Cancer is one of the deadliest challenges that humans face today. Different forms of cancer have taken millions of lives all around the world. According to studies, every year approximately 7.5 million patients are diagnosed with cancer. This presents a massive commercial opportunity for healthcare companies making anti-cancer drugs.
Recent studies have revealed that viruses are the best way to treat cancers. Some specific viruses attack the cancer cells in the upper body which results in an immune response against these infected cells. As all cancer therapies aim to reduce cancer cells, viruses automatically become a unique method of targeting and eliminating cancer cells.
Oncolytics Biotech, Inc. (USA) (NASDAQ:ONCY) is working on a formulation of the reovirus which can be used to target cancer cells without serious harm to the body. Research shows that Oncolytics Biotech, Inc. (USA) (NASDAQ:ONCY)’s formulation of the reovirus replicates particularly well in cancer cells which have an activated RAS (a cellular signaling pathway that is involved in cell growth and differentiation).
The company is targeting a number of different cancer forms, and initial trial data is hopeful. Any conclusive evidence of Reolysin success, even in a single form of cancer, will make Oncolytics Biotech, Inc. (USA) (NASDAQ:ONCY) a goldmine because it would imply that it will also be useful in other RAS activated cancers.
The opportunity
Every year millions are diagnosed with cancer, and there is still no comprehensive treatment for this life threatening disease. According to research, the cancer drug market is almost $80 billion and will be worth $100 billion by 2015. Almost 67% of all cancers are RAS-activated which is a testament to the true potential of Reolysin.
Reolysin has already attracted attention, not only from the investment community, but also from the medical research community. The American Association of Cancer Research has shown a lot of interest in Reolysin, and the body is working with Oncolytics Biotech, Inc. (USA) (NASDAQ:ONCY) to bring this treatment to patients. It is providing both funding and support for various trials of Reolysin.
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Pipeline
Oncolytics Biotech, Inc. (USA) (NASDAQ:ONCY) is using a shotgun approach to test the viability of Reolysin as a cancer treatment. It is targeting a number of different RAS activated cancers simultaneously. The company has 6 treatments in Phase II trials and one in Phase III trials. The most important results are those from Phase III; REO-018 for Head and Neck cancer.
This is the only trial nearing completion and will provide the first conclusive evidence of Reolysin’s usefulness. Therefore, it will be solely responsible for shaping market perception on the entire Reolysin range.
| Reolysin Phase II and Phase II Trials | |
|---|---|
| Phase II | Phase III |
| OSU-07022 – Patients with Metastatic Ovarian, Peritoneal and Fallopian Tube Cancers | REO 018- Head & Neck Cancer |
| IND 211- Non-Small Cell Lung Cancer | |
| OSU-10045- Pancreatic Cancer | |
| RIND 209- Prostate Cancer | |
| IND 210- Colorectal Cancer | |
| IND 213- Breast Cancer |
The initial trial results from Reo-108 have been hopeful. In this trial, Oncolytics Biotech, Inc. (USA) (NASDAQ:ONCY) administered Reolysin in combination with paclitaxel and carboplatin, to patients with refractory head and neck cancer. The mid-trial results show that the regime is effective with 86% showing reduction/stabilization in tumor size as compared to only 67% in the control group. These results indicate positive end-results for Phase III. The market should expect Phase III results by year-end, and any positive announcements can trigger mammoth rallies.
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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