Calgary Nov 21, 2019 (Thomson StreetEvents) -- Edited Transcript of Oncolytics Biotech Inc earnings conference call or presentation Tuesday, November 12, 2019 at 10:00:00pm GMT

* Andrew R. de Guttadauro

Oncolytics Biotech Inc. - Global Head of Business Development & President of Oncolytics Biotech (U.S.) Inc

* Kirk J. Look

Oncolytics Biotech Inc. - CFO

* Matthew C. Coffey

Oncolytics Biotech Inc. - President, CEO & Director

Oncolytics Biotech Inc. - VP of IR & Corporate Communications

Canaccord Genuity Corp., Research Division - Principal & Senior Healthcare Analyst

Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research of Biotechnology

Good day, ladies and gentlemen. My name is Kat, and I'll be your conference operator today. At this time, I would like to welcome everyone to Analytics (sic) [Oncolytics] Biotech Third Quarter 2019 Results Conference Call. (Operator Instructions) I will now turn the call over to your host, Michael Moore, Vice President, Investor Relations and Corporate Communications. Sir, the floor is yours.

Thanks, Kat. Good afternoon, ladies and gentlemen, and thank you for joining us on our call today to discuss our third quarter and corporate update, including our updated catalyst milestones. With me on the call this afternoon from Oncolytics are Dr. Matt Coffey, President and Chief Executive Officer; Kirk Look, Chief Financial Officer; and Andrew de Guttadauro, Global Head of Business Development.

On today's call, Dr. Coffey will review our clinical and operational progress, including a recap of catalyst milestones. Andrew will touch on our business development progress and our growing relationships with pharma and big biotech. And Kirk, of course, will then speak to our financial position. I'd like to point out, certain statements made on this call, such as those relating to our clinical development plans and business development plans are forward-looking within the meaning of applicable security laws. Please refer to our third quarter press release and MD&A for important assumptions and cautionary statements relating to forward-looking information.

I will now turn the call over to Dr. Matt Coffey. Matt?

Matthew C. Coffey, Oncolytics Biotech Inc. - President, CEO & Director [3]

Hello, everyone, and welcome to our third quarter 2019 and corporate update conference call. The quarter was marked by continued clinical execution as well as even more validation of our unique oncolytic virus, and specifically our entry in this route of delivery, which I believe to be a vastly undervalued differentiator and will be something I'll come back to a few times on today's call. It's just that important.

We remain on track to report a steady cadence of value-driving catalysts across our robust and growing development pipeline before the end of this year and extending into the middle of 2021. I'll describe these important value inflection points later on this call. But first, let me provide a quick overview of our lead program and update on recent highlights from the quarter.

As everyone following Oncolytics should know, we are focused on advancing pelareorep in the lead indication of metastatic breast cancer, and we're conducting 2 key clinical studies with industry leaders that will determine the design of the Phase III registrational program for pelareorep in this indication. We have an approved study design for the Phase III, but we believe these 2 studies named AWARE-1 and BRACELET-1 will provide data supporting the addition of a checkpoint inhibitor to this registration study as well as a biomarker that we believe increases the chance of success in this critical study.

AWARE-1, our window of opportunity study in early-stage breast cancer with Roche's Tecentriq, is ongoing, and we expect to announce additional data before the end of the year. The BRACELET-1 study for which we have a co-development agreement with Pfizer and Merck KGaA, focusing on metastatic breast cancer, will begin enrolling Q1 of next year with our recently announced clinical partner, PrECOG. Last quarter, we announced encouraging results from the safety run in AWARE-1, which is being conducted by SOLTI in Spain to evaluate the efficacy of pelareorep in combination with Roche's Tecentriq and the utility of our biomarker measuring T cell clonality.

This data was also updated and highlighted last week at the Society of Immunotherapy for Cancer Conference in Washington, D.C. by Principal Investigator and Lead Author, Aleix Prat, and were presented by the lead investigator from SOLTI, Patricia Villagrasa. The data from these first patients demonstrated the creation of new T cells as well as the expansion of patients' existing T cell populations. What this means is that we have a brand-new T cells that recognize and react to tumor tissue, and that has some existing T cells that were previously blind to the tumor at baseline now react to the tumor 3 weeks later.

This data is very compelling and provides clinical proof that pelareorep is able to train the immune system to engage, to target and to kill tumor cells in primary disease as well as metastatic disease.

