Earnings Call Transcript - ONCY Q3 2022

Operator, Operator

Good morning, and welcome to Oncolytics Biotech's Third Quarter 2022 Conference Call. All participants are now in a listen-only mode. There will be a question-and-answer session at the end of this call. Please be advised that this call is being recorded at the Company's request. I now would like to turn the call over to Jon Patton, Director of Investor Relations and Communications. Please go ahead, sir.

Jon Patton, Director of Investor Relations and Communications

Thank you, operator, and good morning everyone. Earlier today, Oncolytics issued two press releases, one detailing interim results from the pancreatic cancer cohort of the company's Phase 1/2 GOBLET trial and the other sharing recent operational highlights and financial results for the third quarter of 2022. These announcements and highlights will be the focus of today's call. A replay will be available on the Events & Presentations section of the Oncolytics website about two hours after the call concludes. After remarks from Company management, we will open the call for questions. Please remember that various comments made during this call may include forward-looking statements regarding the Company's business prospects and the development and commercialization of pelareorep, such as the Company's focus, strategy, and objectives, its beliefs about the potential and mechanism of pelareorep as a cancer treatment, the design, goals, and expected benefits of current clinical trials, and anticipated timelines for additional data release. They also cover the Company's plans for a potential registrational study, its business development strategies, and other statements regarding expected developments. These remarks are based on management's current expectations and beliefs, which are subject to various factors, including known and unknown risks, delays, uncertainties, and other factors beyond the Company's control that may cause actual results to differ materially from the anticipated outcomes. While Oncolytics expresses good faith expectations regarding future results, there is no assurance that these will be realized. Factors influencing this include results from current or pending clinical trials, risks to intellectual property, financial forecasts, regulatory agency actions, and other details found in the Company's filings with SEDAR and the SEC. Oncolytics does not commit to updating these forward-looking statements, except as lawfully required. Speaking on today's call will be Oncolytics Chief Executive Officer, Dr. Matt Coffey; Chief Medical Officer, Dr. Tom Heineman; Global Head of Business Development, Andrew de Guttadauro; and Chief Financial Officer, Kirk Look. With that, I will now turn the call over to Matt. Please go ahead.

