Oncolytics Biotech Inc

TSX:ONC

Earnings Call Transcript 2021-Q2

[Operator]

Good morning, and welcome to Oncolytics Biotech's Second Quarter 2021 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.

[Jon Patton, Director of Investor Relations & Communication]

Thank you, operator, and good morning, everyone. Earlier today, Oncolytics issued a press release providing financial results and corporate updates for the second quarter of 2021. 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, the development and commercialization of pelareorep, including statements regarding the company's focus, strategy and objectives, the company's belief as to the potential and mode of action pelareorep as a cancer therapeutic, the design, aims and anticipated benefits of the company's current or pending clinical trials, our plans for collaborations and other business development activities, our financial position and runway and other statements related to the 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 results, performance or expectations implied by these forward-looking statements. And 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 are believed to have a reasonable basis, 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 intellectual property protection, financial projections, actions by regulatory agencies and those other factors detailed in the company's filings with SEDAR and the SEC. Oncolytics does not undertake any obligation to update these forward-looking statements, except as required by applicable laws. Now I will turn the call over to Dr. Matt Coffey, President and Chief Executive Officer of Oncolytics Biotech. Matt?

[Matthew C. Coffey, President, CEO & Director]

Thanks, Jon, and thanks to all listening for joining us on the call today to discuss our second quarter 2021 corporate update. In addition to Jon, I'm joined by Tom Heineman, our Global Head of Clinical Development and Operations; Andrew de Guttadauro, our Global Head of Business Development; and Kirk Look, our Chief Financial Officer. We recently wrapped up a highly productive quarter during which we achieved key clinical and scientific milestones that have advanced our lead breast cancer program towards registration and further position pelareorep to have a broad impact across multiple indications. Chief among these milestones was the completion of 2 critical cohorts in AWARE-1 with data showing that we achieved the trial's primary endpoint. This positive result represents both validation of our hypothesis and a major advancement for our lead breast cancer program. AWARE-1 was designed to answer key questions that were posed by regulators and partners regarding the survival benefit observed in IND 213, our prior Phase II study that showed a near doubling of overall survival with pelareorep treatment in HR+/HER2- metastatic breast cancer patients. And I'm pleased to say it did just that, it's accomplishing its goal. Looking ahead, Pelareorep is now on a clear path towards a registrational study in HR+/HER2- breast cancer. The last major tasks we need to accomplish before advancing to our study is the completion of our ongoing Phase II trial, BRACELET-1. Tom will speak a bit more about BRACELET in a bit, but I'm pleased to say now that the trial remains on track for full enrollment in the fourth quarter.Now before I hand it off to Tom to provide some more details on our recent clinical and scientific accomplishments, I'd like to take a moment to emphasize some of the broader implications of the exciting AWARE-1 data we've seen to date. These data have shown us that pela is acting via a fundamentally different mechanism of action than that of a typical oncolytic virus. Rather than killing cancer cells via lysis, pela is primarily acting as an immunotherapeutic agent that trains immune cells to fight cancer, while simultaneously enabling their success by weakening tumor defense mechanisms. This is an exciting and critically important finding. It clearly differentiates pela from other oncolytic viruses by positioning it to be in an enabling technology for a wide range of immunotherapeutic agents across multiple classes such as checkpoint inhibitors, CAR T cell therapy and bispecific antibodies. The efficacy of these immunotherapeutic agents is often limited by the tumors defense mechanisms, mainly the immunosuppressive tumor microenvironment, or TME. AWARE-1 showed us that pela has the ability to reverse immunosuppressive TMEs and therefore, address critical unmet needs in multiple indications.Based on this ability, we are working towards a long-term goal of developing pela as an immunotherapy backbone that can enable the success of a wide range of agents across multiple indications. As we do this, we are committed to preserving our primary focus and resources on the advancement of our lead breast cancer program towards a registration study. We also plan to committing leveraging collaborations with industry leaders and academia to efficiently execute on our stated clinical milestones outside of our lead breast cancer program such as IRENE and GOBLET trials evaluating pela in combination with checkpoint inhibitors.Lastly, we plan to selectively leverage partnership opportunities to broaden pela's business development potential and further its development as an immunotherapy backbone for agents beyond checkpoint inhibitors. This strategy will allow us to achieve an optimal risk/benefit balance as we work towards advancing registration HR+/HER2- metastatic breast cancer and expand pelareorep's market potential into a variety of highly prevalent indications.With that, I'll now hand it off to Tom to begin taking in a bit more detail about our work over the last several months has allowed us to generate positive momentum and make sustained progress towards these goals. Tom?

