NASDAQ: ONCY
David Bautz: Welcome to the next episode of our CEO Chat series. My name is David Bautz, and I'm a senior biotechnology analyst here at Zacks Small Cap Research. Joining me today is Mr. Jared Kelly. He's the CEO of Oncolytics Biotech (NASDAQ: ONCY). Oncolytics is a biopharmaceutical company developing pelareorep, which is an Oncolytic virus that helps to create a more immunologically favorable tumor microenvironment, thus making tumors more susceptible to various treatment combinations. We recently initiated coverage of Oncolytics with a $6 valuation. Hey Jared, thanks for joining me today.
Jared Kelly: Hey David, thanks for having me, and it's really a pleasure to be here to speak with you.
DB: Alright, so for those investors who might be new to the story, why don't we just start with a brief overview of pelareorep and maybe how it helps to differentiate you in the immuno-oncology space?
JK: Pelareorep is a double-stranded oncolytic virus, and as far as we know, it's the only one being developed that is a double-stranded RNA reovirus that's naturally occurring and that can be intravenously delivered. That allows us to hit primary and metastatic tumors. We are not neutralized by the blood, which is a key advantage, allowing us to go throughout the blood and search for tumors. Pela selectively replicates within RAS mutations and other mutations that are found only in tumor cells. If pela were to infect a normal healthy cell, if there is no mutation, then pela will not be able to replicate. It's really perfectly designed by nature’s way of getting into tumor cells only, causing a sort of what we call havoc in the tumor microenvironment and really lighting up the tumor for the body's immune system to fight the tumor, which in turn allows other drugs, such as checkpoint inhibitors and RAS inhibitors, to work better in really immunologically cold tumors.
DB: Alright, so the company's recently shifted its focus to GI tumors. Can you tell us a little bit about what drove that reprioritization, and then where are you seeing the most compelling signals today?
JK: Absolutely. So, the company's been around for a long time, almost 30 years, with a long history of doing government-funded trials, investigator-sponsored trials, and just a lot of single-arm type exploratory trials. And with that comes 1300 patients’ worth of data, 30 trials, and over 15 different tumor types. Luckily for us, pela shows a signal in all of these tumors and replicates in every one of these tumors, from lung cancer to glioblastoma to breast cancer to all these GI tumors. I joined the company just about 10 months ago, and took about four months to go through all the data with my team, and I brought some new members in. But what we found was that, you know, strong signals across the board, but looking back throughout the history, you can go back as far as 15 years ago and find just fantastic lung cancer data or breast cancer data, but what is it versus the current standard of care? How can we help and get a registration-enabled study going very quickly? Where are we going to add to the treatment landscape? It became abundantly clear pretty quickly that it was colorectal cancer, anal cancer, and pancreatic cancer. So those just happened to be all of these GI tumors that are immunologically cold.
And with our drug delivery system, we create this havoc in the tumor microenvironment, causing all this upregulation of immunoactivity, which then allows us to combine with other treatments and use an immunotherapy in tumors where we never have before. So, the most compelling data that we have right now is by far our colorectal cancer data, where we're showing 27 months versus 11 months on an overall basis when you combine pela with the current standard of care. This is the standard care that's been in colorectal cancer for almost a decade, and we're adding onto it and just making it three times better. Even our duration of response is 19 months, versus four to six months, which is what you'd expect. So, a really strong signal that I think sets us up to move quickly in a very large tumor. And then, we have these other signals in anal cancer and pancreatic cancer. Pancreatic cancer, obviously a little crowded now, so maybe not our lead program, but still a very good opportunity for us. And then anal cancer, this rare tumor type, for which we hope to be able to add anything past the first line. We're excited to move all three of these forward, using our clinical trial and regulatory expertise to manage that process.
DB: So, one of the things that I was most struck by in researching the company was the data that suggests that pelareorep kind of enhances checkpoint inhibitor therapy and chemo, but without adding significant toxicity. What have you learned about what's driving that synergy there?
JK: Pela is a combination therapy. That's how cancer treatment is in the real world these days. While we have strong single-agent activity established from decades ago, it was never really meant to be on its own, so when you add this into any tumor, pela can go to primary and metastatic tumors, so you're not just limited to injecting the virus like you are at other oncolytic virus companies. You're in the blood, causing havoc in all these different tumors. What that does to the tumor microenvironment is it rearranges it. And what it does to the upregulation of the immunoresponse is allow other drugs to get in there, like checkpoint inhibitors or other immunostimulatory drugs, even chemotherapy. So, if we're remodeling the tumor microenvironment, we're making chemotherapy even more effective, and that's been evidenced in multiple trials where we've combined it with chemo alone. For example, in pancreatic cancer, we have a chemo-only trial, a controlled study chemo versus chemo plus pela, and you see the experimental arm with pela show 4X the two-year survival.
