Oncolytics Biotech Inc

TSX:ONC

Earnings Call Transcript 2020-Q3

[Operator]

Good afternoon, and welcome to Oncolytics Biotech's Third Quarter 2020 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]

Thank you, Jason. Good afternoon, everyone, and welcome to Oncolytics Biotech's Third Quarter 2020 Conference Call. Earlier today, Oncolytics issued a press release providing financial results and corporate updates for the third quarter of 2020. A replay of today's call will be available on the Investors and Media 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 regarding the company's focus, strategy and objectives, the company's belief as to the potential mode and action of pelareorep as a cancer therapeutic, the design, aims and anticipated benefits of the company's current or pending clinical trials 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 results, performance or expectations implied by these forward-looking statements.In 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, but there can be no assurance that the 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 other factors detailed in the company's filings with SEDAR and the SEC. Oncolytics does not undertake an 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 for joining us on the call today to discuss our third quarter corporate update. In addition to Jon, I'm joined by Andrew de Guttadauro, our Global Head of Business Development; and Mr. Kirk Look, our Chief Financial Officer.As I begin today's call, I would like to stress yet again how thoroughly impressed I've been by the talent and the unwavering commitment of Oncolytics employees, their partners and investigators as they continue to operate among industry-wide challenges posed by the COVID-19 pandemic. Through the continued execution of our business continuity plan, we have built on the positive momentum generated earlier this year to achieve 3 clinical milestones since our last update. These milestones have further validated our unique Oncolytics immunotherapy platform, advance our lead breast cancer program towards the initiation of a registration study and often an opportunity to expand pelareorep's potential market into additional indications with high unmet needs. We believe we are well positioned to continue reporting a steady cadence of value-creating milestones across our broad clinical pipeline.Now I'd like to move on and discuss some of our recent highlights. Our primary focus is the advancement of pelareorep, our intravenously delivered immuno oncolytic virus towards a registration study in hormone receptor positive HER2 metastatic breast cancer. We believe pelareorep can address a critical unmet need in this indication as many currently available therapies are simply unable to produce a meaningful survival advantage for a significant percentage of patients. Such a belief is supported by the promising results of our Phase II study, IND 213, which showed a near doubling of overall survival with pelareorep treatment in HR+/HER2- metastatic breast cancer patients. We continue to build on these results with our ongoing AWARE-1 and BRACELET-1 clinical trials, the completion of which will determine the design of our Phase III registration program.Now as a reminder, these studies together aim to achieve 3 objectives to facilitate the initiation of the Phase III registrational trial. First, the aim to confirm pelareorep's immunotherapeutic mechanism of action to support the promising efficacy data that's already been generated. Second, the aim to validate the clinical utility of our novel blood-based biomarker measuring T cell clonality to predict patient responses to pelareorep. And finally, they will evaluate pelareorep's ability to enhance the efficacy of checkpoint inhibitors to improve patient outcomes as there is robust and growing preclinical and clinical data sets supporting the synergistic potential of pelareorep checkpoint inhibitor combination therapies.With these objectives in mind, I'm happy to report that we've recently achieved key milestones in both AWARE and BRACELET that have furthered our progress towards