[Thomas C. Heineman, Global Head of Clinical Development & Operations]

Thanks, Matt, and thanks to all those listening on the call today. It's been a very exciting past few months at Oncolytics that may achieve multiple clinical and scientific milestones. Importantly, we have been working to advance our clinical programs and positioning ourselves for a steady cadence of upcoming catalysts. In our lead breast cancer program, we reported data at AACR from all patients in AWARE-1's first 2 cohorts, which examined the effects of pelareorep treatment with or without anti-PD-L1 checkpoint inhibitor therapy in patients with HR+/HER2- breast cancer. The valuation of these cohorts is the core objective of AWARE-1 as HR+/HER2- breast cancer is a subtype in which we saw the most pronounced survival benefit in IND 213 and it is also the subtype we intend to evaluate in a future registrational study. As Matt alluded to earlier, the purpose of AWARE-1 was to build on the IND 203 results and advance pelareorep towards a registrational study by answering 2 key questions that were posed by partners and regulators: first, does pelareorep have an immunotherapeutic effect as was suggested by the survival benefit in IND 213, which became apparent about 10 or 12 months after the start of treatment; and second, is there synergy between pelareorep and checkpoint inhibitors in breast cancer? In other words, does the addition of a checkpoint inhibitor enhanced pelareorep's efficacy and ability to induce anticancer immune responses? To answer these questions, we utilize paired biopsies to collect data on T cell infiltration into tumors, tumor expression of PD-L1 and CelTIL score, which is AWARE-1's primary endpoint in a measure of tumor cellularity and information that is significantly correlated with event-free and overall survival in breast cancer. Excitingly, the data showed that a AWARE-1's second cohort, which included pelareorep and checkpoint blockade therapy, achieved the study's primary endpoint with 60% of patients showing an increase in CelTIL score greater than 30%. In Cohort 1, which did not include the checkpoint inhibitor, we also saw increased cell scores in 6 of 10 patients after treatment. Now there are 2 important things to note regarding these data: first, CelTIL score is a continuous variable. Thus, any increase in CelTIL score is expected to be associated with an improvement in the treatment outcomes of patients. For example, if someone was running in 100-meter dash, any increase in speed will improve the runner's outcome regardless of the magnitude of that increase in speed; and second, the fact that we saw more robust tumor responses in cohort 2 as measured by CelTIL score is both positive and in line with our hypothesis going into the study. Specifically, this confirms that pelareorep and checkpoint inhibitors act synergistically to provide an enhanced immunotherapeutic effect. This is an exciting finding that becomes even more significant when considered in light of the impressive survival benefit observed in IND 213 in patients treated only with pelareorep in chemotherapy. The AWARE-1 results suggest that we will see improved efficacy when adding a checkpoint inhibitor, which bodes well for BRACELET-1 and our other clinical studies evaluating combinations that include pelareorep and checkpoint inhibitors. Our positive CelTIL results were further supported by additional data from AWARE-1's first 2 cohorts. These data show that pelareorep treatment resulted in replication of pelareorep in a high proportion of cancer cells, an average 11-fold increase in anticancer CDA-positive T cells within tumors, the generation of presumptive antiviral and antitumor T cell clones that may mediate both initial tumor cell killing and long-lasting anticancer immune memory. The correlation between T cell clonality and CelTIL score, which supports substantial use of T cell clonality as a treatment biomarker, a more favorable CD8 to Treg ratio indicating a less immunosuppressive tumor microenvironment and the weakening of tumor defense mechanisms and dramatic upregulation of PD-L1 expression in tumor tissue, which resulted in the conversion of some tumors from PD-L1 negative to PD-L1 positive. Importantly, many of these desirable effects were enhanced with the addition of checkpoint blockade therapy to pelareorep. Collectively, these results represent a critical milestone for both our lead breast cancer program and our broader pipeline. In particular, they confirm pelareorep's immunologic mechanism of action, answering the first key collection posed earlier, and they also show that we are well on our way to answering the second key question by demonstrating the synergy between pelareorep and checkpoint inhibition. Importantly, this validates our broader clinical