Oncolytics Biotech Inc. (ONCY) Q3 2018 Earnings Report, Transcript and Summary

Good morning. My name is Sharon and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Oncolytics Biotech’s Third Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session for analysts and institutional investors. [Operator Instructions] I will now turn the call over to your host, Michael Moore, Vice-President, Investor Relations and Corporate Communications. Mr. Moore, please go ahead.

Thank you, Sharon. Good morning, ladies and gentlemen and thank you for joining us on our third quarter 2018 financial results and corporate update call. With me on the call this morning from Oncolytics are Dr. Matt Coffey, President and Chief Executive Officer, and Kirk Look, Chief Financial Officer. On today’s call, Dr. Coffey will review our progress in the third quarter, provide an update on our clinical development plans and strategy including our program in metastatic breast cancer that consists of our window of opportunity study and the planned phase through registration study. We will also review the other combination studies we are conducting or plan to conduct over the next 12 months to 18 months. Kirk will review our financial result and activity for the third quarter. I’d like to point out certain statements made on this call such as those relating to our clinical development plans and business development plans are forward-looking within the meaning of applicable security laws. Please refer to our third quarter press release and MD&A from important assumptions and cautionary statements related to forward looking information. I will now turn the call over to Dr. Matt Coffey. Matt?

Thanks Mike. Good morning everyone and thanks for joining our call today. I will just direct you to our forward-looking statements, and we will be making a number of these forward-looking statements. And I wanted to start the call by just reminding everyone of what a tremendous year it’s been 2018 in terms of making progress. It sets the stage for what we believe will be a transformation in the company in 2019. We wanted to provide an overview on our thinking now that we’ve had more feedback on the Phase 3 with KOLs, pharma partners and our current thinking about biomarkers and how we think we’ve identified potential markers that will predict for overall survival in various patient populations by better measuring the immune response to the lysis for the tumors. We’ll give an update on our metastatic breast cancer program and how we are positioning it for the Phase 3, some guidance on our immune checkpoint program and why we think it’s such a pivotal time in oncolytic viruses and how pharma is trying to position these agents as we move to registration. Now the emerging role of Pelareorep, I wanted to start off, we’ve had a lot of questions, people have asked me, you know, Matt why are you not using REOLYSIN anymore as the name of the product. And the reason for this is, in our interactions with the FDA during our special protocol assessment; it came to their attention or one of the reviewer’s attention that’s the name REOLYSIN rhymes with the existing chemotherapeutic bleomycin, so REOLYSIN/bleomycin. The concern was this may lead to dosing errors, transcriptional errors if the pharmacist misread REOLYSIN to bleomycin there was a chance that it would lead to misdosing the patients. What the FDA requested is that we use the generic name or the user name pelareorep to avoid any confusion, and frankly the marketed name, I believe, will be likely in the purview of our strategic partner, who’ll want to name it, to be consistent with their existing franchises. So as a go-forward, we refer to reovirus as our proprietary strain is pelareorep until such a time as our strategic alliance renames the product. But the benefit of a generic name is, it’s not subject to change and it is specific to our strain and reovirus, so we’re quite happy to use that. Now the emerging role of pelareorep, I think over the last 24 months, we’ve been able to reposition our agents as what’s going to become a very important segment of immuno franchise, hopefully for the treatment of breast cancer, but certainly beyond that. Now where we think, we have the most interest is in metastatic breast cancer, due to the fact that we’ve seen a significant increase in overall survival in this patient population. As a result of this, we went and presented data to basically every pharma company as we’re hoping to get a strategic partner to run the Phase 3 with us. Our thinking is, we would like to do this in conjunction with pharma, so that we could retain a co-promote for North America. But while we were having these discussions, we opened the data room up and people went through. So what began to emerge was a picture not only of our virus, but other viruses as a backbone or a standardized backbone for immune checkpoint inhibition. And these interactions through BD resulted in committed relationships now with Roche, and metastatic breast cancer to the point of this will be to develop or confirm our biomarker thinking as well as to suggest whether or not we should add a third arm to the existing SPA. We have two collaborations with Merck, one in pancreatic, which I’ll touch on today. We believe we’ve started enrollment. We’re waiting for a confirmation, but also a second study in multiple myeloma. We have a collaboration with Bristol-Myers Squibb and Celgene, both of these also in multiple myeloma, which is an excellent test system for our agent in heme malignancy. Now last year, we established a partnership with Adlai Norte. They’ve in-licensed new products as well. And we’re looking to see these studies starting in China here very quickly. But really the thinking is, these agents, our significance in engaging the immune system through the creation of their genome and through their infection process in our particular instance, the viral double stranded RNA, promotes an inflamed phenotype and we’ll touch on this and why this is so important. But