Matt Coffey, Chief Executive Officer

Thank you, Jon, and good morning to all of who have joined us today. I'll begin by getting right to the exciting news reported earlier this morning, which came on an abstract with interim data from our GOBLET trial, published as part of the SITC Annual Meeting. These data showed an objective response rate or ORR of 70% in 10 evaluable pancreatic cancer patients treated with a combination of pelareorep, checkpoint inhibitor atezolizumab, and the chemotherapeutic agents gemcitabine and nab-paclitaxel. This ORR is nearly three times greater than the average ORR seen in historical control trials, which is about 25%. These remarkable results have brought our pancreatic cancer program to a pivotal trial readiness. As we are now planning to advance pelareorep, or pela as we will refer to it, into a registrational study for this indication pending discussions with regulatory authorities. With our pancreatic cancer program now representing a second near-term registrational opportunity alongside our breast cancer program, we believe that we have transformed pela's value proposition and are at a true inflection point in the company's history. We arrived here guided by a clear strategic focus and commitment to a data-driven approach that had us collaborating with industry leaders to selectively pursue therapeutic opportunities beyond our lead program. This approach enabled us to keep our efforts in breast cancer on track while simultaneously building a robust proof of concept data set in pancreatic cancer. We now have two pillars upon which we can build our registrational program going forward. With regards to our breast cancer program, we are increasingly enthusiastic about its prospects at upcoming milestones. Chief among these potential value drivers will be the disclosure of an expansive data set from BRACELET-1 at a major medical meeting in the first half of next year. As a reminder, BRACELET-1 is a randomized Phase 2 trial in HR positive, HER2 negative metastatic breast cancer. It includes cohorts evaluating paclitaxel monotherapy, paclitaxel plus pela, and paclitaxel plus pela in combination with a PD-L1 checkpoint inhibitor. Those of you familiar with Oncolytics have likely heard me refer to BRACELET-1 as pela's last major step on its path to a registrational breast cancer study. The data generated by BRACELET-1 are expected to inform the design of a pivotal trial while simultaneously validating our prior data in HR positive, HER2 breast cancer, which provides a robust foundation for the program. These include the results of the randomized Phase 2 trial in IND-213, which showed a statistically significant near doubling of overall survival in HR positive, HER2 negative breast cancer patients treated with pela combined with paclitaxel versus those treated with paclitaxel alone. These data showing pela's ability to drive a meaningful clinical benefit contributed to a special protocol assessment from the FDA, which means IND-213 counts as one of the two pivotal studies required for approval. Additional data forming the foundation of our HR positive, HER2 negative breast cancer program include Phase 1 results demonstrating pela's single-agent activity, as well as results from the AWARE-1 trial demonstrating and characterizing its immunological mechanism of action. Prior to reporting BRACELET-1's findings, we also expect to report additional data from AWARE-1 as well as the results from our Chinese partner Adlai Nortye's bridging trial in HR positive, HER2 negative breast cancer. Both of these announcements are expected later this quarter. As we move forward in 2023 and beyond, we will aim to replicate our recent success by maintaining a core focus on our near-term registration opportunities in HR positive, HER2 negative breast cancer and pancreatic cancer while selectively exploring additional indications primarily through partnerships and collaborations. Our team is engaging with regulators and seeking regulatory input on the registration program for breast cancer, which we expect to be able to discuss in more detail in the first half of 2023, as breast cancer will remain a crucial part of Oncolytics' story and value proposition going forward. We believe we are closing in on our goal of delivering treatments that improve the lives of cancer patients and are excited for what's ahead. Having completed that high-level overview of HR positive, HER2 negative breast cancer and pancreatic cancer, two programs we expect to primarily focus on going forward. Let me hand the call over to Tom to provide some more insights on the new pancreatic cancer data and after that, Andrew will dig into what this means for our business development. Tom?

Tom Heineman, Chief Medical Officer

Thanks, Matt. It's my pleasure to have the chance to discuss our new pancreatic cancer data, which as Matt mentioned, were published in an abstract earlier today as part of the SITC Annual Meeting. These data come from GOBLET, a multi-indication Phase 1/2 trial we are conducting in collaboration with Roche and AIO, which is an academic cooperative medical oncology group in Germany. The results published at SITC are from the trial's first cohort that enrolled patients with first-line advanced or metastatic pancreatic cancer. Patients in this cohort received pela in combination with atezolizumab and standard of care chemotherapy, gemcitabine and nab-paclitaxel. As of the abstract's July 28 cutoff date, seven of ten evaluable patients in this cohort had achieved a partial response per resist criteria, with two more achieving stable disease. This gave an objective response rate and clinical benefit rate of 70% and 90%, respectively. We believe these results are striking and they markedly exceeded our expectations going into the study. For context, the pre-specified success criteria for efficacy in stage one of GOBLET's pancreatic cancer cohort was three objective responses in 12 evaluable patients. This landmark was actually achieved with the first three evaluable pancreatic cancer patients, and as of the SITC abstract's cutoff date, we have more than doubled this initial goal in only the first ten evaluable patients. Furthermore, historical data from trials evaluating the combination of gemcitabine and nab-paclitaxel showed an average objective response rate of only about 25%, almost three times less than the objective response rate reported in our SITC abstract. Prior studies also showed that checkpoint inhibitors are unable to benefit the vast majority of pancreatic cancer patients, as these agents only improve outcomes in persons classified as MSI high. Unfortunately, MSI high patients represent less than 1% of the total pancreatic cancer population. Given the limited efficacy observed in each of these aforementioned historical settings, GOBLET's interim results strongly suggest that pela synergistically combines with checkpoint inhibitors and chemotherapy to drive tumor responses in pancreatic cancer. This is noteworthy as the objective response rate is known to correlate with survival and has even been used as a registrational endpoint in certain oncology indications. Moreover, prior clinical data in pancreatic and other cancers have demonstrated pela's ability to activate an anti-cancer immune response and reverse the immunosuppressive microenvironments that limit the efficacy of checkpoint inhibitors. These earlier results collectively provide strong mechanistic support for GOBLET's interim results, increasing our enthusiasm for the pancreatic cancer program. Looking ahead for this program, we plan to discuss our results with regulators with the goal of enabling advancement into a registrational study rather than into GOBLET's optional stage two expansion phase. We believe this approach represents the best strategy to address the urgent needs of pancreatic cancer patients, given both the strength of our data and the limited efficacy of currently available therapies. Lastly, before handing it off to Andrew, I wanted to briefly preview our upcoming poster presentation at SITC later this week. The poster will include updated data from stage one of GOBLET's pancreatic cancer cohort, which was designed to enroll a total of 12 evaluable patients versus the first 10 reported in the abstract today. These updated results will also be discussed during a virtual KOL event a week from today on Monday, November 14, which will give viewers the opportunity to hear expert commentary from three key opinion leaders in our data and on the current pancreatic cancer treatment landscape. It'll also include a question-and-answer session, and I highly encourage all listening now to join us next week using the link available on the Events & Presentations section of our website. I'll now turn it over to Andrew to discuss how our recent clinical results are driving our business development efforts and corporate strategy. Andrew?

