-




---



##### Table of Contents



ONCOTHYREON INC.
 
 Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 Three monthsended March 31,2010
    
    
    2009OperatingNet loss
    
    $
    (772
    )
    
    $
    (2,472
    )Depreciation
    
    
    112
    
    
    
    65Stock-based compensation expense
    
    
    225
    
    
    
    416Loss on disposal of plant and equipment
    
    
    4
    
    
    
    5Change in fair value of warrant liability
    
    
    (4,621
    )
    
    
    Deferred rent
    
    
    24
    
    
    
    28Recognition of unearned revenue
    
    
    (8
    )
    
    
    (4
    )Net change in assets and liabilitiesAccounts receivable
    
    
    (22
    )
    
    
    151Government grant receivable
    
    
    
    
    
    
    (375
    )Prepaid expenses
    
    
    93
    
    
    
    186Accounts payable
    
    
    (280
    )
    
    
    (142
    )Accrued liabilities
    
    
    1,402
    
    
    
    (903
    )Accrued compensation and related liabilities
    
    
    (409
    )
    
    
    (653
    )(4,252
    )
    
    
    (3,698
    )InvestingPurchase of short-term investments
    
    
    (9,342
    )
    
    
    Redemption of short-term investments
    
    
    2,363
    
    
    
    Purchase of plant and equipment
    
    
    (141
    )
    
    
    (38
    )(7,120
    )
    
    
    (38
    )Net cash outflow
    
    
    (11,372
    )
    
    
    (3,736
    )Decrease in cash and cash equivalents
    
    
    (11,372
    )
    
    
    (3,736
    )Cash and cash equivalents, beginning of period
    
    
    18,974
    
    
    
    19,166Cash and cash equivalents, end of period
    
    $
    7,602
    
    
    $
    15,430
  -4-




---



##### Table of Contents



ONCOTHYREON INC.
 
 Notes to the Condensed Consolidated Financial Statements
Three months ended March 31, 2010 and 2009
(Unaudited)
 1. DESCRIPTION OF BUSINESS
  2. BASIS OF PRESENTATION
   3. RECENT ACCOUNTING PRONOUNCEMENTS
 Improving Disclosures about Fair Value Measurements Fair Value Measurements and
Disclosures
 -5-




---



##### Table of Contents



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, 2010
    
    
    December 31, 2009Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalMoney market
funds (asset)
    
    $
    5,040
    
    
    $
    
    
    
    $
    
    
    
    $
    5,040
    
    
    $
    8,039
    
    
    $
    
    
    
    $
    
    
    
    $
    8,039Certificates of
deposits (asset)
    
    
    
    
    
    
    21,223
    
    
    
    
    
    
    
    21,223
    
    
    
    
    
    
    
    14,244
    
    
    
    
    
    
    
    14,244Warrants (liability)
    
    
    
    
    
    
    
    
    
    
    5,438
    
    
    
    5,438
    
    
    
    
    
    
    
    
    
    
    
    10,059
    
    
    
    10,059
   5. RESEARCH AND DEVELOPMENT
  6. SHARE CAPITAL
  -6-




---



##### Table of Contents



Three months endedMarch 31,2010
    
    
    2009Numerator:Net loss($000)
    
    $
    772
    
    
    $
    2,472Denominator:Weighted average shares outstanding used
to compute earnings per share  basic
and diluted
    
    
    25,573,405
    
    
    
    19,492,432
  7. WARRANTS
 Derivatives and Hedging
 Three months endedMarch 31, 2010Exercise price
    
    $
    3.92Market value of stock at end of period
    
    $
    3.45Expected dividend rate
    
    
    N/AExpected volatility
    
    
    77
    %Risk-free interest rate
    
    
    2.2
    %Expected life in years
    
    
    4.15Shares underlying warrants outstanding classified as liabilities
    
    
    2,817,744Shares underlying warrants outstanding classified as equity
    
    
    1,021,174
   Warrant liability at January 1, 2010
    
    $
    10,059Balance at March 31, 2010
    
    
    5,438Change in fair value
    
    $
    (4,621
    )
 8. STOCK-BASED COMPENSATION
 Stock Option Plan
  -7-




---



##### Table of Contents



Three months endedMarch 31,2010
    
    
    2009Weighted average grant-date fair value for stock options granted
    
    $
    
    
    
    $
    0.97Expected dividend rate
    
    
    N/A
    
    
    
    N/AExpected volatility
    
    
    N/A
    
    
    
    124.70Risk-free interest rate
    
    
    N/A
    
    
    
    2.26Expected life of options in years
    
    
    N/A
    
    
    
    6.00
 Restricted Share Unit Plan
    9. INVESTMENT AND OTHER (INCOME) EXPENSE, NET
  Three months endedMarch 31,2010
    
    
    2009Investment (income) loss
    
    $
    (41
    )
    
    $
    (37
    )Net foreign exchange (income) loss
    
    
    
    
    
    
    17Sale of equipment (gain) loss
    
    
    4
    
    
    
    Other
    
    
    (3
    )
    
    
    Total investment and other (income) loss, net
    
    $
    (40
    )
    
    $
    (20
    )
 -8-




---



##### Table of Contents



10. CONTINGENCIES, COMMITMENTS, AND GUARANTEES
 Royalties
   Guarantees
    11. FINANCIAL INSTRUMENTS
  Foreign Exchange Risk
  -9-




---



##### Table of Contents



Accounts Receivable, Government Grant Receivable and Accounts Payable and Accrued Liabilities
  Notes Receivable
  Notes Payable and Class UA Preferred Stock
  Limitations
  12. SUBSEQUENT EVENTS
 NASDAQ deficiency notice
  
 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. 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:
 -10-