meeting these objectives and brought us closer to the initiation of a registration study. The first of these milestone came from the AWARE-1 window of opportunity study in early-stage breast cancer. This is a study being conducted by SOLTI and represents the first use of our clinical supplier agreement with Roche. Last quarter, I spoke about how pleased we were to have doubled the number of study centers. As such an achievement would likely lead to rapid patient enrollment. Today, I can report that this was, in fact, the case, as we enrolled 24 of 38 patients, including all of the patients in the study's first 2 cohorts.Now completion of enrollment in these first 2 cohorts is particularly noteworthy. As these patients, like those enrolled in BRACELET-1 have the hormone receptor positive HER2 breast cancer sub type with and without Tecentriq, allowing us to measure the contribution of the checkpoint inhibitor. This progress has been further bolstered by the recently announced compelling data from the completed set of cohort 1 patients presented at this year's SITC meeting. These data demonstrated the ability of pelareorep without checkpoint blockade to reverse the immunosuppressive tumor microenvironment and suggests that pelareorep treatment may have long-lasting anticancer immune memory effects. Specifically, the data showed that pelareorep treatment led to tumor-specific replication in all observed subjects at a level that was dramatically higher than we have seen in any other study.Now this high level of replication may explain the single-agent activity in metastatic breast cancer we've previously reported. Additionally, we observed an average 14-fold increase in intratumoral CD8 positive T cells and the generation of new presumptive anti-viral and anti-tumor T cell clones that may facilitate a long-lasting immune memory effect. This is the clearest evidence we have generated today that the virus can promote pro-inflammatory tumor environment.The AWARE-1 data also showed that 70% of cohort 1 patients saw an increase in CelTIL, the study's primary endpoint at a measure of tumor inflammation that is associated with favorable clinical outcomes. The CelTIL responses particularly are encouraging given the absence of a checkpoint blockade therapy in cohort 1. These results add to AWARE-1's robust dataset, which also includes data that confirms pelareorep's immunotherapeutic mechanism of action, demonstrates its potential to synergistically combine with checkpoint inhibitors and support the clinical utility of T cell clonality as a blood-based biomarker that may allow us to select and to stratify patients who are more likely to respond to pelareorep-based treatment in our pivotal studies.To summarize, the data from SITC helped to answer of the questions from our IND 213 study, can pelareorep generate an adaptive T cell-based immune response that educates a patient's immune system to fight their cancers. We have a 14-fold increase in intratumoral CD8-positive T cells and with 70% of patients showing an increase in CelTIL, we now believe we have definitively shown just that.Going forward, having completed cohort 2 of the AWARE study, we expect to answer the question of whether there is synergy between pelareorep and checkpoint blockade therapy in breast cancer. We expect to present data to answer this question at the San Antonio Breast Conference in December.Moving on now to BRACELET-1, our Phase II trial evaluating the safety and efficacy of pelareorep-based combination therapies in hormone receptor positive HER2 metastatic breast cancer patients. Like in AWARE, we've continued to make sustained progress in this trial. We continue to rapidly enroll patients and have executed our plans laid out during our last call to accelerate the opening of additional trial sites. To date, we have activated 13 out of 20 sites and are conducting the study under the auspices of PrECOG's world-renowned research organization. We've also successfully completed the trial safety running with the data and safety monitoring board, verifying pela's outstanding safety profile.Now as a