Oncolytics Biotech Inc. (ONCY)

[onco_investor]

Oncolytics Begins Final Tests On Viral Cancer Drug

Nice mention in the online Wall Street Journal - July 26th, 2010

http://online.wsj.com/article/BT-CO-20100726-707662.html?mg=com-wsj

By Laura Kusisto Of DOW JONES NEWSWIRES TORONTO (Dow Jones)--Within two years, a few small drug companies could begin to change the way we treat cancer. Oncolytics Biotech Inc. (ONC.T) is one company in the final stages of testing viruses that could stabilize or shrink tumors with few side effects.

Calgary-based Oncolytics has started enrolling advanced head and neck cancer patients in Phase III trials using a combination of chemotherapy and Reolysin, a drug made from a mild virus.

Reolysin "has the potential to revolutionize cancer therapy," Alan Ridgeway, an analyst at Paradigm Capital, wrote in a recent report. The drug "will likely ultimately be approved to treat multiple forms of cancer," Ridgeway wrote, initiating coverage at a buy rating. He told Dow Jones that Reolysin is more promising at this stage than most therapies he's seen.

The trial has received the go-ahead in the U.S., U.K., and, just last week, Canada. Oncolytics will have preliminary data from the U.S. trial in a year, and it will likely have final data by 2012. The drug could receive U.S. Food and Drug Administration approval the following year.

The reovirus, from which Reolysin is made, only replicates in cells with an activated Ras pathway, rare in normal cells. About two-thirds of cancer cells have mutations that allow the injected virus to replicate until it eventually begins to destroy the cancerous cells. Because the drug targets mainly cancer cells, the main side effect is a mild fever.

In the Phase II trial, Reolysin given with chemotherapy had what Chief Executive Brad Thompson calls "an unusual response rate." Forty-two percent of patients had a partial response or better, compared to fewer than 10% of patients who have at least a partial response to current treatment.

Viral therapies have been showing promise in Phase II studies, but those results are based on too small a sample size to be conclusive, says William Phelps, the director of pre-clinical cancer research for the American Cancer Society. Viruses aren't the only potential breakthrough in cancer research, but they're one of several new therapies that have shown promising early results in combination with chemotherapy, Phelps says.

Three different companies that have been working on viral therapies for more than a decade hope to see final results in the next one to three years. Massachusetts-based Biovex Inc. is two-thirds of the way through a Phase III trial using a modified herpes virus to treat melanoma, and expects results in a year. It's also about to begin a Phase III trial for treatment of head and neck cancer.

San Francisco-based Jennerex, Inc., with research facilities in Ottawa, hopes to begin a Phase III trial of a vaccinia virus therapy for liver cancer sometime next year. "We've all been working pretty hard for 10 years. At least in the whole field, there's been a lot of collaboration," the company's chief scientific officer, John Bell, said.

Some smaller drug companies have struggled to get financing in the last couple of years, but all three companies successfully raised money to continue trials. "It was one of the worst periods for financing I've ever seen," Oncolytics' Thompson told Dow Jones. But "we raised more money in 2009 than we've ever raised." The company made C$37 million by buying a small company with a failed clinical trial, exercising some of its warrants and raising C$20 million through an initial public offering.

Oncolytics, which has no revenue, has enough money to last until the third or fourth quarter of next year, with 12 different trials ongoing. The company has approval for a Phase II trial of Reolysin on non-small-cell lung cancer, which may help it get a partnership with a major pharmaceutical company, analysts say. Oncolytics is in active discussions with major drug companies, but Thompson wouldn't disclose more.

Company website: http://www.oncolyticsbiotech.com

-By Laura Kusisto, Dow Jones Newswires, 416-306-2028; [e-mail]