Specifically, it demonstrated viral replication within the tumor that led to tumor inflammation marked by a robust increase in new clones of tumor-targeting CD8-positive T cells. Now to put this in perspective, the average person walking around an urban environment will produce 2 or 3 new T cell clones per month, the immune system just doesn't require anything more than this in this environment. On study, we saw as many as 450 new T cell clones in a patient, which is a significant amount of T cell clones to recognize and attack tumor tissue. Simply put, we're creating a hot tumor microenvironment that did not previously exist. The exact environment required by checkpoint inhibitors that currently only work in a little as 1 in 5 patients.

So as we've stated time and time again, what if we can make a 2 in 5 and double a $25 billion drug class?

Additional data presented at SITC demonstrated additional support for our IV delivery based on an increase in T cells within both the tumor center and at the tumor periphery or stroma. This indicates that T cells are indeed getting into the tumor, not just gathering around the outside. Importantly, we also observed a decrease in the number of regulatory T cells or Tregs, which inhibit an antitumor immunological response by suppressing inflammation. This decrease in Tregs is also observed in checkpoint combination therapy experiments in breast cancer mouse models, further highlighting the robust transformations that pelareorep is making to the tumor microenvironment.

The next patient cohort to report from AWARE-1 study focuses on patients receiving pelareorep and standard of care without Tecentriq. This cohort will allow us to compare the patient population to those patients that have already received pelareorep with the standard of care and Tecentriq. This comparison of the 2 cohorts will allow us to confirm the impact pelareorep has on enhancing the antitumor T cell response, both on its own and in combination with checkpoint inhibitors. With respect to BRACELET-1, we are pleased to announce our recent partnership with PrECOG, a leading cancer research network and perhaps the preeminent breast cancer group in North America.

The principal investigator will be PreCOG member, Dr. Kathy Miller, Professor of Oncology at Indiana University School of Medicine and Associate Director of Clinical Research at Indiana University Melvin and Bren Simon Cancer Center. I cannot overstate how happy we are to be working with this group on this critically important study in our target patient population of hormone receptor-positive metastatic breast cancer. Quite simply, PrECOG and Dr. Kathy Miller, in particular, chose when and what they work on. So to have a group of their stature choose to work with Oncolytics and demonstrate their enthusiasm to work with an IV-administered oncolytic virus is incredibly gratifying.

We recently finalized the design of BRACELET-1 in collaboration with Pfizer and Merck KGaA, as well as input from PrECOG, and the protocol is currently under FDA review. PrECOG will begin patient enrollment in Q1 2020 at 15 centers across the United States.

Before moving on, I want to remind you that examination of our biomarker of T cell clonality for predicting patient response to pelareorep in combination with immune checkpoints is at the core of everything we're doing in the clinic. Confirming the utility of this biomarker across several studies as prognostically and predictably determined with a patient that's susceptible to treatment with pelareorep will be critical as we move forward into Phase III.

Being able to select and stratify patients who are likely to respond to treatment in our pivotal study substantially improves our chance of success and enables a precision medicine approach to fighting cancer. And quite frankly, as Andrew will go into, this is what pharma is looking for before making long-term commitments to pelareorep.

The use of the biomarker for the registration study is likely to be twofold. We will first use the assay to select patients for eligibility based upon having adequate immune reserves to respond to treatment. We will then further enrich the study after the first cycle by stratifying for patients that have not demonstrated a positive vaccination-like effect from those that have not. In doing so, we can get a potentially value inflection point sooner with greater financial flexibility.

We believe our biomarker is a game-changer for Oncolytics and our future clinical programs. So we are committed to fully characterizing its use in our current and planned studies.

I want to pause for a minute and highlight the most important differentiator for pelareorep with its systemic delivery by intravenous injection. As I mentioned earlier, I believe this is a tremendously undervalued differentiator for Oncolytics. It is globally accepted in the world of oncolytic viruses that this is a goal and a huge need in this space, and no other oncolytic virus has demonstrated meaningful data on IV delivery. They are all required intratumoral, which is very different in terms of tumors that can be reached and cannot effectively address metastatic disease.

We've consistently shown across multiple clinical studies that our virus can successfully infiltrate, replicate within and inflame multiple tumor types, including both primary and metastatic disease. These findings have been further validated by meta-analysis that was recently presented during the podium presentations at the Annual International Oncolytics Virus Conference. The data demonstrated that across 13 clinical studies, IV-delivered pelareorep resulted in an impressive average of 81% of patient tumor samples testing positive for virus replication, with no infection in normal tissue. This is a fantastic result across a broad range of tumor types, including our lead indication of breast cancer. Interestingly, though, this number climbs to 96% when we exclude melanoma skin biopsies. This analysis provides definitive proof that systemically delivered pelareorep can successfully avoid neutralization to reach both primary tumors and metastatic disease, making it a valuable therapy and immune adjuvant across a wide range of cancers.