development strategy.Finally, the AWARE-1 data also support the clinical utility of T cell clonality as a predictive biomarker, which may allow us to identify the patients who are most likely to respond to therapy and improve our chances of success with future registrational study.Looking forward, these positive AWARE-1 data have our lead breast cancer program rapidly progressing down a path towards a registrational study. As Matt mentioned, the next and final major step on this path is the completion of BRACELET-1, which continues to advance as planned. As a reminder, BRACELET-1's design was developed in collaboration with Pfizer and Merck Serono, who support the overall clinical benefit observed in the IND 213 study and investigate T cell clonality as a clinical biomarker. Its design is essentially identical to that of IND 213 with 2 key exceptions: first, it is exclusively enrolling HR+/HER2- breast cancer patients, which is a population in which we saw the most pronounced overall survival benefit in IND 213; and second, it includes an additional study arm to evaluate the safety and efficacy of pelareorep in combination with Pfizer and Merck Serono's anti-PD-L1 checkpoint inhibitor, Bavencio. We are particularly excited about this study arm given the AWARE-1 data showing synergy between pelareorep and anti-PD-L1 therapy.Overall, I'm thrilled with the progress BRACELET-1 has made to date. This trial has continued to rapidly advance since dosing its first patient in June 2020 despite the challenges that were posed by the pandemic. In fact, we remain on track to complete enrollment by the end of the year. The progress we've made on BRACELET-1 is thanks both to my highly talented colleagues at Oncolytics as well as to our investigators and partners at PrECOG, the world-renowned organization that is managing the study. As we look ahead, I'm confident that this group will keep us on track to advance pelareorep towards regulatory approval in HR+/HER2- breast cancer while simultaneously positioning us to take advantage of pelareorep's potential across additional cancer indications.Now shifting gears, I'd like to briefly talk about one of these additional indications, pancreatic cancer. At the most recent ASCO meeting in June, we presented some promising clinical and biomarker data demonstrating proof-of-concept for pelareorep checkpoint inhibitor combination therapy in this indication. These data were from a Phase II trial evaluating pelareorep in combination with the PD-L1 inhibitor, pembrolizumab, in pancreatic adenocarcinoma. The patients in the trial had all progressed after first-line treatment, making this an extremely challenging study population. Another notable facet of the study's design was that patients were given pelareorep-pembrolizumab combination in the absence of chemotherapy. This provided a more direct look at the combination's anticancer activity and allowed us to assess pelareorep's potential to overcome the immunosuppressive TMEs that often limit the efficacy of checkpoint inhibitors in pancreatic and other GI cancers. Now despite the advanced nature of disease in the enrolled patients and the rigorous design, this study showed a 42% disease control rate. This encouraging result indicates the strong anticancer activity of the pelareorep-pembrolizumab combination.Additionally, biomarker data showed that patients achieving disease control had increased activation of anticancer CD8-positive T cells in the peripheral blood and reduced levels of pro-tumor Treg cells in both the peripheral blood and the tumor compared to patients with progressive disease. The association between treatment-induced anticancer immune responses and improved tumor control, together with data showing increased tumor infiltration of anticancer immune cells following treatment, further demonstrates pelareorep's underlying immunologic mechanism of action and validates our strategy of combining it with checkpoint inhibition. Finally, the safety data from this study continue to support pelareorep's outstanding safety profile. Collectively, these findings, which are consistent with the results of the AWARE-1 study,[Audio Gap] pelareorep's broad applicability and support its continued evaluation in combination with checkpoint inhibitors in pancreatic and other gastrointestinal cancers. In order to pursue pelareorep's development in gastrointestinal cancers, we are leveraging collaborations with industry leaders and academia, namely Roche and AIO, a leading academic cooperative medical oncology group based in Germany. This allows us to preserve our primary focus on and devote the necessary resources to our lead breast cancer program. Now to speak a bit more about these collaborations and their business development efforts, I'll hand it off to Andrew. Andrew?