I think this is the first time and we’ll touch on the deals that have been done, large pharmas finally paying attention to this area. The reason, they’re thinking this is so important is largely due to the fact that it seems there’s a good rationale for combining viruses with checkpoint inhibition. And we’ll touch on why this has been so difficult. Combinations of checkpoint inhibitors have been toxic, combinations with checkpoint inhibitors and IMiDs in [indiscernible] has been toxic, but the safety profile of the viruses, and especially our virus with a database that suggests there really is no side effect is very compelling. The fact that we can stimulate a pro inflammatory response or basically lighting up the immune system to the presence of this tumor is very significant. And there is a very strong rationale for why we’d want to combine this with checkpoint blockade. Now, when people think viruses, I think your first thought is to run to HIV it’s to run to the flu. But most viruses don’t actually cause illnesses, or if they do, its species specific, so the human interaction with them is very minor. But when people think gene therapy Oncolytics viruses, they immediately get into the thinking of intratumoral injections and this has led to an approval with T-VAC it’s a very important agent, but the difficulty with intratumoral is, it’s a specialized delivery system and it lends itself only to accessible lesions. Cancer unfortunately is a metastatic disease, so we need to be able to treat beyond an injectable lesion. Our [ph] viruses are also significant segments where we have existing viruses, and we add checkpoint inhibitors to them. We add immune stimulatory agents. Pelareorep is a little bit difference, it’s an IV administration, so it’s a standardized dose, and because it’s not modified, it doesn’t require special handling procedures. Now, importantly, it’s an unarmed virus as we don’t carry agents that would stimulate the immune system. Instead we rely upon the virus’s innate ability to infect preferentially or pardon me, replicate preferentially in tumor cells that really lead to this engagement of innate adaptive response and we’ll talk about this now. Now the thinking of reovirus has evolved somewhat. We’ve talked about this before, but you know when we started this program everything starts in a tissue culture plate, and the virus is very, very good at lysing tumor cells but not normal cells. And the reason for this was basically recognition of the virus genome in normal tissue. So reovirus is a poor pathogen, because when it enters the cell, it removes its outer coat so that it can start making copies of its genetics, and make copies of itself. Now the genome of reovirus is double-stranded RNA. So as the cell, as the normal cell allows the virus to start making copies of its genome, it’s immediately seen by the immune system. Now double-stranded RNA is a very important signal to the immune system, and it’s so important in fact, that your body has evolved mechanisms to block protein translation. What I’m saying is, it’s able to block the virus making protein copies of itself and it does this through a protein called PKR which will bind these double-strand RNA elements and stops the cell from making more copies of protein. Now PKR is called a pattern recognition receptor, and these are a very old form of our immune system. What they are is proteins in the cytoplasm that recognize microbes through their genetics, through flagella through various basically patterns, if you want, hence the name pattern recognition receptor. Now PKR recognizes double-stranded RNA and blocks protein translation. This is the first step in preventing viral spread. Now, other pattern recognition receptors also recognizes double stranded RNA, and this is again why double-stranded RNA is such an important signal, the body recognizes it as non-self, and in an effort to block any infection these pattern recognition receptors, when engaged with double-stranded RNA begin a cascade of signals that result in the immune system basically being very strongly shaken to life. Agents or recognition receptors like MDA-5/RIG-1, Toll-like Receptor 3 and PKR work in concert to cause a release of interferons and other chemical danger signals that are pro inflammatory. This is a really quick way of blocking the infection. Now in tumor cells, the steps are very similar, but we have a non-functional PKR. So what happens is the virus will internalize in these cancer cells, it will start making copies of its double-stranded RNA genome. But here PKR can’t block the infection; it’s unable to stop translation. So what happens is the virus is able to make basically a photocopier of itself. It’s something that creates more of the genome, and it’s called an RNA to RNA polymerase. Now this is a very active little enzyme, and it starts creating pools of double-stranded RNA in the cytoplasm, and as the cells become infected, make copies, and lyse, what we’re getting is very high accumulation of double-stranded RNA within the tumor. Now as a result of this, we get a release of these pro inflammatory signals, and this is where we see our side effect profile. As the patients are releasing interferon, we’re starting to see the patients become unwell. We’re starting to see fevers, malaise, aches and pains. But importantly, if we look at the immune system, what we find is an increase in our natural killer cells. Now these are our innate response. These are drawn to the site of infection and again, what they’re trying to do is restrict viral growth and limit viral spread. So these chemical signals coming from the tumor now alert our NK cells that there is a problem and they’ll come to the site of infection and wll do their best to eliminate the infection by targeting and killing these infected cells. Now as a consequence of this, what we get is maturation of dendritic cells and T cells that also become drawn to the side of the infection. But here what we've done, is the T cells are expanding and their