Oncolytics Biotech(R) Inc. Reaches Special Protocol Assessment Agreement With the FDA on Design of Phase 3 Trial for REOLYSIN(R) in Head and Neck Cancers

CALGARY, Canada -

- Company to Host Conference Call

Oncolytics Biotech Inc. (”Oncolytics”) (TSX:ONC, NASDAQ:ONCY) today announced that it has reached an agreement with the U.S. Food and Drug Administration (FDA) under the Special Protocol Assessment (SPA) process for the design of a Phase 3 trial examining REOLYSIN in combination with paclitaxel and carboplatin in patients with platinum-refractory head and neck cancers. The SPA is an agreement between Oncolytics and the FDA that the design and planned analyses of the Phase 3 study is adequately designed to provide the necessary data, that depending upon outcome, could support a license application submission for REOLYSIN.

“Oncolytics is the first company to reach an agreement with the FDA on a Phase 3 trial design for an intravenously-administered oncolytic virus under the SPA process,” said Dr. Brad Thompson, President and CEO of Oncolytics. “This is an exciting step forward for our clinical program for REOLYSIN, which has become a first-in-class agent. A Phase 3 trial in patients with platinum-refractory head and neck cancers is a logical choice for our first pivotal trial with REOLYSIN. In Phase 1/2 trials, the treatment combination has increased the response rate by several-fold compared to historical outcomes.”

As specified in the SPA, the randomized, two-arm, double-blind, multicentre, two-stage, adaptive Phase 3 trial will assess the intravenous administration of REOLYSIN with the chemotherapy combination of paclitaxel and carboplatin versus the chemotherapy alone in patients with metastatic or recurrent squamous cell carcinoma of the head and neck, or squamous cell cancer of the nasopharynx, who have progressed on or after prior platinum-based chemotherapy. All patients will receive treatment every three weeks (21 day cycles) with paclitaxel and carboplatin and will also receive, on a blinded basis, either intravenous placebo or intravenous REOLYSIN. All dosing takes place in the first five days of each cycle with all patients receiving standard intravenous doses of paclitaxel and carboplatin on day one only, and on days one through five, either intravenous placebo or intravenous REOLYSIN at a dose of 3×10(10) TCID(50). Patients may continue to receive the trial combination therapy for up to eight, 21-day cycles and, thereafter, blinded placebo or blinded REOLYSIN until the patient has progressive disease or meets other criteria for removal from the trial.

The primary endpoint for the trial is overall survival (OS); secondary endpoints include progression free survival (PFS), objective response rate (complete response (CR) + partial response (PR)) and duration of response, and safety and tolerability of REOLYSIN when administered in combination with paclitaxel and carboplatin. The first stage of the trial is non-adaptive, and is designed to enroll 80 patients. The second stage is adaptive, and is designed to enroll between 100 and 400 patients with the most probable statistical enrolment being 195 patients in this stage. This adaptive trial design allows frequent data evaluation to determine if the probability of reaching a statistically significant endpoint has been achieved.

The decision to pursue a Phase 3 trial in head and neck cancers was predicated on positive results seen in the Company’s U.K. Phase 1 and Phase 2 combination REOLYSIN and paclitaxel/carboplatin clinical trials, as well as significant preclinical work demonstrating synergy in combination with taxane or platinum-based drugs. Interim results of the U.K. Phase 1/2 trial reported in March 2009 demonstrated an overall response rate (PR and CR) of 42% and a total clinical benefit rate (PR + CR + stable disease) of 75%. Enrolment in the Phase 2 portion of the trial was concluded in July 2009, and updated results are expected to be presented in the fourth quarter of 2009.

Conference Call Details

Dr. Brad Thompson, President and CEO of Oncolytics, will host a conference call and webcast today, October 2, 2009 at 6:30 a.m. MT (8:30 a.m. ET) to update investors on the Phase 3 program for REOLYSIN. To access the conference call by telephone, dial 1-416-644-3426 or 1-800-732-1073. A live audio webcast will also be available at the following link: www.newswire.ca/en/webcast/viewEvent.cgi?eventID(equal sign)2828320 or through the Company’s website at www.oncolyticsbiotech.com. Please connect at least 15 minutes prior to the webcast to ensure adequate time for any software download that may be needed. A replay of the webcast will be available at www.oncolyticsbiotech.com and will also be available by telephone through October 9, 2009. To access the telephone replay, dial 1-416-640-1917 or 1-877-289-8525 and enter reservation number 4169017 followed by the number sign.

