Oncolytics Biotech Inc. (ONCY)

[onco_investor]

RBC Capital Markets presentation Q/A Transcript
from Brad’s presentation at the RBC Capital Markets' Healthcare Conference in New York, The panel was titled "Cancer: Improving Treatment Through Combination Therapy."

Thanks to RJC for the transcript
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This is a full transcript of Brad's parts in the four company (plus moderator) panel presentation on Mar 3, 2010 at the RBC Capital Markets' Healthcare Conference in New York. The panel is titled "Cancer: Improving Treatment Through Combination Therapy."

The panel discussion can be heard at: http://www.wsw.com/webcast/rbc116/panel15/

Introduction

{6:22} Brad Thompson [Oncolytics Biotech]: Oncolytics Biotech is a company that's focusing on using a variety of different viruses for the treatment of a variety of different cancers. Our lead product, called Reolysin, is about to initiate its first Phase III study (hopefully in about 3 weeks), in the UK, the US, and Belgium; and we're looking at platinum refractory head and neck cancers in combination with Carbo/Tax.

We have a number of Phase II studies running. We're running a Phase II in non-small cell lung cancer in combination with Carbo/Tax, and metastatic melanoma in combination with Carbo/Tax. We're about to initiate a Phase II in colorectal cancer, in combination with Carbo/Tax again (our favorite drug combination), and a pancreatic cancer study … a randomized study where we're comparing Carbo/Tax/Reolysin against Gemzar, and the third arm is Carbo/Tax alone. It's an interesting time for us, and like my colleagues on the panel here, it's nice to be in Phase III's, or starting Phase III's finally.

Early Challenges

{12:40} Alan Ridgeway [RBC Capital Markets]: Oncolytics probably can be considered the leader in live virus therapeutics for the treatment of cancer. Can you talk a little about the natural attributes of Reolysin, and why it makes a good cancer therapy.

Brad: I think that there are a number of challenges, which my colleagues on the panel, have already talked about … starting out with a new agent and a new therapeutic, and using a live agent is amongst those areas. We're using a naturally occurring virus that affects your lungs and your bowels normally. I think the challenge for us has been overcoming … the term could be "not very relevant" worries about safety, primarily, and while retaining enough efficacy, we're keeping a balance in place. And so very early on in the program, we had to go that extra yard in insuring that we had a "more than acceptable" safety profile. We did way more animal tox [toxicology studies] than you would expect ... hundreds of primates, and now that we're up into about 370 or 380 patients in total treated in our IV program, you start to get a kind of a settling down about those concerns and issues about safety. We understand the safety profile about our drug candidate extremely well, and that's very helpful.

Now for us, we picked a naturally occurring virus as opposed to an engineered virus to get around some of the issues we saw on the horizon with respect to using engineered viruses. And that's, I think, born fruit. A lot of the regulations associated with the use of these agents are directed toward the fact that they're genetically engineered, and we've just skirted around that by using a non-engineered virus. So what we have is an agent that's safe … I mean, I think we've taken it beyond a shadow of a doubt. Now that we've got a SPA for our Phase III (which was our route), I think the regulatory concerns have kind of drifted away. The FDA is quite comfortable with this concept now. Our European colleagues have never been concerned about it. We've never had the kind of issues in Europe that we've had to deal with in the United States, and now people are just considering this to be another drug candidate, which is exactly what we hoped we would get to.

I think for us, having made a drug approval in this area [short mumble] immunize things in Europe, so there's no path. Again, a common feature with new agents is you're making up your path as you go up blind allies. There are just things that you have to do, that you don't know you have to do until you stumble across them; and I've never actually done as much science in humans as I've done on this project. Usually you do that before you get into humans. Pretty much everything we've learned about the basic science of this agent has been in human clinical studies, and I think that's a significant feature.

Advantages of Co-Therapy

{25:56} Alan Ridgeway: Reo, in combination with chemo really helps, is what you've been able to find, really helps the virus function and work as an anti-cancer agent. Can you talk a little about what you have learned over the years with your combination therapies?

Brad: What we (as it turns out) naively thought when we started out, was that we could take our single agent and put it head to head with everything, and be quite pleased about that … that was based on the fact that Reolysin requires an activated Ras pathway to grow in a cell. So if you look at solid primary tumors, it's [Ras active for] two thirds to 75% of each one of those, and if you look at metastatic disease it's between 90% and 100% typically. It's somewhat lower in non-solid tumors, and that's why we've stayed away from them. When we did local therapy, injecting the virus directly into the tumors, we actually got response rates that mirrored that, and so we proudly put up our hand, and charged into mono-therapy studies.