learning to recognize tumor epitopes and viral epitopes and what this results in is a learned immune response in animals that are cured of their disease, we can't re-implant the tumor. So, we used to think of this really as a lytic response. That’s importance. But really what’s important is the selective replication of the virus within tumor cells and the creation of the danger signals that alert our immune system that there's a very significant problem. The release of these interferons, the release of these pro-inflammatory signals to create cold tumors hot, but also side-effects of this double stranded RNA are over expression of PD-L1 on tumor cells, overexpression of PD-1 on T cell and really this is why we think there's going to be strong synergies with immune checkpoint blockade. This is actually changed our thinking also around how we measure those responders. And what we've done now is we think we've identified biomarkers of immune activation that correlate with overall survival and we’ll talk a little bit about the importance of these biomarkers and why we need to confirm these prior to the Phase 3. Now the metastatic breast cancer program, this is our shortest path to a registration study is our thinking. We’ll give a quick update on this plan and again just provide assurances is that this is the Phase 3 company; we have Phase 3 assets, we are doing some supplementary data with strategic partners to confirm our thinking around biomarkers and to provide a recommendation whether or not our existing SPA program should include checkpoint blockade or not. Now, this thinking for this came for a study that our colleagues at the National Cancer Institute of Canada ran and what we saw here was a dramatic increase in overall survival. Now, in the intention-to-treat group, this is everybody on study. We saw seven-month improvement in the median survival, so patients historically would survive 10 months. These were moved out past 17. So this is significant for patients. This is time spent with family and it's not a PFS benefits, it’s an overall survival benefit. We've actually extended life. Now, what’s important about this also is it gives some important clues about how our agents working. When we look at the control arm, I think there’s three survivors overall out of nearly 40 patients. When we look at the test arm, what we get is, third of the patients are still live at the time of the analysis and importantly there's a delayed separation in the curve. This has become a recurring motif for a common type of observation in the field of immune oncology. And the reason for this is it takes some period of time for our T cells to expand, to recognize the new tumor epitopes and to basically position themselves to control the disease. In our instance here it takes about eight months, this is very similar that you see with checkpoint blockade. Now, this really affected some of our thinking. So when we approach FDA and when we approach DMA we went with the existing package and we said this is the data that was generated by the National Cancer Institute and the guidance that we were given back is your agent is not acting predominantly cytolytically, but it's acting as though it's stimulating innate and adaptive responses. Now the biomarker work we’ve since develops confirms this, but one of the concerns that FDA expressed to us was without an effective biomarker we couldn't identify early responders and we couldn't stratify for patients that would respond versus those that wouldn't. Now this is a significant hindrance to successful Phase 3 because you’re trying to just emulate results you saw on Phase 2. With the biomarker we can further refine and stratify for responders based on what we think is early immunological evidence of response. Now, I’m going to talk a little bit why this is important later, but the addition of a biomarker significantly derisk our Phase 3 program, and potentially shortens our regulatory timelines by significant margin. Now not only did the FDA point this out as a potential risk and very strongly encouraged us to capture this data in the Phase 3, potential partners were cautious about moving into a Phase 3 without a biomarker. In this day and age large pharma has bet a lot of money in the world of biomarkers, as example, Rosebud Foundation medicine the entire company to more sprightly and adaptively be able to come up with biomarkers through their various programs. Now, as I said this data led to a lot of BD outrage, and it end up with a lot of people in our data room. And the question that kept coming up, if the virus is causing such an inflamed phenotype, is there reason to think that they should add checkpoint blockade to the breast cancer program improving the outcomes to those patient's on reovirus but also expanding the franchise with checkpoint inhibition. And if you look at the next slide this really speaks to why Pharma thinks there's a role for pelareorep as a backbone for checkpoint inhibition. Now checkpoint inhibition is I think the most significance step forward in immune oncology. The ability to unclog the tumor, the ability to re-energize our own immune systems, to combat our disease is more than significant. The difficulty is though it requires prerequisites. Patients have to have a certain amount of immune status left after pretreatment. They actually have to have those inflammatory cells at the site of the tumor, so that they could actually be active and the tumor cells themselves have to have PD-L1, the receptor expressed if these antibodies are going to be able to work. Now, as I said, double stranded RNA is a very significant danger signal in mammalian cells. And what we’re looking at here on the left is a patient's bone marrow smear prior to any treatments and you can see that there's very little expression of PD-L1, we’re using an antibiotic here to stain for that. Now this patient receives one cycle of pelareorep with carfilzomib which is the proteasome inhibitor, which is the combination, we’re actually using