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ONCYF: FDA Grants Fast Track Authority

By John Vandermosten, CFA


On May 8th, Oncolytics Biotech, Inc. (OTC:ONCYF) announced that the FDA had granted Fast Track status to REOLYSIN for the treatment of metastatic breast cancer.  Fast Track is granted when there is promise that a therapy can treat a serious or life-threatening disease and address an unmet medical need.  The status is awarded to pharmaceutical products that treat diseases with limited therapeutic options.  The designation provides several incentives with regards to approval and interaction with the FDA.  Closer collaboration, frequent meetings regarding trial design and rolling review all come together to streamline the approval process.  Accelerated approval and priority review are other potential benefits as well, and we anticipate the company will aggressively pursue these options which will have the dual benefit of reducing costs and advancing the launch date of REOLYSIN.  We believe that the granting of Fast Track by itself, with closer collaboration with the FDA, will increase the likelihood of approval and provides stronger support for our 2022 launch estimate.

Oncolytics First Quarter Results 

On May 5, 2017, Oncolytics released first quarter 2017 operational and financial results and filed their first quarter report on SEDAR with the Canadian Securities Administrators.  First quarter net loss of ($3.5) million was above our estimates of ($3.7) million due to lower operating expense (Financial statement data is denominated in Canadian dollars).  On a per share basis, net loss was ($0.03), matching our estimates.  No revenues were reported, in line with our expectations.  

Research and development expense was $2.3 million, declining from $2.7 million in the prior year due to a reduction in foreign exchange loss, lower intellectual property expenditures and a fall in manufacturing and related process development expenses.  These trends were partially offset by greater clinical trial and research collaboration expenses.  The clinical trial program focused on the preparation and development of the breast cancer registration study including the preparation of regulatory documents, regulatory filing fees and key opinion leader activities.  Clinical activities also included patient enrollment in the checkpoint inhibitor pancreatic cancer study with pembrolizumab and REOLYSIN.  Manufacturing and process development expenses were mainly attributable to shipping and storage costs of bulk and vialed REOLYSIN.

Operating expenses of $1.3 million declined slightly from the prior year’s $1.4 million on lower public company related expenses.  This was offset in part by smaller increases in office expenses and share based payments.  Lower public company expenses were attributable to the effort by management to eliminate certain investor relations services and bring some of these efforts in house.

Cash and equivalents levels at the end of 1Q:17 were $10.1 million, decreasing from $14.1 million at the end of 2016.  Cash burn of $4.0 million was higher than our estimate of $3.5 million due to a $700 thousand reduction in accounts payable and accrued liabilities over the three-month period.  Oncolytics’ balance sheet continues with no debt and $3.3 million in current liabilities.

Oncolytics had a busy first quarter, with several announcements related to the company’s IND 213 trial using REOLYSIN in combination with paclitaxel for patients with metastatic breast cancer.  An abstract was submitted to the American Association of Cancer Research (AACR) followed by a presentation of the data at the association’s annual meeting in early April.  The company also announced a collaboration with Myeloma UK and Celgene for combination therapy employing REOLYSIN and Imnovid or Revlimid for patients with Myeloma.  Co-founder Matt Coffee also stepped up to take the reins as CEO in mid-January.  

Key Details of IND 213 Study

➢ Data from IND 213 provided the first example of an immuno‐oncology viral‐agent demonstrating a statistically significant improvement in median OS in a randomized clinical study.

➢ REOLYSIN continues to generate significant benefit in overall survival (OS) for cancer patients, despite limited impact on response rates and/or PFS, suggesting Oncolytics’ proprietary isolate of the unmodified reovirus has features of both an oncolytic and immuno‐oncology agent.

➢ Patients with measurable biomarkers including wild type PIK3CA, KIT, APC, PTEN, ATM, AKT1, and mutated TP53 may demonstrate better OS results.  These biomarkers may allow REOLYSIN to be used in a targeted treatment approach and allow for improved clinical trial design.

➢ Results from IND 213 have provided the most meaningful confirmation of REOLYSIN’s safety and efficacy.  With support from key opinion leaders, Oncolytics will pursue a registration pathway in support of a rapid route to market in metastatic breast cancer.

Myeloma UK (MUK) eleven

The MUK eleven trial was launched in collaboration with the British cancer charity Myeloma UK and Celgene.  The study began in March 2017 and seeks to use agents to modulate the immune system to target myeloma.  This is a Phase Ib trial that will use Celgene’s lenalidomide and pomalidomide as rescue treatment in patients with relapsing myeloma.  In addition to safety and tolerability of Celgene’s products, the trial will also examine whether or not REOLYSIN provides a benefit to patients.  Targeting a panel size of 44 patients, the trial will be conducted at several NHS hospitals throughout the UK and be coordinated by a group associated with the University of Leeds.

2017 Estimates 

First quarter 2017 operational expenses were slightly lower than our estimates, while cash burn was slightly higher due to movements in working capital items.  We maintain our previous estimates for income statement and cash flow items as well as our target price of $2.00 per share.  Our initiation provides further detail on our valuation parameters.  


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