reminder, BRACELET's design is essentially identical to the design of our prior IND 213 study with 2 exceptions. First, the study focus is exclusively on hormone receptor positive HER2 subset of metastatic breast cancer patients which is the patient population, which we saw the most pronounced overall survival benefit. Second, BRACELET-1 adds an additional study arm to evaluate pelareorep in combination with Pfizer and Merck's anti-PD-1 checkpoint inhibitor with NCL. This design was developed in collaboration with Pfizer and Merck KGaA to support the overall survival advantage observed in IND 213 by demonstrating pelareorep's ability to induce an antitumor immune response in a near identical patient population.Additionally, the study aims to validate T cell clonality utility as a clinical biomarker and evaluate the efficacy of pelareorep checkpoint inhibitor combination therapy. Together, BRACELET and AWARE make up the core of our lead breast cancer program. This program has been substantially derisked by the compelling data these trials have produced to date as well as our prior regulatory achievements. These achievements include Fast Track designation and a special protocol assessment for our metastatic breast cancer program. The continued progress made in BRACELET and AWARE-1 trials has us on track to meet the clinical objectives needed to initiate a registration study and leaves us well positioned for a sustained near and long-term success.Now I'd like to shift gears a bit and talk briefly about our investigator-sponsored IRENE study. The first patient was recently dosed in the study, which was initiated as an expansion of a breast cancer program in a new disease subtype, triple-negative breast cancer. While our immune checkpoint inhibitor therapy is approved for the treatment of triple-negative breast cancer, the limitations of checkpoint inhibitors leave a large met un-need (sic) [ unmet need ] for these patients. This need exists in part because only about 40% of triple-negative breast cancer patients have sufficient PD-L1 expression to be eligible to receive checkpoint inhibitors at this time. And of those that are eligible, only about half of those are likely respond to these therapies.Our Phase II IRENE study aims to address the unmet needs of triple-negative breast cancer patients by evaluating pelareorep in combination with Incyte's anti-PD-L1 checkpoint inhibitor, retifanlimab. The study is supported by prior clinical data, showing the systemic pelareorep administration, primely adaptive to immune response and increased PD-L1 expression across multiple breast cancer subtypes. Such data demonstrates the potential appeal pelareorep to increase the number of patients that are eligible for and can respond to checkpoint inhibitors and highlights the market opportunity that exists for pelareorep in this breast cancer subtype.Moving on, I would like now to shift the discussion away from our primary focus on metastatic breast cancer and speak a bit more about the work that's been done with pelareorep in additional indications. As we announced earlier this week, an upcoming oral presentation at the 2020 Society of Neuro Oncology Annual Meeting will feature data from REO-Glio, a recently completed investigator-sponsored Phase Ib trial. This trial, evaluating the combination of pela in granulocyte-macrophage colony-stimulating factor alongside standard chemo radiotherapy and adjuvant temozolomide for the treatment of newly diagnosed glioma multiform or GBM. Data in the presentation's corresponding abstract show that this combination of therapy is safe and well tolerated in newly diagnosed GBM patients, and we are eager to share additional data related to the combination's efficacy at the conference later this month.Now before we move on to our next section, I want to extend my gratitude to the University of Leeds Cancer Research U.K. and the Brain Tumour Charity for designing, managing and funding the REO-Glio trial.With that, I'll now hand the call over to Andrew to discuss our BD efforts and how these have driven some exciting developments in our GI cancer program. Andrew?