Andrew de Guttadauro, Global Head of Business Development

Thanks, Tom. We are in the midst of a very exciting time for Oncolytics' BD team as our recent data in pancreatic cancer have substantially enhanced pela's potential licensing value proposition. Given the pancreatic readout and our existing clinical dataset in breast cancer, we can now offer potential partners two near-term registration opportunities that we believe have a high likelihood of technical and regulatory success. Further, first-line metastatic pancreatic cancer and HR positive, HER2 negative breast cancer represent two highly attractive market opportunities, which I'll discuss in more detail now. Looking first at HR positive, HER2 negative breast cancer, estimates indicate that there will be approximately 300,000 drug treatable cases in the U.S., major European markets, and Japan by 2028. And despite the limited benefits current therapies can provide, drug sales in the HR positive, HER2 negative breast cancer subtype are expected to grow from $11 billion in 2020 to $31 billion by 2030. Thanks to IND-213's results, we already have a randomized data set demonstrating pela's ability to improve patient outcomes in this indication, and that will count as one of the two trials required by the FDA for registration. With BRACELET-1's upcoming readout, we aim to validate this finding with a second randomized dataset, which we believe would leave pela well-positioned to capture a substantial portion of this market following a subsequent registrational study and potential approval. Turning our attention to pancreatic cancer, estimates indicate that there will be approximately 135,000 metastatic first-line drug treatable cases in the U.S., major European markets, and Japan by 2028. This represents the patient population being valued in our GOBLET trial. Beyond its prevalence, another aspect of pancreatic cancer that makes it a valuable commercial and partnering opportunity is the significant unmet need and lack of past successful innovation in this indication. Pancreatic cancer patients are typically treated with regimens composed of older chemotherapeutic agents such as gemcitabine and nab-paclitaxel. Unfortunately, only about one in four patients will respond to these regimens, and those that do respond see only modest survival benefits. For example, the combination of gemcitabine and nab-paclitaxel resulted in a median overall survival of less than nine months in a randomized Phase 3 trial of over 860 metastatic pancreatic cancer patients. Despite the best efforts of researchers across academia, biotech, and pharma, these older minimally effective treatment regimens currently remain the best option for the overwhelming majority of pancreatic cancer patients. Even PD-1 and PD-L1 checkpoint inhibitors, which have revolutionized the treatment of numerous cancers, are unable to effectively treat the 99% of pancreatic cancer patients who are not classified as MSI high. Taking all this into consideration, one could appreciate the significance of our GOBLET data, which suggests pela may be the key to unlocking the potential of checkpoint inhibitors and pancreatic cancer. Therefore, we believe pela's successful development could transform the standard of care in this indication, opening up a large new market opportunity and leading to drastically improved clinical outcomes for patients. To enable our efforts in pancreatic and breast cancer, our BD team is focused on securing a global clinical and commercialization partnership with a leading biopharma company. As we work towards this goal, we are fortunate to have established relationships with several industry leaders, including Pfizer, Roche, Merck Serrano, Bristol Myers Squibb, and Insight. Our collaborative trials with these major players have allowed each to become intimately familiar with pela, which we believe will serve us well in any partnering discussion. While we can't predict the timing of any potential partnership, we will be thoughtful and diligent as we seek to achieve the best possible outcome for Oncolytics and its shareholders. Our plan is to pursue a single licensing deal for both of our breast cancer and pancreatic cancer programs that allows us to minimize our clinical and commercial risk, while providing upside through upfront payments, milestones, and royalties. By leveraging our current and maturing data from the IND-213, BRACELET-1, and GOBLET trials, we intend to create competition among potential partners and drive continued interest. Given the clinical data we have generated and the attractive commercial opportunities offered by our breast and pancreatic cancer programs, we believe we are ideally positioned to execute on our BD objectives. We plan to provide additional updates as appropriate and look forward to moving forward with pela's newly enhanced value proposition. Next, I'll turn the call over to Kirk to discuss our Q3 financial results. Kirk?

