Oncolytics Biotech Inc. (NASDAQ:ONCY) Q1 2023 Earnings Call Transcript

Oncolytics Biotech Inc. (NASDAQ:ONCY) Q1 2023 Earnings Call Transcript May 5, 2023

Operator: Good morning. And welcome to Oncolytics Biotech’s First Quarter 2023 Conference Call. All participants are now in listen-only mode. There will be a question-and-answer session at the end of this call. Please be advised that this call is being recorded at the company’s request. I would now like to turn the call over to Jon Patton, Director of Investor Relations and Communications. Please go ahead.

Jon Patton: Thank you, operator. And good morning everyone. Earlier this morning, Oncolytics issued a press release providing recent operational highlights and financial results for the first quarter and full year of 2023. A replay of today’s call will be available on the Events & Presentations section of the Oncolytics website approximately two hours after its completion. After remarks from company management, we will open the call for Q&A. As a reminder, various remarks made during this call contain certain forward-looking statements relating to the company’s business prospects and the development and commercialization of pelareorep, including statements regarding the company’s focus, strategy and objectives, company’s belief as to the potential and mode of action of pelareorep as a cancer therapeutic, the design, aims and anticipated benefits of the company’s current pending clinical trials, and anticipated timing of the release of additional data, the company’s plans and expectations regarding potential registrational studies, company’s business development plans and strategies, company’s financial runway, and other statements related to anticipated developments in the company’s business.

These statements are based on management’s current expectations and beliefs and are subject to a number of factors, which involve known and unknown risks, delays uncertainties and other factors not under the company’s control that may cause actual results, performance or achievements of the company to be materially different from the performance or expectations implied by these forward-looking statements. Any new forward-looking statement in which Oncolytics expresses an expectation or beliefs as to future results, such expectations or beliefs are expressed in good faith and are believed to have a reasonable basis, but there can be no assurance that these statement or expectation or belief will be achieved. These factors include results of current or pending clinical trials, risks associated with intellectual property protection, financial projections, actions by regulatory agencies and those factors detailed in the company’s filings with the SEDAR and the SEC.

Oncolytics does not undertake any obligation to update these forward-looking statements, except as required by applicable laws. Speaking on today’s call will be Oncolytics’ Chief Executive Officer, Dr. Matt Coffey; Chief Medical Officer, Dr. Thomas Heineman; Global Head of Business Development, Andrew de Guttadauro; and Chief Financial Officer, Kirk Look. I will now turn the call over to Matt to begin management’s remarks. Please go ahead, Matt.

Matt Coffey: Thanks, Jon. It’s my pleasure to provide an overview of our recent highlights and outlook for the coming months. I will start with the exciting news that came out just last week when we announced the results from our randomized BRACELET-1 trial in HR-positive/HER2-negative metastatic breast cancer will be shared in an oral presentation at the upcoming ASCO Annual Meeting. ASCO is one of the world’s most well-regarded oncology conferences and will provide an excellent venue to discuss our results with potential partners and the broader breast cancer community. With BRACELET’s ASCO abstract set to be published later this month, we are weeks away from a crucial milestone to pelareorep or Pela, as I’ll often refer to it.

As I have mentioned on previous calls BRACELET-1 represents Pela’s last major step on the path to a pivotal study in HR-positive/HER2-negative metastatic breast cancer. Key goals for the trial are to inform and design a subsequent licensure-enabling study and to validate prior randomized Phase 2 data that showed Pela driving a statistically significant near doubling of median overall survival when combined with paclitaxel in this indication. Given BRACELET is important to Pela’s value proposition, setting the stage for its upcoming readout will be the primary focus of today’s call. As we look ahead to BRACELET-1 upcoming readout and beyond, we believe we are well positioned for growth with a pipeline that includes two core pillars, namely our HR-positive/HER2-negative breast cancer and pancreatic cancer programs.

Both of these programs represent meaningful registration opportunities supported by compelling proof-of-concept clinical data and FDA Fast Track designations. We expect to have additional guidance on the optimal registration-enabling pathway for these programs later this year, highlighting just how excited these times are for Oncolytics. With that, I’ll now pass the call off to Tom.

Thomas Heineman: Thanks, Matt. Before previewing BRACELET’s upcoming readout, let me first briefly recap our HR-positive/HER2-negative breast cancer programs current clinical data set to provide context for the trial’s goals. I’ll start with an overview of IND.213, which was a randomized Phase 2 trial that evaluated Pela combined with Paclitaxel versus Paclitaxel alone. As Matt mentioned, the trial produced statistically significant data that showed a near doubling of median overall survival in HR-positive/HER2-negative metastatic breast cancer patients in the combination therapy group. These results supported a subsequent Fast Track designation from the FDA as well as a special protocol assessment agreement indicating that IND.213 was a sufficient foundation to allow advancement to a pivotal licensure-enabling study.