While we're focused on our lead indication of metastatic breast cancer, this certainly speaks to the potential value of our delivery, both on clinics and for future development partners based on the breadth of cancers where pelareorep can become a cornerstone in combination with multiple immunotherapies.

Additional data presented at the IOVC and the data catalyst we highlighted in today's press release, and we will discuss now with data surrounding the synergies between pelareorep and CDK4/6 inhibitors.

Now as I mentioned last quarter, we're also exploring combination studies of pelareorep with other key oncology drug classes beyond checkpoint inhibitors, and CDK4/6 inhibitors are part of our initial investigations. Preclinical work with CDK4/6 inhibitors have been conducted by our academic collaborators and are also being worked on with industry partners to confirm the activity of this treatment combination.

Our preliminary data suggests that pelareorep synergizes with CDK4/6 inhibitors by blocking cellular signal pathways and releasing more double-stranded RNA into the tumor cell. This triggers a process called immunogenic cell death. Immunic (sic) [immunogenic] cell death is a cell's way of sending out a danger signal to our immune cells saying, come and eat me or come and kill me. The result is another very effective way to make a cold tumor very, very hot. And CDK4/6 combinations may not require checkpoint blockade.

Approved CDK4/6 drugs like Pfizer, Eli Lilly and Novartis', are targeting early-stage breast cancer around clinical trials for multiple solid tumor types. Like with checkpoint inhibitors, pelareorep's synergies with CDK4/6 inhibitors have the potential to expand the use of these drug classes in their current indications and to a broader patient population. It's obviously very early, but this drug class is important enough that these advancements can definitively play a role in business development activities.

On the subject of data and validation, we also recently reported the positive results from a Phase Ib study of pelareorep in combination with Merck's KEYTRUDA in patients with advanced pancreatic adenocarcinoma have been published in a peer-reviewed journal called Clinical Cancer Research. The publication highlights a partial response of 17.4 months. Now this is considerably longer than even typical OS data in these patients, let alone a partial response, and validate our biomarker demonstrating the creation of new T cell clones during the treatment. This is the first evidence published on the ability to actually predict for progression-free survival and the ultimate goal of overall survival and is the study that led to our ongoing Phase II study in pancreatic cancer.

It was also a factor of why Merck chose to be a collaborator on this study, and we look forward to announcing data on this study next year.

The publication of our study results helped drive broader appreciation for our unique oncolytic virus and its delivery within the medical community and is another important target indication and it supports our ongoing business discussions with this program.

We will also have data presented at the Annual American Society for Hematology Conference this December. This data highlighted in our recent announcement from the abstract supports an ongoing NCI-sponsored multiple myeloma study combining pelareorep with a proteasome inhibitor, carfilzomib, a.k.a. Amgen's KYPROLIS and helps us understand why we see such dramatic tumor results in these patients. Specifically, this study is investigating the potential mechanism underlying the apparent synergy of proteasome inhibition in pelareorep, and it's reported for the first time that proteasome inhibitors increased pelareorep's entry, infection and killing of multiple myeloma cells by inhibiting or minimizing any antiviral response.

Emerging positive results from this ongoing NCI-sponsored study conducted at Emory University and the University of Utah, has led to the current multiple myeloma checkpoint combination study at Emory University. These results will be presented by Dr. Flavia Pichiorri, Associate Professor at Judy and Bernard Briskin Center at the City of Hope, Los Angeles, California.

Now before handing the call to Andrew to discuss our BD efforts, we had one more corporate highlight from the quarter. Last month, we announced a strategic addition to our Board of Directors. Leonard Kruimer joined Oncolytics Board, bringing more than 30 years of experience in corporate finance, planning and strategy and M&A, 20 of which were in senior management positions in private and publicly listed biotechnology and life science companies, including his time at Crucell, where he played a leading role in selling the company to Johnson & Johnson for $2.3 billion. We're pleased to welcome him and look forward to benefiting from his extensive executive experience.

With that, now I'll hand the call over to Andrew de Guttadauro, Global Head of Business Development, to provide a brief business development review. Andrew?