About the Special Protocol Assessment Process

Upon the request of a study sponsor, the FDA will evaluate certain protocols and issues relating to the protocols to assess whether they are adequate to meet scientific and regulatory requirements; this includes clinical protocols for Phase 3 trials whose data will form the primary basis for an efficacy claim that will be part of an original Biologics License Application.

For more information about the SPA process, please go to: www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/ucm080571.pdf

(Due to the length of this URL, it may be necessary to copy and paste this hyperlink into your Internet browser’s URL address field. Remove the space if one exists.)

About REOLYSIN

REOLYSIN is a proprietary formulation of the human reovirus that acts primarily as a direct cytotoxic agent. Reovirus is naturally occurring (not genetically engineered) and has been demonstrated to replicate specifically in tumour cells bearing an activated Ras pathway, leaving healthy normal cells intact. At least two thirds of carcinomas and more than 90% of metastatic disease has Ras involvement.

About Oncolytics Biotech Inc.

Oncolytics is a Calgary-based biotechnology company focused on the development of oncolytic viruses as potential cancer therapeutics. Oncolytics’ clinical program includes a variety of human trials including a Phase III trial in head and neck cancers using REOLYSIN, its proprietary formulation of the human reovirus. For further information about Oncolytics, please visit: www.oncolyticsbiotech.com.

This press release contains forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements, including the Company’s expectations related to the SPA agreement on a Phase 3 combination REOLYSIN and paclitaxel/carboplatin trial for patients with platinum-refractory head and neck cancers, the planned timing and implementation of the Phase 3 trial, and the Company’s belief as to the potential of REOLYSIN as a cancer therapeutic, involve known and unknown risks and uncertainties, which could cause the Company’s actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties include, among others, the availability of funds and resources to pursue research and development projects, the efficacy of REOLYSIN as a cancer treatment, the tolerability of REOLYSIN outside a controlled test, the success and timely completion of clinical studies and trials, the Company’s ability to successfully commercialize REOLYSIN, uncertainties related to the research and development of pharmaceuticals and uncertainties related to the regulatory process. Investors should consult the Company’s quarterly and annual filings with the Canadian and U.S. securities commissions for additional information on risks and uncertainties relating to the forward looking statements. Investors are cautioned against placing undue reliance on forward-looking statements. The Company does not undertake to update these forward-looking statements, except as required by applicable laws.

For further information: Oncolytics Biotech Inc., Cathy Ward, 210, 1167 Kensington Cr NW, Calgary, Alberta, T2N 1X7, Tel: +1-403-670-7377, Fax: +1-403-283-0858, cathy.ward@oncolytics.ca; The Equicom Group, Nick Hurst, 300 5th Ave. SW, 10th Floor, Calgary, Alberta, T2P 3C4, Tel: +1-403-218-2835, Fax: +1-403-218-2830, nhurst@equicomgroup.com; The Investor Relations Group, Erika Moran, 11 Stone St, 3rd Floor, New York, NY, 10004, Tel: +1-212-825-3210, Fax: +1-212-825-3229, emoran@investorrelationsgroup.com

Source: Oncolytics Biotech Inc.

For further information: Oncolytics Biotech Inc., Cathy Ward, 210, 1167 Kensington Cr NW, Calgary, Alberta, T2N 1X7, Tel: +1-403-670-7377, Fax: +1-403-283-0858, cathy.ward at oncolytics.ca; The Equicom Group, Nick Hurst, 300 5th Ave. SW, 10th Floor, Calgary, Alberta, T2P 3C4, Tel: +1-403-218-2835, Fax: +1-403-218-2830, nhurst at equicomgroup.com; The Investor Relations Group, Erika Moran, 11 Stone St, 3rd Floor, New York, NY, 10004, Tel: +1-212-825-3210, Fax: +1-212-825-3229,
emoran at investorrelationsgroup.com