[Andrew R. de Guttadauro]

Thanks, Tom, and thanks to all who have joined us on today's call. As Tom mentioned, we are leveraging collaborations with Roche and AIO to further develop pelareorep in combination with checkpoint inhibition in pancreatic and other GI cancers. We are doing this through our Phase I/II GOBLET trial, which is designed to evaluate pelareorep plus Roche's anti-PD-L1 checkpoint inhibitor, Tecentriq, in patients with metastatic pancreatic, metastatic colorectal and advanced anal cancers. We continue to make progress in GOBLET and recently received approval from regulators in Germany. Now that we have the blessing of the German regulators and the study manager, AIO, we have opened the trial for enrollment and are working with sites to commence enrollment as soon as possible. GOBLET study is representative of the broader strategy we are executing to expand pelareorep's potential therapeutic impact by focusing its development in highly prevalent indications beyond our lead HR+/HER2- breast cancer program. This strategy is represented by our additional ongoing trials, including IRENE, which is our Phase III study evaluating pelareorep in combination with Incyte's anti-PD-1 checkpoint inhibitor, retifanlimab in triple-negative breast cancer, and by our ongoing study with BMS evaluating pelareorep-OPDIVO combination therapy in multiple myeloma. These collaborative trials leverage the growing interest from large pharma and biotech companies in improving the efficacy of checkpoint inhibitors. Such interest is driven by a large commercial opportunity and a high unmet need as the checkpoint inhibitor market is expected to reach $55 billion by 2025 despite less than 1 in 5 patients responding to these therapies. The low response rate of checkpoint inhibitors are due to several different resistance mechanisms that can be addressed by the immunotherapeutic effects pelareorep has demonstrated in AWARE-1 and other clinical trials. This leaves us well positioned as we execute on our BD strategy and work towards the goal of securing a global clinical and commercialization partnership. We are taking a proven approach in pursuit of this goal as past deals have typically been preceded by research collaborations that are similar to those in which we're currently engaged. Now before I hand it off to Kirk, I'd like to take a moment to speak about our BD strategy as it pertains to development of pelareorep as an enabling technology for additional immunotherapeutic agents beyond checkpoint inhibitors. In order to execute on this goal, we aim to identify high-quality partners that will take the lead on this development pathway and assume the research responsibilities and costs associated with it. These efforts are bolstered by preclinical data showing that pelareorep synergistically combines with agents such as CAR T cells and bispecific antibodies as well as PARP and CDK4/6 inhibitors, which were the subject of separate poster presentations at AACR in April. This stems from pelareorep's ability to train immune cells to fight cancer and weakened tumor defense mechanisms by reversing immunosuppressive TMEs. While these preclinical data and potential opportunities are exciting, I should emphasize that our primary focus remains on our lead breast cancer program and the execution of our stated clinical objectives. As we move forward, we plan to continue leveraging our relationships with our distinguished collaborators, Roche, Pfizer, Merck Serono, BMS, Incyte and Adlai Nortye to maintain an optimal risk/benefit balance as we work to execute on our goals. We are very pleased with the progress we have made to date and are confident that our talented team and pelareorep's robust data set has us poised for continued success. With that, I'll turn the call over to Kirk Look, our CFO, to discuss our financial results for the second quarter. Kirk?