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Andrew R. de Guttadauro, Oncolytics Biotech Inc. - Global Head of Business Development & President of Oncolytics Biotech (U.S.) Inc [4]

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Thank you, Matt. As I mentioned on our last call, we've seen renewed interest among large pharma in gaining access to oncolytic viruses to potentially combine with their immuno-oncology assets. This interest is reflected by deals executed by Merck, BMS, J&J, Boehringer Ingelheim and others over the past 2 years. The majority of these deals were preceded by initial clinical collaborations designed to first evaluate the viability of the combination of the oncolytic viruses in question with the acquiring company's own immuno-oncology assets. That's exactly what Oncolytics is doing with our ongoing studies designed to demonstrate potential synergies with Bavencio, Tecentriq, KEYTRUDA and OPDIVO. Potential partners' interest is firstly driven by our demonstrating pelareorep's potential to synergize with a range of checkpoint inhibitors and tumor types.

That said, these same partners are also excited about our systemic effect and attendant IV route of administration, as the latter allows for nurses to administer pelareorep in the chemotherapy suite, much the same way they do other infused cancer therapies. Pelareorep's ease of administration is attractive to potential partners because it addresses a major drawback of most OVs, which require intratumoral administration, which is an uncommonly used approach by which to treat oncology patients and carries commercial drawbacks not experienced with IV administration.

In addition, pelareorep's systemic effect allows it to directly impact metastatic disease, a critical therapeutic aspect that IT-administered OVs have yet to prove they can similarly impact. Pelareorep's systemic effect, therefore, allows pelareorep to impact cancer across a broader range of its life cycle to include its critical metastatic stage.

As Matt previously mentioned, we're also excited about pelareorep's emerging potential synergized with the CDK4/6 therapies, one of the fastest-growing drug classes in oncology, with 2019 worldwide sales projected to exceed $4 billion. Our goal is to strike a licensing agreement with either company with checkpoint assets or a company recognizing the significant clinical and commercial potential inherent in a therapy capable of being safely and efficaciously combined with multiple checkpoints to treat a range of tumor targets with unmet clinical need.

With that, I'll turn the call back over to Matt.

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Matthew C. Coffey, Oncolytics Biotech Inc. - President, CEO & Director [5]

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Thanks, Andrew. Before I hand the call to Kirk for a quick review of our financial position, let me recap our guidance over the next 2 years in terms of upcoming catalysts.

As discussed in our most recent conference call that highlighted our robust set of catalysts and milestones for the first time, within our press release that went out earlier today, and on the call, we touched on preclinical data demonstrating the synergies between pelareorep as well as another oncology drug class called CDK4/6 inhibitors. We're also on track to announce additional AWARE-1 data before the end of the year.

Our planned Phase II study of pelareorep, in combination with Merck's KEYTRUDA in multiple myeloma, is in the hands of our Lead Investigator, Dr. Kevin Kelly at USC's Norris Cancer Center. Dr. Kelly is negotiating with the FDA to finalize the protocol, and we await updates from Dr. Kelly on the study initiation.

Now looking at the first half of 2020, we expect to complete enrollment in AWARE-1 and initiate the BRACELET-1 study and report final data from AWARE-1 as well as interim data from our ongoing Phase II study in second line pancreatic cancer with Merck's KEYTRUDA in Q2 of 2020. The study should also complete enrollment around the same time.

Now the second half of 2020 will include final data from the Phase II pancreatic study and interim data from both multiple myeloma studies with OPDIVO and KEYTRUDA as well as final data from our previously mentioned NCI-sponsored multiple myeloma study combining pelareorep and Amgen's KYPROLIS. We expect BRACELET-1 to complete enrollment in the second half of 2020 as well as report interim data before the end of the year. Final data from BRACELET-1 study is expected in the first half of 2021. Now this is without question the most robust set of data catalysts of any company in the oncolytic spire space. And it's so why we're so excited about the future.

I'll now turn the call to Kirk Look, our CFO, to discuss our financial results for the quarter.

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Kirk J. Look, Oncolytics Biotech Inc. - CFO [6]

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Thank you, Matt, and hello, everyone. At September 30, 2019, we reported cash and cash equivalents of $12.3 million to fund our continuing operations. This includes gross proceeds of USD 3.7 million from our underwritten public offering, which importantly added a full quarter to our runway, giving us a stronger financial position. Our net loss for the third quarter of 2019 was $3.5 million compared to $3.3 million in the third quarter of 2018, equating to a loss of $0.16 per share in 2019 compared to a loss of $0.20 per share in 2018. Research and development expenses for the third quarter of 2019 were $1.6 million compared to $1.9 million in the third quarter of 2018.

In the current quarter, our R&D activities centered on the continued enrollment in our AWARE-1 study, preparing for the first patient to be enrolled in our BRACELET-1 study, which continues to track towards Q1 next year, and supporting our other checkpoint inhibitor combination trials. Our operating expenses for the third quarter of 2019 were $1.8 million compared to $1.5 million in the third quarter of 2018. The increase in operating expenses are primarily due to transaction costs related to our August 2019 public offering and our continued investment in our Investor Relations and business development activities.