the Bristol-Myers Squibb study. And what we can see in eight days, so from one Monday to the next Monday we go from zero expression of PD-L1 to nearly 98%. Now commensurate with this, we see an accumulation of NK cells in the tumor that’s statistically significant. We see a statistically significant increase in T cells. We see changes in the microenvironment, not only do we get PD-L1 overexpression, we get CTLA-4, IDO, we get release chemokines and cytokines and we basically set the tumor up for response to checkpoint blockade, and I think this is what exciting. The virus stimulates immune system so well that we can get overall survival benefit. We saw that in breast-cancer, but potentially we can even amp this up further by adding checkpoint blockade to it. Now this type of data is what has -- pharma very very excited about oncolytic biotherapy and it was exactly data like this that led to Merck's acquisition of viralytics. It was Phase 1b data that demonstrated quite a profound inflamed phenotype and stimulated the acquisition of the company. So, we’re talking significant sums of money for any agents that can synergize in this checkpoint blockade area. Now our registration strategy is still tied very much to breast cancer, but it does contemplate whether we should add checkpoint blockade to that. Now, we have a window of opportunity study that will begin first quarter, very early in first quarter and this was actually in response first off to a collaborative group called SOLTI and later it actually expanded into work we’re doing with Roche in the area in terms of adding to Tecentriq to this important area. Now we approached Aleix Prat, who is now one of our KOLs with the results of the Phase 3 to see whether or not we can get their cooperative group which has I think over 70 centers in Spain, Portugal to participate with the study. Dr. Prat is internationally recognized as a leader in breast cancer. He helped with the thoughts around the Phase 3. But again one of the things that he highlighted is we didn't have an effective biomarker plan. We weren’t able to tie overall survival to changes either tied to mutational status on the tumor or what we think now is we’re importantly changes in our immune repertoires, our activation levels of the immune both innate and adaptive and tying this to overall survival. Now what Dr. Prat proposed to us was a window of opportunity study and what this is a study where women are treated for three weeks with standard of care across various subtypes and we add the virus to this. At the end of that single treatment cycle they go for radical mastectomy and what this allows us to do is capture the tumor tissue to see the changes of the virus has evoked in the immune system and whether or not it has increase the inflammation in the tumor. Now, we have before reported very good objective responses in patients with hormone receptor positive HER-2 negative disease and in that subgroup of patients we actually saw near doubling of overall survival, and that’s why this has been the focus of our Phase 3 work. The AWARE study will look at those patient population and we believe what we will see is an increase in inflammation or an increase in NK natural killer cells or T cell into the tumor tissue at the time of the mastectomy. Now previously we’ve reported no activity in triple negative breast cancer, albeit it in a very small subset. What we believe we see, what we will see in the triple negatives are accumulation -- no accumulation of inflammatory cells compared to the hormone receptor positive group. Now interestingly we don't have any experience with HER-2 new. These patients are normally treated with Herceptin. This could be potentially new market for us or it could indicate that we should really focus on hormones receptor positive disease. Now, the biomarkers are really driven around immune markers in the blood. And as I said we believe we've identified one very strong and potentially second biomarker that could identify patients responding to therapy as early as cycle two-day one. What this allows us to do is to set a threshold to say whether these patients are responders very early and further stratify for these patients on the study. This significantly derisks our Phase 3 program and the AWARE study should confirm whether or not the changes in immune status correlate well with inflammation in the tumor. Now during this, Roche became aware of the program, became aware of some of the biomarker work and actually expanded our thinking on the biomarker work. And they reached out us to say, we think checkpoint blockade based on what we know with your agent should increase the activity. So half these patients will receive Tecentriq, half of them will not. And what we want to see in the presence of checkpoint blockade is even greater accumulation of these inflammatory cells, and again defining the safety signal for us in the phase -- leading into the Phase 3 program. Now where does this lead us? If anything it enhances our commitment to the Phase 3 this SOLTI program as I said is 38 patients, but because they’re only treated for three weeks there’s no follow-up, it’s a biochemical test within pathology, so it's going to go very rapidly. We anticipate this will be finished by next summer with an enrollment period of anywhere between three to five months and this is based on work that SOLTI have done in similar studies before. So with our Phase 3 we have an improved SPA and what this is, is guidance from the FDA that if we meet the predetermined endpoints we can register the product for sale. Now the window of opportunity study, why it's so important is really to confirm a couple of things first and foremost we need to confirm its acting as an immunotherapy and this will be confirmed by accumulation of immune cells within the tumor mass. So again what we’re hoping is this release of interferon from the infected cells, the danger signal of the double-stranded RNA will cause natural killer cells and T cells to be drawn to the site