Additional data supporting our HR-positive/HER2-negative breast cancer program include Phase 1 results demonstrating Pela’s single agent activity in this syndication as well as results of AWARE-1 a window-of-opportunity study that evaluated Pela-based treatment combinations in early-stage breast cancer patients. AWARE-1 successfully met its primary endpoint. In addition, AWARE-1 demonstrated Pela’s immunologic mechanism of action including its ability to remodel the tumor microenvironment in ways that are associated with improved patient prognosis such as increased infiltration of T cells into the tumor and improvement in the risk of recurrent score. With these prior results, providing a robust foundational data set for our HR-positive/HER2-negative breast cancer program, the goals of BRACELET-1 are to substantiate the positive results of IND.213 and inform the design of a licensure-enabling study.

To accomplish these goals, we and our collaborators at Pfizer and Merck KGaA, designed BRACELET to enroll 48 patients randomized across three cohorts, a control arm, consisting of standard of care Paclitaxel monotherapy, an arm evaluating Paclitaxel combined with Pela and a third arm in which the checkpoint inhibitor of avelumab was added to Paclitaxel plus Pela. The first two arms mirror, the IND.213 study groups, while the third arm was included to evaluate whether the additional of avelumab to Paclitaxel plus Pela provides additional benefit. Note that avelumab is an anti-PD-L1 antibody that was co-owned by Pfizer and Merck KGaA when we designed the study. However, today it is solely owned by Merck KGaA. Note that BRACELET-1 is not powered to demonstrate statistically significant differences between the treatment groups.

Therefore, a successful BRACELET-1 result would be a demonstration that one or both of the Pela containing arms numerically outperform the Paclitaxel monotherapy group. The key endpoints that we are monitoring in the trial include overall response rate and progression-free survival. Another key endpoint is overall survival. However, these survival results need more time to mature before they come into focus. Next, I would like to lay out the sequence of events that will take place around the BRACELET-1 announcement, all of which will be guided by ASCO’s embargo policy. On May 25 at 5:00 p.m. Eastern Time, the BRACELET-1 abstract will be published on the ASCO website, which will allow us to put out a press release detailing the contents of the abstract.

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So, please keep a lookout for that press release with the most up to date information. On Saturday June 3, BRACELET-1’s oral presentation will be delivered by Dr. Amy Clark during one of ASCO’s Clinical Science Symposium. Following this presentation, we plan to host the Key Opinion Leader Webinar on Monday, June 5 at 8:00 AM Eastern Time, to provide expert perspective on the results and what they mean for our HR-positive/HER2-negative breast cancer program’s next steps. Those interested in joining can find the webinar’s registration link on the Events and Presentation section of our website. In addition to the oral presentation on BRACELET, the ASCO Conference will include a poster on preclinical studies evaluating Pela’s potential technology for CAR T-cell therapy in solid tumors.

These studies were conducted in collaboration with Dr. Richard Vile’s group at the Mayo Clinic and followed the publication of a paper on this topic in Science Translational Medicine last year. As a reminder, data from the Science Translational Medicine paper showed Pela synergistically enhancing the efficacy of CAR T cells leading to cures in murine solid tumor models. This was an exciting finding. To date CAR T cells have been unable to effectively treat solid tumors despite the fact that they have revolutionized the treatment of blood-based cancers where long-term patient cures have been achieved. Mechanistic analyses linked the promising results reported in Science Translational Medicine to Pela’s ability to overcome the three key challenges that limit the activity of CAR T cells against solid tumors, namely four cell perseverance, immunosuppressive tumor microenvironments, and antigen escape.

With solid tumors representing the vast majority of new cancers, these data suggest Pela may have the potential to substantially expand the addressable population for CAR T cell therapies. Collaborative studies to build on these results are ongoing and we look forward to sharing additional data at ASCO in the coming weeks. Lastly, before handing it off to Andrew, I’ll speak briefly about our Phase 1/2 GOBLET trial. This trial evaluates treatment combinations including Pela plus Roche’s atezolizumab and gastrointestinal cancers. We continue to make encouraging progress in GOBLET with updates from its advanced anal and metastatic colorectal cancer cohorts expected in the second half of the year. In addition, we continue to advance towards key milestones in the trials pancreatic cancer cohort, which forms a foundation of our pipeline’s second core pillar.

Updated data from this cohort as well as guidance on the program’s path towards registration are also expected in the second half of the year. With that, Andrew will now speak about our business development efforts. Andrew?