[Andrew R. de Guttadauro]

Thanks, Matt. As we've mentioned in the past, there's a growing interest from large pharma and biotech companies in improving the efficacy of checkpoint inhibitors by pairing them with oncolytic viruses. This has been marked by several deals by companies such as Merck, BMS and J&J, which have typically been preceded by initial collaborations designed to evaluate the feasibility of potential combinations. This is the exact approach Oncolytics has been taking.We've leveraged our robust and growing clinical dataset to foster relationships with large pharma and biotech, which have led to our ongoing pelareorep studies designed to value potential synergies with Roche's Tecentriq, Pfizer and Merck KGaA's Bavencio, BMS' OPDIVO and Incyte's retifanlimab. The latest example of our ability to execute on this approach comes from the recently announced GOBLET trial, which is a Phase I/II trial, being conduct in collaboration with Roche and AIO, a leading academic cooperative medical oncology group based in Germany.GOBLET is designed to value pelareorep in combination with Roche's anti-PD-L1 checkpoint inhibitor, Tecentriq, in patients with metastatic pancreatic, metastatic colorectal and advanced anal cancers. The study aims to address a large unmet need, similar to the one being addressed by the IRENE study, Matt mentioned earlier. There are approximately 4.8 million global GI cancer cases annually, and approximately 80% of GI cancer patients do not respond to checkpoint inhibitor therapy, often due to immunosuppressive tumor and microenvironments. These limitations of checkpoint inhibitors, combined with pelareorep's promising early clinical dataset in colorectal and pancreatic cancer, highlight a compelling market opportunity for pelareorep in GI malignancies. Prior clinical studies have shown rapid maturation of dendritic cells, increased activation of CD8-positive cells and upregulation of tumor PD-L1 expression following pelareorep treatment in GI cancer patients.These data highlight pelareorep's potential to increase the number of patients responding checkpoint inhibitors in these indications. Further, we've previously reported data from early clinical study showing a greater than 90% clinical benefit rate in KRAS-mutated colorectal cancer patients and a greater than 80% increase in progression-free survival in pancreatic cancer patients with low levels of CCAM 6 expression. These data in pancreatic cancer were particularly compelling as they allowed us to identify CCAM 6 as a predictive biomarker of resistance to pelareorep. The GOBLET study is, therefore, designed to confirm both the utility of CCAM 6 and T cell clonality as biomarkers in GI cancers, which will be critical as we move towards later stage trials. As Matt mentioned earlier, the ability to select it and stratify patients who are likely to respond to treatment improves our chances of success and enables us to be more cost-efficient and enroll trials faster, which gets us to potential value inflection point sooner with greater financial flexibility.Looking ahead, we are eager to continue advancing the GOBLET study, and we expect to begin dosing patients in the first half of next year. As a whole, the checkpoint inhibitor market is expected to reach $25 billion annually by 2022, despite the low response rates we have been discussing throughout this conference call. Our extensive clinical data set demonstrating pelareorep's ability to induce and adaptive immune responses highlights its potential to improve these response rates and accelerate the growth of checkpoint inhibitor companies. This has driven exciting business development opportunities across our pipeline, highlighted by BRACELET, AWARE, IRENE, GOBLET and our ongoing study with BMS evaluating pelareorep OPDIVO combination therapy in multiple myeloma patients.Ultimately, it is our goal to leverage relationships such as these to secure global, clinical and commercialization partnership to both facilitate pelareorep's approval and maximize its commercial opportunity. We expect the continued advance for pelareorep, particularly in our lead breast cancer program, to drive those towards this goal by advancing our ongoing discussions with potential partners across the pharma and biotech industries.With that, I'll turn the call over to Kirk Look, our CFO, to discuss our financial results for the quarter. Kirk?

[Kirk J. Look, Chief Financial Officer]

Thanks, Andrew, and good afternoon, everyone. I'm very pleased to report that Oncolytics remains in a strong financial position as we advance pelareorep towards registration.Now our cash and cash equivalents as of September 30, 2020, were $26.7 million compared to $12.3 million as of September 30, 2019. This includes gross proceeds of $3.6 million from our aftermarket facility, which we established last quarter, pushing our financial runway to the end of 2021. Our operating expenses for the third quarter of 2020 were $2.5 million compared to $1.8 million in the third quarter of 2019. This change is largely due to an increase in our Investor Relations activities along with an increase in our directors' and officers' insurance premiums.Our research and development expenses for the third quarter of 2020 were $3.9 million compared to $1.7 million for the same period last year. During the current quarter, in addition to progressing our AWARE-1 and BRACELET-1 studies, we also completed a cGMP production run, along with the associated release testing. We also incurred costs connected to changes in personnel and expansion of our U.S. office, all in the support of our clinical program.Finally, our net loss for the third quarter of 2020 was $6.7 million compared to $3.5 million in the third quarter of 2019, equating to a net loss of $0.16 per share for both the 2020 and 2019 periods.With that, I'll hand it back to Matt.