of infection predominately in hormone receptor positive disease. What we’re also looking for is increased expression of immune markers like PD-L1 on the tumor cells or PD-1 on T cell as well as CTLA-8, IDO and others. What we’d also like to do is capture whether or not Tecentriq or checkpoint blockade enhances this inflammatory response. And lastly, we’re going to confirm what we think our biomarker thinking is now that we’ve had some success and we’ll be reporting in this biomarker work first quarter next year. If this is the case, its significantly derisk the Phase 3 program and really does is provide some guidance to us and our potential phama partners as to whether we want to change the existing SPA and add a third arm of adding the checkpoint inhibitors. So what we’d look at is standard of care, standard of care plus virus, Standard of Care plus virus plus checkpoint blockade if it’s recommended by what the outcome of the AWARE-1 study is. Now it’s entirely possible that we’re just going to find that we should proceed as is under the existing SPA. But what it also gives us is confirmation that a biomarker is active. This as I said, we believe we’ll shorten our reg development times, as well as even some of the clinical times. And again going forward potential pharma alliances were very concerned that we didn't have a biomarker. We now believe we have one and we’ll be able to test that I think very effectively in the AWARE-1 background. But this sets the stage for the Phase 3. It derisk it. It’s a potentially speeds it up and in either case we think it significantly enhances the chance of this Phase 3 is going to be run with a pharma partner either with or without checkpoint blockade. Now, all this work that people have done in reviewing our due diligence room [ph] has led to a lot of BD outrage. So this BD outrage in metastatic breast cancer is actually created opportunities beyond metastatic breast cancer and into the use of immune checkpoint inhibitors, which appear to be where pharma really want to position these agents, and we’ll talk about that in a moment. Now our clinical pipeline really starts with a Phase 3 program. And as I said right now the thinking is going to be pelareorep with paclitaxel, which is standard of care we may wish to add a checkpoint inhibitor to that. This is going to be informed by AWARE-1 which our pelareorep standard of care plus Tecentriq. This will begin a very early next year and will be done by summer. This is the gating study for the Phase 3. It provides us a supplementary data and confirms our biomarker thinking. Now pelareorep in pancreatic cancer, as I said we’re excited. We think it actually began enrollment today. We’re waiting for confirmation, but that's how soon it will be starting, if it’s not this week it will be in the next week or two. But again we’re now underway with our pharma colleagues to really investigate and exploit the use of the virus with checkpoint blockade. Pelareorep with Keytruda and multiple myeloma will begin next quarter, and pelareorep with Opdivo we think we’ll begin this quarter. We have ongoing studies with Celgene, but again all of these are open-label studies, all of these are to inform Pharma of the potential utility of the virus as immunotherapy a standalone immunotherapy but importantly potentially a standardized backbone across checkpoint blockade and across other areas including CDK 4/6 as well as PARP where we’ve recently reported some positive synergistic data. All of these studies are open-label and provide real-time information to our potential partners to make informed decisions. We’re looking to potentially see interim data in multiple myeloma for the end of 2019 as well and we’ll be reporting on some exciting results at ASH in multiple myeloma that we believe will provide a strong rationale for adding checkpoint blockade. Now we've been working at this for a while and if you look at the market environments it’s really led to a period where there is a lot of excitement around checkpoint blockade. Now Amgen open the door with the acquisition of BioVex. That was Phase 3 material. Now Merck acquired viralytics, and I like the viralytics story because it's similar to ours. It's an RNA virus that creates double-stranded RNA transcripts which signal the immune system and causes a pro-inflammatory cytokine response. Now the difference here is their approach largely focused on intratumoral or intravesical that is a delivered it into the bladder for bladder delivery. Our focus is systemic. It’s a similar story in terms of it promotes a pro-inflammatory response. It causes lysis. It causes immune system activation. It’s also a wild type virus. So I think there's a lot of parallels that can be drawn. I'm a big fan of their management and their science behind it. And again, I'll point out that this was acquired for 396 million based on Phase 1 data. This is how Pharma values these agents where are these agents going. Now other recent sort of acquisitions or partnership has been AbbVie Turnstone, BMS, PsiOxus, Merck KGgA with Vyriad, Boehringer Ingelheim acquired ViraTherapeutics, Jansen acquired BeneVir. Now, it's important to point out all of these partner starships are at least certainly the majority. We’re preceded either by IST or some form of active collaboration. Now this is why we think it's so important that we run these IST's with Pharma, so that they have a say in the biomarker plan, they have a say in what data capture, they have a say in even some of the interpretation of the data, but at the end of the day it is our data, its data we can share with other partners, its data that the partners themselves can see and review and its led to an expansion in BD activities. This has applied pressure. And now this week with these studies getting underway we’re generating data in real-time that we think will lead to the strategic alliance that will allow us to offset our phase 3 costs. Now, on that I'm going to switch gears and let you guys listen to Mr. Kirk Look our CFO.

