ONCY - Oncolytics Biotech: Back In The Spotlight With 2 Potential Catalysts

2023-07-01 03:28:37 ET

Summary

• Today, we put a small oncology-focused biotech firm called Oncolytics Biotech in the spotlight for the first time in over two years.
• Its primary pipeline asset is heading towards pivotal Phase 3 development as part of a combination therapy for two different cancer indications.
• An update investment analysis on Oncolytics Biotech Inc. follows in the paragraphs below.

May your choices reflect your hopes, not your fears ."? Nelson Mandela

We did our initial assessment around Oncolytics Biotech Inc. (ONCY)(ONC:CA) early in 2021. Recently, a Seeking Alpha follower requested an update on this small developmental concern. Since there has been no article on this name since our last piece on it, we decided to do a follow-up. An updated analysis follows below.

Company Overview:

This small oncology focused clinical-staged biotech concern is based in Calgary, Canada. Its stock trades just under $2.50 a share and sports an approximate market capitalization of just north of $150 million.

The company's primary asset is a compound called Pelareorep. This is an intravenously delivered immunotherapeutic agent. Pelareorep works by activating the innate and adaptive immune systems as well as weakening the tumor's defense mechanisms. This, in turn, makes the tumor more susceptible to a broad range of oncology treatments.

Recent Developments:

The company has been evaluating pelareorep as part of a combination therapy with paclitaxel to treat metastatic breast cancer. In late May, Oncolytics announced results from a Phase 2 trial 'BRACELET-1' around this combination therapy. This study began enrolling in the first quarter of 2020.

Data was for the most part encouraging. The combination treatment reduced risk of disease progression by 71% compared to paclitaxel monotherapy. It piled up a 12-month progression-free survival rate of 32.8% compared with 0% for the monotherapy. The pelareorep/paclitaxel combo also racked up an overall response rate of 37.5% compared to just 13.8% for paclitaxel alone.

Now it is important to note that this study had just less than 50 trial subjects. They were split in three cohorts.

• Paclitaxel monotherapy
• Paclitaxel in combination with pelareorep
• Paclitaxel plus pelareorep in combination with the anti-PD-L1 checkpoint inhibitor, avelumab.*

* This combination had a zero percent 12-month progression-free survival rate

It also should be noted researchers highlighted 'the need for supportive care, noting that one-third of patients discontinued either pelareorep or avelumab during the trial .' That said, results will open the gate to a pivotal Phase 3 study.

In addition, pelareorep has been chosen to be a part of a Phase 3 study that will evaluation the compound as part of a combination therapy to treat pancreatic cancer, a terrible affliction that has a current five year survival rate of just 12%. The study is to be called Precision Promise. The companies involved have worked with the FDA to come up with an adaptive trial that could cut two years off overall development time, obviously lowering development costs greatly as well. This study will combine pelareorep with a checkpoint inhibitor and the chemotherapeutic agents gemcitabine and nab-paclitaxel to treat this form of aggressive cancer. Definitive agreements are still being worked through, but the trial is calendared to kick off early in 2024.

This follows Phase 1/2 data the company reported with these results :

Pelareorep combined with atezolizumab, gemcitabine, and nab-paclitaxel. This compares to an average ORR of ~25% reported in relevant historical control trials1-4. In addition, a phase 2 study of pelareorep plus gemcitabine that included 29 evaluable chemotherapy-naïve pancreatic cancer patients showed a median overall survival {MOS} of 10.2 months and a one-year survival rate of 45%, compared to historical control trials showing mOS of approximately 6.7 months and one-year survival rates of approximately 20 - 22%, respectively1,5-6. A subsequent phase 2 study of pelareorep plus checkpoint inhibition without chemotherapy in pancreatic cancer patients who progressed after first-line treatment showed a 42% disease control rate (n = 12), post-treatment increases in PD-L1+ cells, and a correlation between clinical response and increased activation of anti-cancer CD8+ T cells. "

Analyst Commentary & Balance Sheet:

Since BRACELET-1 data was posted, four analyst firms including Canaccord Genuity and H.C. Wainwright have reissued Buy/Outperform ratings on this stock. Price targets proffered have ranged from $5 to $15 a share.

After posting a net loss of $6.4 million in the first quarter, the company had just under $30 million of cash and marketable securities on its balance sheet. Management guided they had enough funding in place for ' at least 12 months '.

Verdict:

My view on Oncolytics is a mixed slate. On one hand, the company has two pivotal Phase 3 trials in the initial stages as part of combination therapies against two indications. Data from mid-stage studies were mostly encouraging and good enough to move on to late-stage development. On the other hand, Oncolytics is at least a couple of years away from any potential commercialization.

In addition, outside a buyout or collaboration deal with upfront payments, dilution is likely on the near-term horizon as the company raises additional capital to support late-stage studies. Given this, ONCY would seem to only merit a small ' watch item ' position within a well-diversified biotech portfolio by investors with a high-risk tolerance.

We promise according to our hopes and perform according to our fears ."? François de La Rochefoucauld

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