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

Thank you, Kirk. Now before we move to the Q&A, I wanted to talk briefly about our recent corporate achievement that we're pretty excited about. Last month, we announced that Dr. Richard Vile, a world-renowned expert and key opinion leader in oncolytic viruses and adoptive T cell therapies joined our scientific advisory board. Dr. Vile is a Professor of Immunology at the Mayo Clinic, Director of Mayo's Immuno-Oncology and Gene Virus Therapy programs and Co-Director of the Cancer Immunology and Immunotherapy program. His research specializes in oncolytic viruses, but also adoptive T cell therapies, such as CAR-T cells, and the potential synergistic interactions between these oncolytic viruses and adoptive cell therapies. Dr. Vile's extensive experience setting pelareorep has left him intimately familiar with pelareorep substantially competitive advantage over other viruses. One such advantage is pelareorep's ability to be administered systemically by nursing staff without the need for special handling procedures. This differs from other oncolytic viruses that often require intratumoral administration and/or special handling due to the BSL-3 classification.Further, pela's systemic administration route facilitates its delivery and select for application in both local and metastatic tumors and it remains the only viral agent to show a survival advantage in late-stage metastatic breast cancer patients. These characteristics, together with the guidance of Dr. Vile and the rest of our leadership team leaves us well positioned as we work to demonstrate the ability of pelareorep to synergistically combine with additional immunotherapeutic agents and increase the number of patients responding to such therapies.Looking ahead, we expect to continue achieving a steady cadence of value-creating milestones due to the sustained advancement of our diverse clinical pipeline. We continue to steadily progress towards a registrational study in our lead hormone receptor positive HER2-negative metastatic breast cancer program, while simultaneously executing on additional studies that broaden pelareorep's commercial opportunity. This execution, in turn, drives the continued development of our industry partners, which deliver additional value to our stakeholders.Our ability to consistently execute on our goals despite the unpredictable and industry-wide challenges posed by COVID-19 speaks to the extraordinarily dedicated and talent of our employees and partners. I'm confident that we will continue to build on this positive momentum as we generate value for our shareholders and most importantly, improve the lives of our patients.With that, I'd now like to open the lines to take some questions. Operator?

[Operator]

[Operator Instructions] Your first question comes from the line of John Newman from Canaccord.

[John Lawrence Newman, Principal & Senior Healthcare Analyst]

So Matt, I wondered if you could just remind us why showing increased T cell clonality with pelareorep in the AWARE-1 study is important? And what it potentially indicates the therapy is doing, especially in the absence of checkpoint inhibitors in cohort 1?

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

That's a great question. So my way of background, CelTIL is a pathological assessment. So the patient will have a biopsy at baseline and in a point later. And really what CelTIL tells you is the level of cellularity or basically the number of cancer cells as well as the number of inflammatory cells. So if we see a decrease in the cancer cells due to lysis or immune targeting of them, it goes -- the cellularity decreases. And if we see an increase in inflammatory cells, it goes up, and the net effect is you end up with a positive CelTIL score.What this really tells us in patients, especially notably in breast cancer, the presence or probably the absence of T cells really is prognostic of a poor outcome. And really, what that tells you is there's no inflammatory cells. There's no NK cells. There's no T cells within the tumor. So the immune system is completely blind to this tumor. So these patients tend to have very poor prognosis. And by increasing the CelTIL score and doing so dramatically in the vast majority of patients, what it tells us is the immune system now is aware of the tumor. It's trafficking these pro-inflammatory cells into the tumor to counter the growth of the tumor. And also, we're getting a decrease in cellularity. So what that means is between the virus and the immune cells, it's eliminating the cancer cells within the tumor. So the CelTIL score is a very positive tool and a very powerful tool to tell us how well patients are doing.And what we're seeing from some of the early immunology and immuno mass cytometry, we actually are getting expansion of T cells within the tumor. So T cells that were resident within the tumor, we're seeing those expand, and presumptively then those are anti-tumor T cells. The other thing that's coming out of the AWARE study is we could actually take the immune system at baseline, and again, at day 21, when the surgery is done, and we can apply that to the tumor of the patient. And what we find is there's no recognition of the tumor at baseline and incredible recognition by the release of chemokines and cytokines, notably interferon gamma that the immune system has learned to recognize and target. And this is very important for these patients because what we want to establish and I think we have established now in this cohort 1, we have memory cells that recognize the tumor that will be with these women for the rest of their life and hopefully are able to challenge micrometastatic disease and recurrence of disease, so that these women have a much better long-term outcome.

[John Lawrence Newman, Principal & Senior Healthcare Analyst]

Okay. Great. And can you also talk about the differences that are seen when you think about what has been shown in the past with some of the PD-1 inhibitors showing an increase in CelTIL versus what you're seeing with pelareorep on its own, showing an increase in CelTIL?