When you get to IV studies … you kind of end up balancing commercial issues with respect to activity issues. If you want to treat first or second line patients, you're compelled to look at combining yourself with "standard of care". And for us, it's radiation, and the first line and second line chemo-therapeutics. So we started looking (back in the lab) at synergies at a cellular level, and also looking at tumor effects above that level. When we started looking at IV monotherapy studies, we found that the response rates were about half of what we saw with local therapy. So it was obvious we had a delivery issue. So, between the vein and wherever, there was something happening with the virus that was not good for activity. Combination therapy overcomes that. The two issues with viral delivery, and we're talking about a particle here that the immune system recognizes. So the immune system can interfere with it between the time you put it in, and the time it gets into the tumor; then you have to get across the tumor interface. If you think you have trouble getting a drug into a tumor, try taking something that's 80 or 90 nanometers across and you can almost hold that up and see it. It's complicated.

But as soon as you add in things that knock down the immune system a bit, that gets out of the way; and Carbo/Tax ablates response against Reo by about 90%, Gemzar is about the same, cyclophosomide's about the same, so those agents actually address any immune interference. And anything that makes the tumor leaky gets the virus in, so Taxanes are exquisite at that; and if you get into any of the VEGF, or VEGF by itself … you know, Sudent or Avastin do the same thing. What we found, is by combining with those agents in humans, and combing those two effects, we boosted the response rate back pretty much to the theoretical again. So instead of getting the 30%-35% of the mono-therapy, we're getting clinical benefit rates up between 65% and 90% with true strong responses … strong PR's and CR's in the 45% to 50% range … pretty much across all indications. The technology of the combination therapy really is the way to go, both scientifically, and commercially for us.

Partnering

{40:15} Alan Ridgeway: Can you comment on what you're currently seeing in the partnership process? What is it that Oncolytics is looking for in a partner, and what do you think would be the ideal time for you to partner with a large commercial Player?

Brad: We went away and did essentially the same analysis as Scott described, with respect to whether, and when, one should partner. In our case, if you have a partner commit to two extra big programs (if you look at that 3 to 15 year horizon, with respect to cash flow per share), if you get that commitment on a fully diluted basis it's about twice the cash flow per share over that entire period, with a partner under your wing. I think there's some good hard economic reasons to partner with respect to things that end up mattering (supposedly mattering anyway), to most of us somewhere down the road, such as shareholder value. That's driving our direction on that, so we believe there's a good economic reason to do that.

We've had kind of an interesting situation with this particular product, because it's curious (and honestly, most people thought it would fail miserably, early on), but it was so curious … we've had a number of our colleagues, companies on the big side looking over our shoulder through the whole process and offering helpful (and sometimes not very helpful) suggestions about what we should be doing or not doing. So it's going to be one of those evolving partnering processes rather than, you know … "today we're going to start partnering, and introduce ourselves". When you get down to the point where you're talking about your kids going through 8 grades or 10 grades of school, over a process, you know that you've been talking with people for kind of a long time, and that's kind of where we are right now. I think that the sweet spot for us to partner is sometime between now and the first Phase III data, which will come out on the first part of our Phase III study about a year from now. If we go past that window, then we'll take the Phase III study in Head and Neck to the end, and that will be the next opportune moment for partnering.

The economics don't really matter to us … either of those two windows. There's a group of companies that are very much interested in partnering with us before we get Phase III data, for economic reasons. There's another group of people that are very much more interested in our non-small cell lung data. There's basically two groups of people, looking at two different timelines. But clearly, if you can't stand and justify it on an economic basis from a shareholder perspective, then one should not partner. Both strategies work, and for some companies, I think that when they do that analysis, they would be surprised that the answer is they shouldn't partner … they should be stand alone, they should be a specialty unit, and have a hugely good case about focusing and doing things themselves. I think we've done a very good job of that. You can do that mathematically … we've sat down with analysts and sometimes there's very good case, and sometimes you get mixed models where a partner will fit with some products and not with other products. But if you do that analysis and the answer comes up "yes", then that's where you are, and that's where we are, and it clearly works for us. That's the process that we're going through. We're very active in discussions … it gets cliché, but we're very active in discussions, but we will do it when it's the most benefit to our shareholders."

The Future

{48:44} Alan Ridgeway: "I just thought, in order to finish off our discussion, I'd ask each of you to comment for investors: what's your vision of the company; where do you see it 3 to 5 years from now, and what can we look forward to over the next 12 to 18 months as far as milestones?"

Brad: "Clinical milestones in the next 12 to 18 months … we'll have our Phase IIIa data for the platinum refractory head and neck out, we'll have our first line non-small cell lung study with K-Ras pre-screened patients in Phase II out, our metastatic melanoma for Phase II in combination with Carbo/Tax out, and we'll be in several other randomized studies at that time. If you're looking at "end game" (and we're just actually starting talking about end game issues … which for us is about a 3 to 5 year period), and I think, clearly, that we'll have our first product … indication … being sales, and we'll be partnered, and our expectation is that we'll probably be sold within that timeframe. We're thinking about that last element quite a bit right now."