Kirk Look, Chief Financial Officer

Thanks, Andrew. I'm pleased to say that Oncolytics continues to operate on a sound financial foundation with an anticipated cash runway beyond 12 months and through several important milestones based on our current projections. These milestones most notably include a readout on overall response rate, progression-free survival, and evolving overall survival data from BRACELET-1, which is expected in the first half of next year. Turning to our financial results, Oncolytics finished the third quarter of 2022 with $32.4 million in cash and cash equivalents compared to $41.3 million in cash and cash equivalents as of December 31, 2021. Now, general and administrative expenses for the third quarter of 2022 were $2.4 million compared to $2.9 million in the third quarter of 2021. This change was mainly due to lower investor relations activities as the current global business conditions have negatively impacted market sentiment for the biotech industry and the overall markets. Research and development expenses for the third quarter of 2022 were $3.7 million compared to $3.3 million in the third quarter of 2021. This change was mainly due to our clinical development program, primarily from a net increase in our clinical study costs. Compared to the third quarter of 2021, we saw higher GOBLET patient enrollment and sample analysis activities this quarter. This increase was offset by lower BRACELET-1 patient costs as BRACELET entered into the retreatment and follow-up phase upon reaching full enrollment at the end of the last quarter. The net loss for the third quarter of 2022 was $4.4 million compared to $4.9 million for the third quarter of 2021. This equates to a net loss of $0.08 per share for the third quarter of 2022 and $0.09 per share for the third quarter of 2021. Now with that review of our third quarter financial results complete, I'll turn the call back over to Matt.

