Oncolytics Biotech Inc. (NASDAQ:ONCY) Q2 2021 Results Earnings Conference Call August 6, 2021 8:00 AM ET
Company Participants
Jon Patton - Director, IR and Communication
Matt Coffey - President and CEO
Tom Heineman - Global Head, Clinical Development and Operations
Andrew de Guttadauro - Global Head, Business Development
Kirk Look - CFO
Conference Call Participants
John Newman - Canaccord
Patrick Trucchio - H.C. Wainwright
Operator
Good morning. And welcome to Oncolytics Biotech’s Second Quarter 2021 Conference Call. All participants are now in 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 would now like to turn the call over to Jon Patton, Director of Investor Relations and Communication. Please go ahead.
Jon Patton
Thank you, operator. And good afternoon, 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 two 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 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 of 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.
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, 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 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?
Matt Coffey
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, 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 [ph] to have a broad impact across multiple indications.
Chief among these milestones was the completion of two critical cohorts in AWARE-1 with data showing that we achieved the trials 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 2 study that showed a near doubling of overall survival, with pelareorep treatment in HR positive, HER2 negative metastatic breast cancer patients. And I'm pleased to say it did just that, it's accomplishing a goal.
Looking ahead, pelareorep is now on a clear path towards a registrational study in HR positive, HER2 negative breast cancer. The last major tasks we need to accomplish before advancing to our study is the completion of our ongoing Phase 2 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 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 pelareorep is acting via a fundamentally different mechanism of action than that of a typical oncolytic virus, rather than killing cancerous alveolitis, pelareorep is primarily acting as an immuno therapeutic 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 pelareorep from other oncolytic viruses by positioning it to be an enabling technology for a wide range of immuno therapeutic 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 pelareorep 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 pelareorep 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 planning to continue 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 pelareorep in combination with checkpoint inhibitors.
Lastly, we plan to selectively leverage partnership opportunities to broaden pelareorep'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 positive, HER2 negative 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?
Tom Heineman
Thanks, Matt. And thanks to all those listening on the call today. It's been a very exciting past few months at Oncolytics, and we achieved 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-1s first two cohorts, which examined the effects of pelareorep treatment with or without anti-PDL1 checkpoint inhibitor therapy, in patients with HR positive, HER2 negative breast cancer. Evaluation of these cohorts is the core objective of AWARE-1 with HR positive, HER2 negative 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.
That Matt alluded to earlier, the purpose of AWARE-1 was to build on the IND-213 results, and advance pelareorep for the registrational study by answering two 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 a synergy between pelareorep and checkpoint inhibitors in breast cancer? In other words, as the addition of a checkpoint inhibitor enhance pelareorep's efficacy, and ability to induce anti cancer immune responses?
To answer these questions, we utilized paired biopsies to collect data on T cell infiltration into tumors, tumor expression of PDL1, and CelTIL score, which is AWARE-1s primary endpoint and a measure of tumor cellularity and inflammation that is significantly correlated with event free and overall survival in breast cancer.
Excitingly, the data showed that AWARE-1 second cohort which included the 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 CelTIL scores in six of 10 patients after treatment.
Now, there are two 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 for patients.
For example, if someone was running in 100 meter dash, any increase in speed will improve the runners 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 acts 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 an IND-213 in patients treated only with pelareorep and 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 first two cohorts. These data show that pelareorep treatment resulted in replication of pelareorep in a high proportion of cancer cells, an average a 11 fold increase in anti-cancer, CD8-positive T cells within tumors, the generation of presumptive anti-viral and anti tumor T cell clones that may mediate both initial tumor cell killing and long lasting anti cancer 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 T reg ratio, indicating a less immunosuppressive tumor microenvironment and the weakening of tumor defense mechanisms and dramatic upregulation of PDL1 expression in tumor tissue, which resulted in the conversion of some tumors from PDL1 negative to PDL1 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 question 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 patients who are most likely to respond to therapy and improve our chances of success in the 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-1s design was developed in collaboration with Pfizer and Merck Serono [ph] 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 two key exceptions.
First, it is exclusively enrolling HR positive, HER2 negative 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 PDL1 checkpoint inhibitor BAVENCIO.
We are particularly excited about this study arm, given the AWARE-1 data showing synergy between pelareorep and anti PDL1 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 PrECOGz, 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 for its regulatory approval and HR positive, HER2 negative breast cancer, while simultaneously positioning us to take advantage of pelareorep's potential across additional cancer patients.
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 2 trial, evaluating in combination with a PDL1 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 studies design was that patients who were given a pelareorep, pembrolizumab combination in the absence of chemotherapy. This provided a more direct look at the combinations anti cancer 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 rigorous design, this study showed a 42% disease control rate. This encouraging result indicates the strong anti cancer activity of the pelareorep, pembrolizumab combination.
Additionally, biomarker data showed that patients achieving disease control at increased activation of anti cancer CD8 positive T cells in the peripheral blood and reduced levels of pro-tumor T reg cells in both the peripheral blood and the tumor compared to patients with progressive disease.
The association between treatment induced anti cancer immune responses and improved tumor control, together with data showing increased tumor infiltration of anti cancer 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 continued to support pelareorep's outstanding safety profile. Collectively, these findings which are consistent with the results of the AWARE-1 study, - 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 our business development efforts. I'll hand it off to Andrew. Andrew?