Andrew de Guttadauro: Thanks Tom. Let me start by reiterating our enthusiasm for Pela’s core licensing value proposition, which stems from our two substantially de-risk registration opportunities in breast and pancreatic cancer. By 2028, the addressable markets for drug treatable HR-positive HER2-negative breast and first-line pancreatic cancer are expected to reach approximately 300 and 135,000 patients respectively across the U.S., major European countries and Japan. Moreover, data from the IND-213 and GOBLET trial provides clinical proof of concept and demonstrate Pela’s potential to substantially improve the treatment paradigm in these indications. With clinical data de-risking our efforts in large markets with clear unmet needs for improved treatments, we have been gardening healthy interest in our pursuit of a single licensing deal for our breast and pancreatic cancer programs.

While I can’t speak to the specifics of ongoing BD conversations at this time, there are a couple of points that I can make now. First, feedback from our ongoing conversations have indicated that BRACELET-1’s readout in a few weeks will hopefully kick-off a new phase in our BD process. Given the potential for BRACELET-1 to provide a second randomized data set demonstrating the ability of Pela Paclitaxel combination to outperform Paclitaxel alone, this feedback isn’t surprising. Second, I’ll note that even in the event of a successful BRACELET-1 outcome we don’t expect to hastily finalize or announce any deal. If successful, we have a breast cancer program supported by two randomized data sets, a special protocol assessment agreement indicating one of two necessary pivotal studies is complete and a fast track designation.

This would put us in an enviable position, any negotiation particularly when paired with a pancreatic cancer program. Given all this, we plan to continue advancing our BD activities with a disciplined methodical approach that seeks to drive competition among multiple parties. Our ongoing past collaborative trials have allowed us to establish formal relationships with many of the leading players in the space, including Pfizer, Roche, Merck Serono, Bristol-Myers Squibb and Insight, which we believe leaves us well positioned as we seek the best deal possible for our shareholders. To conclude my section of the call, I’ll speak briefly about our preclinical CAR T program. Building off Tom’s earlier remarks, having been heartened by the positive data from the work we’ve done with Dr. Vile in the Mayo Clinic, we are advancing research collaborations of biotech companies interested in validating or recapitulating the results from the Science Translational Medicine publication.

One of these companies has already produced results with Pela in combination with their own CAR T constructs that are in-line with what was seen previously in Dr. Vile’s work. That company is now repeating those results to ensure their accuracy and we look forward to reviewing them with our research partner in the second half of the year. Recapitulating the Science Translational Medicine results is an important step for our collaborator because unlike other agents, a class effect cannot be assumed that CAR T cells since they behave according to their specific genetic makeup. We look forward to providing more information on CAR T work with Mayo at the upcoming ASCO meeting. With that, I’ll pass the call off to Kirk for a review of quarterly financials.

Kirk?

Kirk Look: Thanks Andrew. I’m pleased to report that Oncolytics remains well financed through BRACELET-1’s readout this quarter, as well as past the important regulatory updates from our breast and pancreatic cancer programs expected in the second half. As of March 31, 2023 we had $29.7 million in cash, cash equivalents and marketable securities providing us with an anticipated runway into 2024. This compares to $32.1 million as of December 31, 2022. General and administrative expenses for the first quarter of 2023 were $3.2 million compared to $2.6 million for the same period last year. Now, this increase was primarily due to increase Investor Relations activities partly offset by lower share-based compensation expenses. Research and development expenses for the first quarter of 2023 were $3.5 million compared to $3.7 million for the same period last year, this decrease was primarily due to lower BRACELET-1 study costs and share-based compensation expenses, partly offset by increased manufacturing expenses associated with a process development production run and higher personnel related expenses.

The net loss for the first quarter of 2023 was $6.4 million compared to $6.8 million in the first quarter of 2022. This equated to a net loss of $0.10 per share for the first quarter of 2023 and $0.12 per share for the first quarter of 2022. So this completes my financial review and brings us to Matt’s closing remarks. Matt?

Matt Coffey: Thanks Kirk. Before moving on to the Q&A session, I’d like to close with a brief recap of all the exciting milestones we expect to achieve between now and the end of the year. The first of these milestones will become later this month when we announced randomized Phase 2 data from BRACELET-1 in an oral presentation at ASCO, which again is a randomized trial that represents Pela’s last major step on the path to a registrational study in HR-positive HER2-negative breast cancer. Also at ASCO, we anticipate reporting additional pre-clinical data on the combination of Pela and CAR T cell and solid tumors. In the second half of the year, we expect to provide update data from our first line pancreatic cancer program and additional guidance on the registrational pathway for this and our other core program in HR-positive HER2-negative breast cancer.

