Oncolytics Biotech Inc. (ONC) Earnings Call Transcript & Summary

Good morning, and welcome to Oncolytics Biotech's First Quarter 2023 Conference Call. [Operator Instructions] 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.

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 of 2023. A replay of today's call will be available on the Events and Presentations section of the Oncolytics website approximately 2 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 containing the company's focus, strategy, and objectives, the company's belief as of the potential and mode of action of pelareorep as a cancer therapeutic. The design aims to anticipate the benefits of the company's clinical trials and the anticipated timing of the release of additional data. The company's plans and expectations regarding potential registrational studies to be 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 the risk 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 forward-looking statement in which Oncolytics expresses an expectation or belief as to future results, such expectations or beliefs are expressed in good faith, and I believe it's on a reasonable basis, but there can be no assurance that these statements or expectation or belief will be achieved. These factors include results of current or pending clinical trials, risks associated with inertial property protection, financial projections, and actions by regulatory agencies, and those are the factors detailed in the company's filings with SEDAR and the SEC. Oncolytics doesn't 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.

Thanks, John. It's my pleasure to provide an overview of our recent highlights and outlook for the coming months. I'll 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've 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 desire a subsequent licensure-enabling study and to validate prior randomized Phase II data that showed pellet driving a statistically significant, near doubling of median overall survival when combined with paclitaxel in this indication.  Given BRACELET's 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 the BRACELET-1 upcoming readout and beyond, we believe we are well positioned for growth with a pipeline that includes 2 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 proven concept clinical data and FDA Fast Track designations. We expect to have additional guidance on the optimal registration enabling pathways for these programs later this year, highlighting just how excited these times are for Oncolytics. With that, I will now pass the call off to Tom.

Thanks, Matt. Before previewing BRACELET's upcoming readout, let me first briefly recap our HR-positive HER2-negative breast cancer programs, and 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 II 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 is 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 I results demonstrating Pela's single-agent activity in this indication 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, the 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 recurrence 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 3 cohorts, a control arm consisting of standard-of-care paclitaxel monotherapy, an arm evaluating paclitaxel combined with Pela, and the third arm in which the checkpoint inhibitor, avelumab was added to paclitaxel plus Pela.  The first 2 arms mirror the IND 213 study groups, while the third arm was included to evaluate whether the addition 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 outperformed the paclitaxel monotherapy group. The key endpoints that we are monitoring 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'd 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. So please keep a look out 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 Symposiums. Following this presentation, we plan to host the key appended leader webinar on Monday, June 5 at 8:00 a.m. Eastern Time to provide an expert perspective on the results and what they mean for our HR-positive HER2-negative breast cancer programs' next steps. Those interested to join can find the webinar's registration link on the Events and Presentations 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 labeling technology for CAR-T cell therapy in solid tumors. These studies were conducted in collaboration with Dr. Richard Wiles 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 cares have been achieved.  Mechanistic analysis linked to promising results reported in Science Translational Medicine to Pela's ability to overcome the 3 key challenges that limit the activity of CAR T cells against solid tumors, namely cell perseverance, immunosuppressive tumor microenvironment, 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 I/II GOBLET trial. This trial evaluates treatment combinations, including pela plus Roche's atezolizumab in 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 trial's pancreatic cancer cohort, which forms the 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?

Thanks, Tom. Let me start by reiterating our enthusiasm for Pela's core licensing value proposition, which stems from our 2 substantially derisked registration opportunities in breast and pancreatic cancer. By 2028, the addressable markets for drug-treatable HR-positive, HER2-negative breast in first-line pancreatic cancer are expected to reach approximately 300,000 and 135,000 patients, respectively, across the U.S., and major European countries and Japan. Moreover, data from the IND 213 and GOBLET trial provide clinical proof of concept and demonstrate Pela's potential to substantially improve the treatment paradigm in these indications.  With clinical data derisking our efforts in large markets with clear unmet needs for improved treatments, we have been garnering 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 the BRACELET 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 appelapeclitaxel 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'd have a breast cancer program supported by 2 randomized data sets, a special protocol assessment agreement indicating 1 of 2 necessary pivotal studies is complete, and the fast track designation. This would put us in an enviable position for 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 Pela's 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 and the Mayo Clinic, we are advancing research collaborations with 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. Bold'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 classification cannot be assumed to CAR T cells since they behave according to their specific genetic makeup. We look forward to providing more information on our CAR T work with Mayo at the upcoming ASCO meeting. With that, I'll pass the call off to Kirk for a review of our quarterly financials. Kirk?

