CA - Oncolytics Biotech: Is The Early Data Really That Good?

2023-09-13 11:01:24 ET

Summary

• Oncolytics Biotech is developing an oncolytic virus for solid tumor treatment, but the small patient populations make it difficult to determine the effectiveness.
• The company's main developmental project is pelareorep, a reovirus that infects cancer cells and triggers the immune system to attack tumors.
• Promising results have been seen in breast cancer and pancreatic cancer, but the small patient populations and lack of long-term data raise concerns about the effectiveness. Additionally, the company faces financial challenges.

Topline Summary

Oncolytics Biotech (ONCY) is a cancer-focused biotech developing an oncolytic virus for solid tumor treatment. While they have touted some encouraging phase 2 data in the past year, it's difficult to distinguish signal from noise in such small patient populations. Couple that with ongoing cash challenges, and this is a tough sell for me.

Pipeline Overview

Pelareorep

Pelareorep is the sole developmental project in ONCY's pipeline. This is a reovirus that selectively infects rapidly dividing, permissive cancer cells. Once cells are killed from viral replication, they release other antitumor viral particles, as well as tumor-associated antigens, helping to trigger the adaptive immune system.

Furthermore, while infected, the cancer cells release inflammatory cytokines that signal to the innate immune system to home and attack. ONCY hopes that by pairing these innate and adaptive immune mechanisms that they can help tackle tumors that have not typically done well with immunotherapy.

Pelareorep in breast cancer

Arguably breast cancer is the current flagship for pelareorep, particularly after this year's ASCO results. ONCY presented findings from a randomized, phase 2 study of paclitaxel, with or without pelareorep and avelumab, for patients progressing hormone-positive, HER2-negative breast cancer.

Of note, 9 of 33 patients receiving pelareorep discontinued the virus therapy due to toxicity. Response rates for paclitaxel alone, paclitaxel plus pelareorep, and paclitaxel plus pelareorep plus avelumab were 20%, 31%, and 14%, respectively. Median progression-free survival was 6.4, 9.6, and 5.8 months, respectively.

The authors concluded that the combo of paclitaxel plus pelareorep was worthy of further study, but additional avelumab increased toxicity unnecessarily, without any clear sign of benefit. In a separate press release , ONCY touted a 12-month PFS rate of 32.8% for pelareorep plus paclitaxel, compared with 0% for the paclitaxel arm.

It is worth noting that these numbers were generated in a very small population of patients, and we should be cautious when interpreting the findings too positively. It's odd that the company did not share Kaplan-Meier curves of the progression-free survival findings in their presentation. The cynic in me says this is because the curves don't look as impressive as landmark 6- or 12-month rates do. Like the 12-month PFS rate? 32.8% of patients would mean that it's something like 5 patients who are progression free at 12 months, versus 0 out of 15.

It's very hard to make heads or tails of these findings with small numbers. In general, patients receiving pelareorep were a bit younger, were premenopausal, and had less prior exposure to taxanes, on a percentage basis. So these findings definitely warrant further exploration, but I'm very cautious about overinterpreting them at this time.

Pelareorep in pancreatic cancer

One of the hallmark tumor types we've struggled to impact with immunotherapy is pancreatic cancer. Aside from the incredibly rare mutations that confer MMR deficiency or MSI-high status (which would make them amenable to pembrolizumab therapy), immunotherapy has not gained any ground in the clinic .

At ASCO 2021 , a combination study of pelareorep and pembrolizumab yielded disease control in 5 of 12 evaluable patients, with one response. The safety profile of this combination was deemed manageable, with some signals that achieving disease control could improve progression-free survival, although the overall survival curves had no signal of difference between these so-called "responders" and "non-responders."

Since then, ONCY has opened the GOBLET study to assess efficacy signals across various gastrointestinal cancers, including pancreatic cancer. The big news from this study last year, presented at SITC 2022 , was that combining pelareorep with atezolizumab plus chemotherapy yielded a 69% confirmed response rate in the pancreatic cancer cohort of patients, which the company touts as a near tripling of response rate compares with historical controls.

This combination (pelareorep plus atezolizumab plus gemcitabine plus nab-paclitaxel) was granted Fast Track designation by the FDA back in December . The combination was also selected for inclusion in the Precision Promise study , which is assessing various treatment approaches for pancreatic cancer.

Financial Overview

At the end of June 2023, ONCY held $17.5 million in cash and equivalents (in Canadian dollars), with another $6.8 million in marketable securities. Total current assets reached to $31 million.

Meanwhile, the company reported net losses of $7.4 million, including $7.2 in operational expenses. This was an increase from $5.1 million in Q2 2022.

ONCY bolstered their cash funds at the end of July with a $15 million deal for shares and warrants, the latter at an exercise price of $2.81 for 60 months. Exercising their over-allotment option yielded another $2.25 million.

At this burn rate, with the extra money in the tank, this means that ONCY will be able to sustain operations for 5 to 6 more quarters.

Strengths and Risks

Pelareorep looks promising in certain ways. These early findings show a decent signal of response and progression-free survival, but I'll be clear in my assessment as well: I won't be surprised if they're not able to replicate these findings in randomized studies. For the breast cancer project, we're not being shown everything, namely Kaplan-Meier curves of PFS. I'm not sure why that is, but it is a noteworthy omission.

For the pancreatic cancer, yes a 69% response rate sounds great, but this is in a very small patient population, which increases the noise of the findings. We don't yet know about durability of response, or potential impact on overall survival. We have one encouraging blip on the radar at this time, but there's no way of knowing if it's a false positive.

And this matters in pancreatic cancer, one of the deepest graveyards of targeted and immunological therapy developments. Many, many, many promising therapy approaches showed interesting data in early studies, only to be scuttled later as more patients were added.

Long story short: on the cancer data, ONCY is doing important work, but you should know that at this time the clinical trial findings they've presented do not provide enough clarity on whether they're going to be successful. I certainly do not think they're knocking on the door of an approval just yet. Cautious optimism is the only thing warranted here, in my opinion.

Couple that with a shaky cash situation, which the company has demonstrated they have challenges in dealing with (needing to couple an equity raise with warrants to raise a modest amount of money), and you have a company that still has too short a runway to get to the goal, despite just having diluted shareholders. Anyone getting in today can count on another round of dilution in my view, likely by the end of 2024 or into 2025.

Bottom-Line Summary

ONCY is in an important business doing important work, and there's a chance that they're really onto something. But viral immunotherapy has produced very few successes in cancer to date, and it feels like the company is continuing to paw around in the dark despite major research outlays over the years into pelareorep development.

Unfortunately, I don't see these early efficacy findings as definitive enough evidence that pelareorep has a future yet. And that's why I cannot make a buy recommendation at this time. The money issues they face make it an even dicier proposition. Perhaps there will be more data to drum up hype, and data readouts in other GI cancers later this year might have a short-term impact, but I don't feel ONCY is really worth it as a long-term play at this time.

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