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

What we've presented previously in animal models, and I expect this to be the case. And the real means of the AWARE study was cohorts 1 and 2. I mean you can see this because it's reflective of the target patient population. But it's also the only cohorts that have 10 patients each. The rest of them have 5 or 6. So the study was very much weighted to those cohorts. What we're seeing as compared to what you would see with checkpoint inhibitors is we're getting rapid expansion of T cell clones, checkpoint inhibitors with the exception of CTLA-4 really don't prime very much. They don't actually generate new clones. They just activate the existing ones. But what we've seen in early animal models, when we treat with reovirus, we get pro-inflammatory cells, but we also get accumulation of some Tregs, which are basically slowing or breaking the immune if you will, as well as MDSC cells, which have a very similar role in promoting anti-inflammation.When we add checkpoint inhibitors to the tumor, what we find in animal models, at least, is we maintain that high level of inflammation with accumulation of CD8-positive cells. But in the presence of the checkpoint inhibitor, we're negating or eliminating the Treg from the tumor. So we're getting a much more pro-inflammatory event. And what we're hoping is we'll see the same thing in human patients. What we'd like to see in cohort 2 is the same level of CelTIL, if not higher, but more of the pro-inflammatory immune cells rather than an accumulation of Treg. And early evidence which suggest that is the case.

[Operator]

[Operator Instructions] Your next question comes from the line of Wangzhi Li from Ladenburg.

[Wangzhi Li]

I also had a question about AWARE-1 data. Just what do you think any contribution from the letrozole in the quarter 1 and 2? And also, I think you maybe have mentioned it, but what do you think you will -- when do you think you will report data for the cohort 2, is it at San Antonio? Those are my questions.

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

So to answer your second question first, yes, the plan for San Antonio is to really compare and contrast cohort 1 and 2 because I think that sets the stage for the registration study. I think it sets the stage for what we can expect coming out of BRACELET study. So it will be an important presentation for us at San Antonio. We now have confirmed that we do have 3 presentations in San Antonio. And Wangzhi, forgive me, what was your first question?

[Wangzhi Li]

Do you think there is any role of letrozole for the results, you've shown at the recent presentation, because both quarter 1 and 2, also, the patient also had letrozole, right, in addition to pela.

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

We spoke with the investigators about that. In their previous investigations into CelTIL, like the SOLTI Group is actually the group that's defined and created the CelTIL score. So they're arguably the most familiar within the world. There's no assumption that letrozole is going to have any effect in terms of creating a pro-inflammatory events. The reason it was included is, this study -- it's basically a neoadjuvant study or a window of opportunity. So we're taking these healthy women and they get standard of care and then we add additional agents on top of that. Because obviously, they're hoping to get some shrinkage or changes to their tumor. We do have to combine with standard of care, otherwise, it would be unethical. But in speaking with the investigators in their own examinations of CelTIL, letrozole does not impact negatively or positively the CelTIL score in a meaningful way.

[Wangzhi Li]

Got it. That's helpful. My last question is about BRACELET-1 study. Do you have any further color in terms of timing for you need the data report?

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

I'm sorry, Wangzhi, which study?

[Wangzhi Li]

The BRACELET.

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

BRACELET. BRACELET is actually enrolling really well. We anticipate the completion of enrollment first half of next year. So we'll be reporting, hopefully, near final data by San Antonio next year. That we are hoping to get additional data readouts, but that's in conjunction with Pfizer, our co-development partner. So they'll have to approve that.

[Operator]

There are no further questions at this time. I now turn the call back to Mr. Matt Coffey for closing remarks.

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

Well, thanks again to everyone for joining us on the call. We look forward to the continued advancement of our clinical program, and we'll keep everyone updated along the way. Thanks so much.

[Operator]

That concludes today's conference call. You may now disconnect.