DB: Yeah, that's good. So, the company recently had a pretty important meeting with the FDA regarding plans for pela in anal cancer. What can you tell us about the outcome of that meeting?
JK: You know, we've spoken to the FDA, believe it or not, four times since I've been here. The process can be frustrating because each one of these type C meetings takes about four months from start to finish. You start with a briefing packet, you wait for a meeting date, and you go through the meeting, and so you want to rush and do things as quickly as you can. Our strategy all along was to take these studies where we combine with checkpoint inhibitors - this is anal cancer, and this is pancreatic cancer - and go and get registration-enabled trials, and so that's what we've done now. In eight months or so, we've accomplished two registration-enabled trials: one in pancreatic cancer first line, one now in anal cancer second line, and later. Now these are partnerable studies. This is a checkpoint inhibitor. We’re in discussions with potential partners to do the study together with checkpoint inhibitor partners, but both of them are based on checkpoint inhibitor combinations, so we'll need that buy-in from pharma types.
But what we learned from the FDA is really quite simple. They want a controlled study. We were seeking a single arm based on some other movement, I'll say, in the regulatory space, and that became quite clear even before our meeting that it wasn't going to be permitted based on a combination approach. However, it only adds about 20 patients to the full trial, and it only adds probably six months and maybe $2-$3 million to what our trial design was initially with a single arm, so the outcome was fantastic for us. The best thing that we found here is that in a single trial, we can have an accelerated approval shot on goal based on a response and duration endpoint. And then we can also have a full approval based on a survival or time to event endpoint, it's called, within the same trial. So, we don't have to start over or run two trials side by side, and that's very good in this rare tumor because enrollment could be slow. We're very excited by the potential for the anal cancer and the pancreatic cancer studies based on our regulatory work. Now we’ve checked the box for a very clear regulatory path, and I'm thankful to the FDA for making that possible for us in both of these indications.
DB: Yeah, so you mentioned partnerships. It's going to be important for the company going forward. So, what are you looking for in an ideal partner right now?
JK: I'm looking for a partner to believe in the opportunity to use immunotherapies in tumors that have never been able to be used for immunotherapy. This is checkpoint inhibitors and this is GI cancer. That's why we're doing what we're doing. You have a checkpoint inhibitor in anal cancer that works reasonably well in the first line, but nothing sort of later line. Checkpoint inhibitors don't work hardly at all in pancreatic cancer, and they don't work in most of the colorectal cancer diseases, only in MSI-high patients, and that's a very small portion of the population of cancer patients. What we want to do first and foremost is partner out these studies where we have regulatory clarity. That's one thing we're working on very closely with potential partners. That's something that we'll focus on.
Meanwhile, our flagship study is our colorectal cancer study, where I said we have the best data. We don't have to raise an inordinate amount of money to move that forward. We're going to get controlled data by the end of this year in a $3-$5 billion indication, which is second line, RAS mutant microsatellite stable. You're talking about half of the colorectal cancer market in a second-line setting where the standard of care hasn't changed in a long time, and partners are really paying attention to that study as well, and the outcome, and I'm sure that if we hit our marks where we expect to hit, partners will come to us to get more information on how that colorectal cancer study has played out. But it's very important to us as a small biotech.
Obviously, we're not going to go at this alone and market a drug. I think a lot won't say that, but I'm a realist, and I'm a transactional CEO, and in my mind, there is a chain of drug development, and biotech is the innovative and development arm until they can prove to pharma that it's worth investing. Then, pharma is really built to take drugs to the market and sell them. You need thousands of people out there speaking to PIs and going to doctors and getting prescribers and ready to support your drug as it enters into the market. It's just something that, as a 30-person biotech, is very, very difficult to do. What we're good at is running clinical trials to show strong signals and navigating the regulatory environment to set these up for partners to be able to come in. So, we're looking for a partner who's going to believe in what we're doing and really take it from here in a serious way.
DB: Alright, sounds good. We'll finish kind of big picture: if everything goes right over the next few years, where do you see pelareorep fitting into the treatment landscape, and then what does success look like for Oncolytics?
JK: Yeah, I see pelareorep fitting into the frontline of many different tumor types. Obviously, we're focused right now on GI tumors because I think that's our best shot on goal versus the current standard of care. But there are other indications: lung cancer, breast cancer, et cetera, that this drug will work, at least, that's what we strongly believe based on previous clinical evidence. I could see pelareorep being a backbone immunotherapy across all tumor types. As I said, it's tumor-agnostic. We can replicate within any tumor type and cause tumor microenvironment and havoc, and immunoresponses. What success looks like for Oncolytics is partnering out or moving this drug candidate on to someone who can really invest a lot of dollars into the development of the product candidate and put it where it needs to be.
DB: Sounds good. Jared, thanks again for joining me today.
JK: Absolutely. Thanks for having me.
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