Thanks Matt. And welcome to the call everyone. I'll provide an overview of our financial results and invite you to review our news release and MD&A for additional information. R&D expenses for the third quarter of 2018 were $1.9 million compared to $1.7 million for the third quarter of 2017. Increase in R&D for the quarter is primarily related to foreign exchange losses due to the translation of our U.S. currency partially offset by the stabilization of our clinical trial expenses. In the current quarter our clinical trial activities are mainly related to closing out certain fully enrolled clinical trials, safety data management and updating regulatory documents connected to our clinical program. G&A expenses for the third quarter of 2018 are $1.5 million compared to $1.3 million for the third quarter of 2017. With the rise in expenses relating to our continued investment in our U.S. operations as we've expanded our office space in Santiago, California, and incurred additional personnel costs. Net loss for the third quarter of 2018 was $3.3 million or $0.20 per share compared to a net loss of $3 million or $0.20 per share post consolidation for the third quarter of 2017. As of September 30, 2018, we had cash and cash equivalents of $16.2 million, a $4.4 million increase over the $11.8 million we had on December 31st, 2017. With the window of opportunity study, a very quick and reasonably inexpensive study being the only study Oncolytics is currently sponsoring, our burn rate has stabilized and we can now advance our collaborative studies into 2020. This includes all of our collaborations along with some of the important clinical and data milestones to come from these studies. We were also active in the third quarter and subsequent to the quarter’s end securing financial strength for Oncolytics. We announce a dedicated equity purchase agreement with Lincoln Park Capital in late September and an at the market facility towards the end of October. As outlined in the announcements, these are both at our discussion and do not create dilution until used, but they do create financial strength which is something very important to us as we approach an important time of negotiations in 2019. Finally, a high priority for us remains the funding required for our phase 3 program which we believe we can do through a partnership that allows us to maintain at least a co-promote scenario in North America. As Matt alluded to earlier, we believe our overall clinical development program provides data that it enhances the potential for successful registration program and successful partnering activities. As we see the emerging data from these open label studies and negotiate from a position of financial strength with potential pharma partners, we will be able to determine the best funding options at that time. With that, I will now turn the call back over to Matt before we open it up for Q&A.

