The company has also announced preliminary data from mid-stage trials of Reolysin’s impact on metastatic melanoma tumors. The test involved the intravenous pumping of Reolysin along with carboplatin and paclitaxel. Oncolytics has stated that the results were as per expectations and support progression to more comprehensive studies.
Acquisition Potential
In a few years, the cancer market will reach a $100 billion and leading healthcare companies are already looking to extend their domination. The “patent-cliff” crisis has crippled key healthcare names like Pfizer Inc. (NYSE:PFE) and Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA). Pfizer has lost exclusivity to its highest selling drug Lipitor, and Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA)’s Copaxone is being threatened by competition.
Pfizer has almost 8 candidates in its oncology franchise. The acquisition of Oncolytics Biotech, Inc. (USA) (NASDAQ:ONCY) can create opportunities to try Reolysin combinations with its own approved compounds and pipeline candidates. Pfizer Inc. (NYSE:PFE) is one of the richest companies in the healthcare sector and has approximately $35 billion in cash and short term investments. Pfizer’s balance sheet will be least impacted by a $300 to $500 million acquisition. This will be money well spent if it can improve Pfizer Inc. (NYSE:PFE)’s prospects in a $100 billion oncology market.
Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) is another company looking to expand its product pipeline and has enough cash to acquire Oncolytics. The company’s website lists ‘Selectively Invest’ in ‘Oncology Women’s Health Biologics’ as its key area of focus. Control over Reolysin will certainly help it achieve this goal. Despite the obviously high potential of Reolysin, any potential buyer would wait for conclusive results from Phase III trials of REO-018.
Bottom-line
The market capitalization of Reolysin has halved since February without any major news. The only logical reason behind this sell-off is the $4 per share common stock offering. The other reason can be investors taking profits after a phenomenal three month rally which almost tripled the price.
At current valuations, Oncolytics Biotech, Inc. (USA) (NASDAQ:ONCY) is a bargain by any measure. The stock has shown a lot of resistance around the $2 mark and I believe has bottomed out at current valuations.
The mid-stage results of REO-108 have been tremendously positive, and final stage results are expected by year end. If these results are satisfactory, the market will push Oncolytics above $6 per share. Therefore, I recommend Oncolytics as a long term buy for Reolysin’s potential and the prospects of an acquisition.
The article This Promising Biotech Can Triple originally appeared on Fool.com and is written by Mohsin Saeed.
Mohsin Saeed has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Mohsin is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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