---



##### Table of Contents



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 ONT-10 in 2010 and our decision to initiate one or more Phase 2
trials for PX-866 in 2010; 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
     -11-




---



##### Table of Contents



-12-




---



##### Table of Contents



Key Financial Metrics
 Revenue
 Licensing Revenue from Collaborative and License Agreements
  Licensing, Royalties, and Other Revenue.
  Expenses
 Research and Development
  -13-




---



##### Table of Contents



General and Administrative
 Depreciation
 Investment and Other (Income) Expense
 -14-




---



##### Table of Contents



Change in Fair Value of Warrants.
 Critical Accounting Policies and Significant Judgments and Estimates
   Results of Operations for the Three Month Periods Ended March 31, 2010 and March 31, 2009
  Overview
 Three months endedMarch 31,2010
    
    
    2009(in millions, except per share amounts)Expenses
    
    $
    0.8
    
    
    $
    2.5Net loss
    
    
    0.8
    
    
    
    2.5Basic and diluted loss per share
    
    
    0.03
    
    
    
    0.13
  Research and Development
 Three months endedMarch 31,2010
    
    
    2009(in millions)Research and development
    
    $
    2.5
    
    
    $
    0.7
 -15-




---



##### Table of Contents



General and Administrative Expense
 Three months endedMarch 31,2010
    
    
    2009(in millions)General and administrative
    
    $
    2.8
    
    
    $
    1.8
  Change in Fair Value of Warrant Liability
 Three months endedMarch 31,2010
    
    
    2009(in millions)Change in fair value of warrant liability
    
    $
    4.6
    
    
    $
    
  Liquidity and Capital Resources
 Cash, Cash Equivalents, Short-Term Investments and Working Capital
   -16-




---



##### Table of Contents



Cash Flows From Operating Activities
  Cash Flows From Investing Activities
  Contractual Obligations and Contingencies
  Payments Due by PeriodTotal
    
    
    Less than 1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    More than 5 Years(In thousands)Operating leases  premises
    
    $
    4,946
    
    
    $
    436
    
    
    $
    1,051
    
    
    $
    1,178
    
    
    $
    2,281
  -17-




---



##### Table of Contents



Guarantees and Indemnification
  Off-Balance Sheet Arrangements
  Recent Accounting Pronouncements
 Improving Disclosures about Fair Value Measurements Fair Value Measurements and
Disclosures
  -18-




---



##### Table of Contents



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
   -19-




---



##### Table of Contents



Inherent Limitation on the Effectiveness of Internal Controls
  -20-




---



##### Table of Contents



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
 The suspension of Mercks clinical development program for Stimuvax could severely harm our
business.
  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.
  -21-




---



##### Table of Contents




    
    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;
    
    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.
   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.
  -22-




---



##### Table of Contents



Stimuvax and our other vaccine product candidates are based on novel technologies, which may raise
new regulatory issues that could delay or make FDA approval more difficult.
   We have a history of net losses, we anticipate additional losses and we may never become
profitable.
  -23-




---



##### Table of Contents



There is no assurance that we will be granted regulatory approval for any of our product
candidates.
  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.
  -24-




---



##### Table of Contents



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;
 -25-




---



##### Table of Contents




    
    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.
  The failure to enroll patients for clinical trials may cause delays in developing our product
candidates.
    -26-




---



##### Table of Contents



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.
  
    
    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.
  -27-




---



##### Table of Contents



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.
 -28-




---



##### Table of Contents




    
    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.
   -29-




---



##### Table of Contents



-30-




---



##### Table of Contents



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;
 -31-




---



##### Table of Contents




    
    withdrawal of clinical trial participants;
    
    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.
  Stimuvax
 Small Molecule Products
  
    
    design and develop products that are superior to other products in the market;
 -32-




---



##### Table of Contents




    
    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.
  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.
  -33-




---



##### Table of Contents



Our business is subject to increasingly complex environmental legislation that has increased both
our costs and the risk of noncompliance.
  We have identified material weaknesses in our internal control over financial reporting and have
had to restate our historical financial statements.
 Accounting Changes and Error Corrections
  -34-




---



##### Table of Contents



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.
     -35-




---



##### Table of Contents



If we are required to redeem the shares of our Class UA preferred stock, our financial condition
may be adversely affected.
     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;
 -36-




---



##### Table of Contents




    
    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.
  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.
  -37-




---



##### Table of Contents



The trading price of our common stock may be volatile.
  
    
    public concern as to the safety of products developed by us or others;
    
    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.
  -38-




---



##### Table of Contents



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.
  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.
   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;
 -39-




---



##### Table of Contents




    
    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.
 Derivatives and Hedging
 -40-




---



##### Table of Contents



Item 6.
    
    Exhibits
 ExhibitNumber
    
    Description10.1
    
    Arrangement Agreement among Gamehost Income Fund and
Oncothyreon Inc., Oncothyreon Canada Inc. and 0811769 B.C. ULC
dated February 17, 2010.31.1
    
    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 Shashi K. Karan, Corporate Controller,
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 Shashi K. Karan, Corporate Controller,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 -41-




---



##### Table of Contents



SIGNATURES
  ONCOTHYREON INC.
(Registrant)Date:  May 10, 2010
    /s/   Shashi K. KaranCorporate Controller and Corporate Secretary -42-




---



##### Table of Contents



INDEX OF EXHIBITS
 ExhibitNumber
    
    Description10.1
    
    Arrangement Agreement among Gamehost Income Fund and
Oncothyreon Inc., Oncothyreon Canada Inc. and 0811769 B.C. ULC
dated February 17, 2010.31.1
    
    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 Shashi K. Karan, Corporate Controller,
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 Shashi K. Karan, Corporate Controller,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 -43-