Thanks, Andrew. I'm pleased to report that Oncolytics remains well financed through Bracelin'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.  Our general and administrative expenses for the first quarter of 23 were $3.2 million compared to $2.6 million for the same period last year. Now this increase was primarily due to increased 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 price at 1 study costs and share-based compensation expenses, partly offset by increased manufacturing expenses associated with the process development production rent and higher personnel-related expenses. The net loss for the first quarter of '23 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 $0.23 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?

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 II 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 preclinical data on the combination of pela in CAR T cells in solid tumors. In the second half of the year, we expect to provide updated data from our first-line pancreatic cancer program and additional guidance on the registrational pathways 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 1 of 2 pivotal studies needed for approval in HR-positive HER2-negative breast cancer. While in pancreatic cancer, we envision a randomized Phase IIb/III trial with an adaptive design that would allow us to move seamlessly from a Phase IIb interim analysis to a larger Phase III 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 trial.  Solidifying these designs will further derisk our programs and expedite our entry into a registration environment with shots on goal in 2 indications with the large commercial opportunities and long-standing unmet needs. Beyond our core programs, we will continue to follow the blueprint I laid out on our last earnings call to take full advantage of Pela's platform potential. While maintaining focus on our efforts in 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 as an enabling technology for CAR T cell therapy in solid tumors. By sticking to these blueprints, we have been able to maintain a capitally efficient approach while further enhancing Pela's value proposition.  Finally, we expect to provide updates on GOBLET 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 of their contributions and will now open up the call for questions. Operator?

[Operator Instructions] Your first question will be from John Newman at Canaccord.

Just curious if you could give us any color on the potential pivotal design for pelareorep in breast cancer. I know that 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.

Great question, John. And so 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….

We lost you there for a second.

Sorry. So IND 213, we showed an overall doubling of survival in HR-positive HER2-negative in a very, very heavily appreciated patient population who all had previous exposure to taxanes. BRACELET has a paclitaxel versus paclitaxel pelareorep. And we're in a much earlier patient population who are taxing naive. So we're hoping to see differences in PFS and ORR and keep that huge sort of delta that we have 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 avelumab would cause really has to be taken into consideration. We're going to have to see quite a dramatic improvement beyond that 1-year overall survival to rationalize another $200,000. Andrew, do you want to talk a little bit about what payers have to say about where checkpoint inhibitors might come into life cycle 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 it off?

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 the U.S. So it's kind of a harder taskmaster. And the feedback from them was, look, a 3.5- to 4-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 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 argument's sake that will price around with the CDK4/6 would price by them, which was historic price increases would be over $200,000 per year by the time of launch. And looking at the price increases for checkpoints, let's assume the same as Matt was kind of alluding to. For Avelumab, you're talking about $400,000 charge per patient to treat.  You're going to -- I haven't spoken to the fairs, but having been a reimbursement consultant, I can tell you, they're going to tell us, you're probably going to have to find the patients that have a doubling of overall survival. So that's the cost of the additional really 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 one of the challenges that we have to think about. We all always think about life cycle management. We could always do a separate or smaller trial. If we choose to not include the checkpoint, I'm not saying we aren't, but one thing that could be done is look at that in the life cycle management to try and find maybe the patients who would have that kind of a response and therefore, be able to tell, say, look, for these patients with this profile, we think they'll respond and talk to Pela that way. Matt, anything else from your perspective there?

No, I think that's fantastic. I really think it becomes a very important figure in life cycle management. I'm not sure it's as important to what Phase III looks like because we really do want to capitalize on the 213 results and then expand those hopefully with BRACELET-1 into a Phase III opportunity. Tom, did you want to talk a little bit about what a study would likely look like?

Yes, sure, Matt. So with the comments of Matt and Andrew in mind, I think the study design will be comparatively straightforward, we would envision a 2-arm study with a paclitaxel control arm and then a paclitaxel plus pelareorep with or without avelumab investigational arm. And we would then obviously power appropriately for an overall survival endpoint and perhaps a PFS endpoint depending on how things play out. But I think the overall design would be pretty straightforward to arm study.

The next question will be from Louise Chen at Cantor Fitzgerald.

Congratulations on all the progress this quarter. So I wanted to make sure I heard you right when you said the BRACELET-1 was that power for [indiscernible]? And if not, what do you want to see to consider this a successful trial? Or what do you expect to be? And then secondly, can you elaborate more on the CAR T opportunity and what that means for you? And the last question I had for you is on your cash runway. What positive inflection point does that bring you through?

Thanks, Louise. Tom, do you want to take the first question, Andrew, the second and Kirk the third?

Sure. Well, the first question was? I'm sorry, say that again, please?