Subsequent to the end of the third quarter and as announced in this morning's press release, we have seen some warrants exercised with proceeds of over $1.25 million on the back of the recent share price appreciation, which has more than doubled in the last month. With our cash on hand, along with the proceeds from our warrants and our ATM, Oncolytics is positioned to capitalize on our catalysts and milestones.

With that, I'll turn it back to Matt.

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Matthew C. Coffey, Oncolytics Biotech Inc. - President, CEO & Director [7]

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Thanks, Kirk. Now before we take questions, I want to reiterate just how highly differentiated we are within the oncolytic virus world, which as Andrew highlighted, is an area that is very attractive to large pharma.

Now almost all of these in development, including the only approved OV in North America, are genetically modified and require antitumoral delivery and therefore, cannot reach metastatic disease. We are the only OV with meaningful data demonstrating efficient and selective viral replication within the tumor following systemic delivery. Now this is supported by multiple scientific publications and highlighted by the recent meta-analysis presented at IOVC.

We also feel that this is still significantly underappreciated and believe will be a great source of value as we build our critical mass of data, continuing to confirm our intravenous systemic delivery. Pelareorep remains the only viral agent to show a survival benefit in late-stage metastatic breast cancer. Now these outstanding results have generated multiple big pharma partnership opportunities where discussions remain very active.

As we continue to advance our lead clinical program in breast cancer, our goal is to continue expanding our pipeline to access additional markets with an unmet need and to explore combination therapies with checkpoint inhibitors and other drug classes in oncology.

As I described, Oncolytics is entering a rich period of data catalysts over the next 21 months. We look forward to achieving these milestones in line with our guidance and guidance supplied by that of our clinical investigators and to build additional value for our company and its shareholders.

Now before we go to Q&A, I'd like to touch on a couple of things. First, I'd like to say welcome to our newest covering analyst, Jerry Isaacson at Roth Capital. Happy to see the interest in Oncolytics and the OV space. Second, and it's very important, as I know it's been on many people's minds, today was the 10th day in a row that we closed above $1 on NASDAQ and expect to receive formal notification from them as soon as being back in full compliance. We always knew we would meet this compliance issue, but happy to have it addressed as quickly as we did. I'd now like to open the lines to take some of your questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from John Newton (sic) [Newman] from Canaccord.

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John Lawrence Newman, Canaccord Genuity Corp., Research Division - Principal & Senior Healthcare Analyst [2]

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You mentioned, I think, at the beginning of the call that you will be presenting some additional data for AWARE-1 by the end of this year. Just wondered if you could talk a little bit more about that.

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Matthew C. Coffey, Oncolytics Biotech Inc. - President, CEO & Director [3]

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Yes, John, thanks for the question. And sorry, everyone, I got a cough, I've had a cold all day, so I sound absolutely terrible, my apologies. So AWARE-1, just a reminder for everyone, AWARE-1 is the window of opportunity study. So these are women who are otherwise healthy, but they have a very small primary breast cancer lesion. Now going into this study, we first didn't know if the virus would actually access primary disease. So we were delighted that it did. But the other thing that we're very concerned about is Tecentriq is -- it can be toxic, and this is exacerbated if your immune system is completely healthy. You can imagine ramping up your immune system could potentially be harmful to the patient. So fortunately, it was tolerated in the patients when we presented all that initial data.

The next safety cohorts are in hormone receptor-positive patients only in standard of care and virus. And this cohort, I think almost all of them have either undergone surgery or are about to in the next week. So we'll do a similar analysis looking at cell TIL or inflammatory cell count, T cell characterization, both CD8 positives as well as using multiplexing to show whether Tregs are entering or exiting the tumor. And so we should have a pretty good sense from these first group of patients whether we see the diminishment of Treg in the presence of checkpoint inhibitors or if the virus can do it on itself. The number of clones, we're very interested to see whether or not the Tecentriq is expanding those as well as just looking at the cytokine profile and response in these patients.

So we're hoping to have that out, hopefully, December, if we can get everything on test quickly enough, but there'll be a DSMB meeting to review the safety of this combination as well. So we'll have that out to the marketplace with fuller data provided first quarter next year. And we're still hoping that this will be presented at ASCO 2020.

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Operator [4]

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And our next question comes from Wangzhi Li from Ladenburg.

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Wangzhi Li, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research of Biotechnology [5]

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