[Kirk J. Look, Chief Financial Officer]

Thanks, Andrew. Good morning, everyone. I'm pleased to report that Oncolytics remains in a strong financial position as we continue to advance pelareorep towards a registrational study and execute on additional clinical and corporate objectives. Our cash and cash equivalents as of June 30, 2021, was $50.8 million compared to $31.2 million at the end of fiscal 2020. This included net proceeds from financing activities of $33.4 million, mainly from our at-the-market facility, and I'm pleased to report our financial runway, a key consideration for institutional investment, extends into 2023. Our operating expenses for the second quarter of 2021 were $3.5 million compared to $3 million in the second quarter of 2020. This change was largely due to higher investor relations activities this past quarter and the continued impact from last year's increase in directors' and officers' insurance premiums, and we minimized the effect of these increases through lower professional service fees. Research and development expenses for the second quarter of 2021 were $3.2 million compared to $2.5 million for the same period last year. This change was due to increased clinical trial expenses as we progress our ongoing studies, including direct patient costs for our BRACELET-1 and AWARE-1 studies, as well as incurring trial initiation activities for our GOBLET study. Accordingly, we incurred higher R&D compensation-related expenses in support of our expanded clinical program. Our manufacturing expenses were lower in the second quarter of 2021 compared to the same period last year as 2020 included start-up costs related to a CGMP production run. With that, the net loss for the second quarter of 2021 was $7.2 million compared to $6.8 million in the second quarter of 2020, which equated to a net loss of $0.13 per share for the 2021 period and a net loss of $0.17 per share for the 2020 period. With that, I'll hand it back to Matt. Matt?

[Matthew C. Coffey, President, CEO & Director]

Thank you, Kirk. Before we move on to the Q&A, I'd first like to say how proud I am of the Oncolytics team. When the pandemic began almost 1.5 years ago, they immediately adapted to the challenges posed to keep the company and our clinical programs on track. We continue to build on this momentum every month since. And thanks to these efforts, we've clinically demonstrated immunotherapeutic effects of pelareorep, which augment checkpoint blockade and are the cornerstone for multiple oncology treatments. Their hard work has also left us poised to achieve a steady stream of value-creating milestones, including the dosing of the first patient in our GOBLET study, the reporting of the final AWARE-1 biomarker data for cohorts 1 and 2, which is expected in the second half, completion of the BRACELET-1 enrollments and interim safety update for IRENE and the reporting of interim safety data from our multiple myeloma trial evaluating pelareorep in combination with KYPROLIS and BMS' Opdivo, which is expected in the fourth quarter.Moving forward, the talent and dedication consistently displayed by the Oncolytics team gives me confidence that we will continue to build on our positive momentum as we work towards these milestones. This will allow us to continue generating value for our shareholders as we work towards our ultimate goal of improving the lives of cancer patients. With that, I'd now like to open the lines to take some questions. Operator?

[Operator]

[Operator Instructions] Your first question comes from John Newman with Canaccord.

[John Lawrence Newman, Principal & Senior Healthcare Analyst]

Just wondered on the BRACELET study, Matt, if you could sort of walk us through what you'd like to see there before proceeding to approval study? And then just in terms of pivotal study design, just kind of curious as to how you're thinking about that at the moment.