As a reminder, our special protocol assessment agreement indicates that we’ve already completed one of two pivotal studies needed for approval in HR-positive HER2-negative breast cancer. While in pancreatic cancer we envision a randomized Phase 2b/3 trial with an adaptive design that would allow us to move seamlessly from a Phase 2b interim analysis to a larger Phase 3 portion that could support a regulatory filing. Both of these programs are supported by FDA fast track designations, which should aid in our regulatory interactions as we work to confirm the optimal design for our next trials. Solidifying these designs will further de-risk our programs and expedite our entry into a registration environment with shots on goal and two indications with a large commercial opportunities and long-standing unmet needs.

Beyond our core programs we will continue to follow the blueprints I laid out on our last earnings calls to take full advantage of Pela’s platform potential. While maintaining focus on our effort and breast and pancreatic cancer this blueprint has leveraged collaborations with leading players in industry and academia to advance Pela in additional high value indications such as anal and colorectal cancer, and enabling technology for CAR T cell therapy in solid tumors. By sticking to this blueprint, we’ve been able to maintain a capital efficient approach while further enhancing Pela’s value proposition. Finally, we expect to provide updates on GOBLET’s cohorts evaluating Pela and atezolizumab combinations in anal and metastatic colorectal cancer in the second half of the year.

As we work towards our upcoming milestones we are fortunate to have the support of world-class collaborators, talented employees, dedicated investigators and of course all of our investors. Each of these individuals, as well as our clinical trial participants have been instrumental to Pela’s development and the progress we have made towards our mission of improving the lives of patients with cancer. I would like to express my gratitude for all their contributions, and we’ll now open up the call for questions. Operator?

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Q&A Session

Operator: Thank you, sir. And your first question will be from John Newman at Canaccord. Please go ahead.

John Newman: Hi, guys. Good morning. Thank you for taking my question. Just curious if you could give us any color on the potential pivotal design for pelareorep in breast cancer. I know that there’s – there’s been some studies run in the past with checkpoint inhibitors with various results, but just kind of curious as to how you may or may not work in a checkpoint in a potential pivotal study? Thanks.

Matt Coffey: Great question, John. Thanks. And to throw another wrinkle in the works, I’m not sure if you read the news that Pfizer turned back avelumab to Merck KGaA. So avelumab is no longer of much interest to Pfizer at this point. I’ll get Andrew to touch on the economics, but if we consider IND-213

Kirk Look: Hello. We lost you, Matt.

John Newman: Hello.

Kirk Look: Well, we lost you there for a second.

Matt Coffey: Sorry. So IND-213 was a – we showed an overall doubling survival and HR-positive HER2-negative in a very, very heavily appreciated patient population who’d all had previous exposure to taxanes. BRACELET has paclitaxel to paclitaxel Pela alone and we’re in a much earlier patient population who are taxane naïve. So we’re hoping to see differences in PFS, ORR and keep that huge sort of delta that we had seen with overall survival. We would like to see improvement with avelumab, but the reality of it is if we’ve doubled overall survival, the increased benefit that the additional $200,000 at avelumab would cause – really has to be taken into consideration. We’re going to have to see quite a dramatic improvement beyond that one-year overall survival to rationalize another $200,000. Andrew, do you want to talk a little bit about what payers have to say?

Andrew de Guttadauro: Yes.

Matt Coffey: Where checkpoint inhibitor might come into lifecycle management? And then Tom, I’ll get you to talk about what we think is the most probable trial design. So Andrew, do you want to kick us off?

Andrew de Guttadauro: Sure. Absolutely. So we actually did some research with European payers to see what they would need to see in terms of a survival benefit to cover the product. And we chose the Europeans because as you know, they’re much more stringent with coverage decisions than, than the U.S. So it’s kind of a higher – a harder task master. And the feedback from them was, look, a 3.5 to four- month OS improvement over paclitaxel would probably garner their interest and allow us to discuss contracting and the rest of the coverage process with them. That was for pelareorep plus paclitaxel as the value proposition. So if you add avelumab and you add another – we haven’t decided where we’re going to price ours, but let’s say for arguments sake that we’ll price around where the CDK4/6 would price by then, which would historic price increases would be over 200 grands per year by time of launch.

And looking at the price increases for checkpoints, let’s assume it’s the same as Matt was kind of alluding too. For avelumab, you’re talking about $400,000 charge per patient to treat. You’re going to – I haven’t spoken the affairs, but having been a reimbursement consultant I can tell you they are going to tell us, you’re probably going to have to find the patients that have a doubling of overall survival. So the cost of the additional is a rate limiting factor that has to be considered. If we think we can do – well clinically and therefore commercially with just pelareorep plus paclitaxel. So that’s really the, one of the challenges that we have to think about. We always think about lifecycle management. We could always do a separate or smaller trial if we choose to not include the checkpoint.