Andrew de Guttadauro
Thanks, Tom. And thanks to all who have joined us on today's call. As Tom mentioned, we are leveraging collaboration with Roche and AIO to further develop pelareorep in combination with checkpoint inhibition in pancreatic and other GI cancers.
We're doing this through our Phase 1/2 GOBLET trial, which is designed to evaluate pelareorep, plus Roche's anti PDL1 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.
The GOBLET studies representative of the broader strategy we're executing to expand pelareorep's potential therapeutic impact by focusing its development in highly prevalent indications beyond our lead, HR positive, HER2 negative breast cancer program.
This strategy is represented by additional ongoing trials, including IRENE, which is our Phase 2 study evaluating pelareorep in combination with insights - anti PD1 checkpoint inhibitor, retifanlimab in triple-negative breast cancer, and by our ongoing study with BMS evaluating pelareorep [indiscernible] combination therapy, in multiple myeloma.
These collaborative trials leverage the growing interest from large pharma and biotech companies and improving the efficacy of checkpoint inhibitors. Such interest is driven by a large commercial opportunity and the high unmet need. As the checkpoint inhibitor market is expected to reach $55 billion by 2025, despite less than one in five patients responding to these therapies.
The low response rates of checkpoint inhibitors are due to several different resistance mechanisms that can be addressed by the immunotherapeutic effects pelareorep is demonstrating AWARE-1 and other clinical trials. This leads us well positioned as we execute on our BD strategy and work towards the goal of securing a global clinical and commercialization partnership.
We're 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's synergistically combines with agents such as CAR T cells, and bispecific antibodies, as well as PARP and CDK 4/6 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 weaken 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 [indiscernible] 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 is 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. Kirk?
Kirk Look
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 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 a financial runway, a key consideration for institutional investment extends into 2023.
Now 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. Now we minimize 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 startup 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?
Matt Coffey
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 a year and a half ago, they immediately adapted to the challenges posed to keep the company and our clinical programs on track. They 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. They're reporting to the final AWARE1 biomarker data for cohorts 1/2, 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 her multiple myeloma trial evaluating pelareorep in combination with Kyprolis and BMS is 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?
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] Your first question comes from John Newman with Canaccord. John, please go ahead.
John Newman
Hi, guys. Thanks for taking the question. Just wondered on the BRACELET study, Matt, if you could sort of walk us through what they see there before proceeding to a pivotal study? And then just in terms of [indiscernible] design, just kind of curious as to how you're thinking about that at the moment? Thanks.
Matt Coffey
Thanks for the question, John. So what AWARE is teaching us is that we - with or without checkpoint blockade get a pro inflammatory events. And this is why we think we see these long survival tails on our breast cancer program and our PEG [ph] 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 T regs. So CD8 are the positive inflammatory cells, T regs are negative, viral infections can cause both. So they can antagonize each other. But what we found from AWARE the addition of the checkpoint blockade largely eliminated that T reg.
So again, we're looking for this confirmation that we can skew the CD8 to T reg balance. You know, we're planning for the Phase 3 now. And I think what we're really looking at is the addition of checkpoint blockade into our Phase 3 program, as well as the addition of our biomarkers.
Tom, is there anything you'd like to add to my response?
Tom Heineman
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.
John Newman
Okay. Thank you.
Operator
Thank you. Your next question comes from Patrick Trucchio with H.C. Wainwright. Patrick, please go ahead.
Patrick Trucchio
Hi, thanks. Good morning. 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 2022 events?
Matt Coffey
First, 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 three week course. So a lot of the work that we're doing now is we're looking at [indiscernible] analysis, which - what that does is using appropriate labeling for immunological cells or 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 score have the closest proximity of the inflammatory cells to the cancer cells. And [indiscernible] 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 t regs, while getting this positive CD8 and inflammatory event. We're also doing 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, you know, interferon type 1, type 2, are we seeing cell [ph] 9,10 and 11? Are we seeing more of it in the presence for 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, you know, if we're activating a pathway in non-responders, you know, maybe we can use an inhibitor to that pathway to allow a greater response or if alternatively, if we're getting there very positive proinflammatory accumulation and signalling, is there something we can use to make that even greater.
So it gives us a great deal of information and really decides 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 non-responder, because we have seen these patients, you know, where they've been treated for five or six years. You know, and this is a very heavily treated – pre-treated patient population where we have these unexpected survivors. Where the AWARE-1 will hopefully help us determine as why we have these extraordinary responders versus middling responders to non-responders.
And that was really what the goal of AWARE was. Now AWARE I think is pointed us in the direction to checkpoint blockade. What we saw is, you know, the ability to transform non-PDL1 patients on to that PDL1, 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'll be as wholesome as we can possibly make it. These investigators are obviously looking to, you know, enhance enrollment, expand the number of sites, so the more information we can share with our stakeholders, the better it is for everyone.
But you know, for San Antonio, it'll definitely be a safety updates. We'll see what we can negotiate in terms of additional information.
Patrick Trucchio
That's helpful. Thank you very much.
Matt Coffey
Well, thanks, Patrick.
Operator
Thank you. There are no further questions at this time. Mr. Coffey, you may proceed.
Matt Coffey
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.