Matt Coffey, Chief Executive Officer

Thanks, Kirk. Before providing some brief closing remarks, I wanted to take a moment to recognize the recent appointment of Jonathan Rigby to our Board of Directors. Jonathan is a seasoned industry veteran with over 30 years of experience in the pharmaceutical and biotech sectors. He currently serves as the Group CEO of Revolo Biotherapeutics and was a Co-Founder of Zogenix, Inc., which was acquired by UCB earlier this year in a transaction valued at approximately US$1.9 billion. We are confident that Jonathan's extensive commercial and business development expertise will be invaluable as we enter the next phase of our corporate evolution propelled by the new data from GOBLET's pancreatic cancer cohort. These data have added a second near-term registration opportunity to our pipeline, allowing us to de-risk our binary events in pivotal trials and improve our position as we pursue potential partnering discussions. Taking a step back, we can also appreciate how GOBLET's data validate our overarching clinical development strategy. The strategy seeks to leverage pela's multifaceted mechanism of action to address one of the longest standing problems in oncology, namely the inability of immune cells to recognize, infiltrate, and destroy tumors. On past earnings calls, you've heard me speak about how data from trials such as AWARE-1 demonstrated pela's ability to generate immune cells that recognize and kill tumors while simultaneously remodeling tumor microenvironments to promote immune cell infiltration. This positions pela as a platform molecule that can synergistically enhance the efficacy of a broad range of drug classes such as checkpoint inhibitors, chemotherapy, or CAR-T cells, enabling it to potentially improve the therapeutic outcomes in a wide range of indications. Moving forward, our near-term registration opportunities in breast and pancreatic cancer will be our primary focus while efforts beyond these quick programs will be enabled predominantly through partnership or collaboration. This approach will allow us to operate with capital efficiency as we seek to further unlock pela's expansive therapeutic potential. Finally, before opening up the call for Q&A, I just wanted to reiterate my excitement for where Oncolytics sits today and thank all those who have brought us to this point. I'll start first and foremost with our clinical trial participants, who remain a key source of inspiration for the company. I'll also express my gratitude for the support of our shareholders and the amazing work done by our employees, collaborators, and investigators. It's their contributions that allow us to advance pela's development and pursue our mission of improving the lives of cancer patients. With that, we will begin the Q&A session. Operator?

Operator, Operator

Thank you, sir. Your first question will be from John Newman at Canaccord. Please go ahead.

John Newman, Analyst

Hey guys, good morning. Really interesting GOBLET data here. Just had a couple of questions. Just curious, in terms of the next steps here going forward, what might a registration study look like just roughly speaking in terms of clinical design. I'm just wondering if it would be sort of chemotherapy plus checkpoints plus or minus pelareorep or if maybe there are some different designs and considerations that you've thought about over time here. Thanks.

Matt Coffey, Chief Executive Officer

Thank you for the question. We have discussed this topic extensively, and we will share more details during the KOL presentation next week. I want to remind everyone that we will have a KOL call in a week, where we will address these types of questions. Tom, could you provide an overview of our discussions regarding an adaptive design or a Phase 2/3 program, including what those figures might look like? There are several stakeholders involved in deciding what the final study design will entail, but I believe Tom can give you some insights into our general thoughts. Tom, could you share some details on this?

Tom Heineman, Chief Medical Officer

Yes, certainly. As Matt mentioned, we need to engage various stakeholders and hold discussions before finalizing the design. Currently, we are considering a Phase 2/3 design with a two-arm study that will compare the standard of care with HER2 standard of care plus pelareorep and a checkpoint inhibitor, similar to the GOBLET study. The Phase 2/3 design would allow us to evaluate the data at a specific time point, using an endpoint trigger to decide whether we should proceed with the study based on patient progress. This type of design is fairly common and aims to facilitate a seamless transition toward completing a study that enables licensure while keeping the associated risks at a manageable level.

John Newman, Analyst

Interesting. Okay. Great. We'll certainly have more questions at the KOL event next week. Thank you.

Operator, Operator

Thank you. We have no further questions at this time. Please proceed with your closing remarks.

Matt Coffey, Chief Executive Officer

Thanks to all those who joined today to hear about our recent clinical data and progress. Before we go, I'll remind everyone that we're hosting a virtual KOL event a week from today to provide expert perspective on the interim pancreatic data being presented at SITC. Those interested can find a link to the event on the Events & Presentations section of our website. Thanks again. Have a great day.

Operator, Operator

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we ask that you to please disconnect your lines.