[Matthew C. Coffey, President, CEO & Director]

Thanks for the question, John. So what AWARE is teaching us is that we, with or without checkpoint blockade, get a pro-inflammatory event. And this is why we think we see these long survival tails on our breast cancer program and our [indiscernible] program in all of our programs, really. What BRACELET is really there to accomplish is largely biochemical or immunological signal changes. What we're looking for is that ratio between CD8 to Tregs. So CD8s are the positive inflammatory cells, Tregs are negative. Viral infections can cause both. So they can antagonize each other. But what we found from AWARE is that addition of the checkpoint blockade largely eliminated that Treg. So again, we're looking for this confirmation that we can skew the CD8 to Treg balance. We're planning for the Phase III now. And I think what we're really looking at is the addition of checkpoint blockade into our Phase III program as well as the addition of our biomarkers.Tom, is there anything you'd like to add to my response?

[Thomas C. Heineman, Global Head of Clinical Development & Operations]

No, Matt. I think that's right. I mean we obviously want to look at the BRACELET data as it comes in and be informed by the data. But as I think the expected and most likely scenario is exactly what you described.

[Operator]

Your next question comes from Patrick Trucchio with H.C. Wainright.

[Patrick Ralph Trucchio]

I was just wondering on the AWARE-1 outcome with the final biomarker data. What additional data would you be expecting there to be generated to kind of help you as you're forming the pivotal trial design? And then just regarding the IRENE trial, the interim safety update, would there be any additional signs of efficacy in this initial data? Or is that more a 2022 event?

[Matthew C. Coffey, President, CEO & Director]

First question first. With the AWARE-1, AWARE-1 is a treasure trove for us. It really is because we have so much tissue over a 3-week course. So a lot of the work that we're doing now is we're looking at next neighbor analysis, which -- what that does is using appropriate labeling for immunological cells and cancer cells, it lets us see physically how the virus is drawing the immunological cells into the tumor. What we're hoping to see is those patients who had the highest CelTIL score have the closest proximity of the inflammatory cells to the cancer cells. And we ended up getting these lifts that really show you immunologically what's happened at a cellular level. So that's one thing. And what we're obviously hoping to see is checkpoint blockade continues to restrict these Tregs while getting this positive CD8 inflammatory event. We're also doing an analysis at the molecular level, where we're actually looking for changes in gene expression to really see how this is being driven, what pathways are being turned on? Is it interferon type 1, type 2? Are we seeing [indiscernible] 9, 10 and 11? Are we seeing more of it in the presence of the checkpoint blockade and without? So it really allows us to characterize exactly what's happening so that we can better design future go-forward treatments. Because again, if we're activating a pathway in nonresponders, maybe we can use an inhibitor to that pathway to allow a greater response or if alternatively, if we're getting a very positive pro-inflammatory accumulation and signaling, is there something we can use to make that even greater? So it gives us a great deal of information and really decide how we want to move forward in breast cancer and beyond. And I think maybe the beyond is the other thing, what we're looking for here is to identify what's the difference between a responder and a nonresponder because we have seen these patients where they've been treated for 5 or 6 years. And this is a very heavily pretreated patient population where we have these unexpected survivors. What AWARE-1 will hopefully help us determine is why we have these extraordinary responders versus middling responders to nonresponders. And that was really what the goal of AWARE was. Now AWARE, I think, it points us in the direction to checkpoint blockade. What we saw is the ability to kind of transform non-PD-L1 patients into like PD-L1 over-expression and that leads me into the IRENE question. IRENE, I think, will largely be a safety update. We will negotiate obviously with the investigators, but this is a program that we're running with Incyte. So we do have to maintain the confidentiality obligations under our contracts, but it will be as fulsome as we can possibly make it. These investigators are obviously looking to enhance enrollment, expand the number of sites. So the more information we can share with our stakeholders, the better it is for everyone. But for San Antonio, it will definitely be a safety update. We'll see what we can negotiate in terms of additional information.

[Operator]

There are no further questions at this time. Mr. Coffey, you may proceed.

[Matthew C. Coffey, President, CEO & Director]

I just wanted to thank everyone for dialing in and participating, and thank you for the questions, and we look forward to moving this program further. Thanks, everybody.

[Operator]

Ladies and gentlemen, this concludes today's presentation. Thank you, once again, for your participation. You may now disconnect.