Thanks, Kirk. We've accomplished so much in 2018 and I think that's going to pay out to what happens in 2019 for the company. We're running and are preparing for a total of five combination studies with large pharma. We anticipate that this data will ultimately lead to the strategic alliance that we’ve been looking to get in place over the last 12 to 18 months. These studies will generate new and important data that will advance our partnership discussions and provide critical information that these potential partners need for their investment and partnering decisions. It also I think will significantly de-risk the phase 3 program by allowing us to identify those patients likely to respond at baseline but further to identify those patients who are responding to treatment. We believe we can identify this as early as cycle two. Now we've created a competitive environment for potential partners while we generate this data all of it in real-time and all of it open-label, all while we drive to our phase 3 registration program in metastatic breast cancer. 2019 should prove to be the most valuable year in the company's history with significant catalyst, value inflection points throughout the year. Now with this operator, we'll opening for questions.

[Operator Instructions] And your first question comes from Wangzhi Li with Ladenburg. Your line is open.

Hi, good morning.

Hi, Wangzhi.

Hey, good morning. Thanks for taking my question.

Thanks for calling.

And maybe just – yes, just a little bit color further on the window of opportunity study, what specific biomarker you could expect and - or do the biomarker Assay that were established in case it's positive you want to implement in the phase 3, are they ready to go or we need to do some further work to really make it Phase 3 ready biomarker?

We, without being too coy, we submitted this for presentation next quarter. We did see a correlation between this biomarker and an overall survival benefits. It looks quite good, although the end was small and this is why we want to run it for the AWARE program. Without giving away too much detail, basically it's a measure of adaptive response. This came to us actually by way of some of our strategic alliances. It's an Assay that they've very readily used for checkpoint blockade. They thought it would be adaptable to our situation. We worked with one of their recommended vendors and actually out of the box it was it appears to be predictive. So, we'll give a full account on this, hopefully in a poster or a presentation section at next AACR, but it does look very robust. We're working with one of our potential partners to further gate this. This is something that they have a lot of experience with and they think it's even a very attractive biomarker to run with basket studies because we can verily quickly identify especially with checkpoint blockade, those patients responding and those who aren’t. So, we don’t have to necessarily wait for the OS data we think we can detect immunological changes much earlier than that which is a good way to get rid of failed arms or expand those, that looks successful. But there'll be -- assuming it gets accepted, there'll be a full presentation. But it is robust. It is accepted. And it is something our partners are using.

Okay. Got it. Thank you. And also, maybe if you can - I know you already talked quite some in detail, but maybe friend potential outcome from the window of opportunity study. What's the top potential scenarios and how that affects the Phase 3 study? And if you added this IDO combination arm, how that would affect the SPA with FDA, will that still be in effect or will be changed?

It's a great question. Thank you for asking that. The AWARE-1 study it’s not as you point out the population that we ran the randomized Phase 2, but the benefit of it is we actually get the entire tumor tissue. So, it allows us to better characterize the immune response. We believe what we will see though is inflammation certainly in the hormone receptor positive HER-2-negative group. What we hope the biomarker will do is allow us to basically identify those patients who have more inflammation, who have more recognition of new epitopes and basically use that as the potential biomarker going forward. Now, because we have the whole tissue, and because only half the patients are going to get access to Tecentriq, if we see an increase in cellularity, or what that means is if we see an increase in the inflammatory cells in the tumor, it could potentially recommend a role for Tecentriq in a very broad market that they have not yet envisioned. If that's the case, I think we would look to run this with a strategic alliance, so it would be a three arm study, we would potentially could go back to FDA to inform them that we now have a biomarker or we believe we have a biomarker that potentially checkpoint blockade is recommended. But in speaking with potential partners about this, what's nice if we do see a signal coming out of checkpoint blockade and breast cancer, we could simply add an arm to the study and it would be Standard of Care, Standard of Care virus, Standard of Care with the checkpoint inhibitor. What's nice about this is with the biomarker if we're not seeing any benefit at all with checkpoint blockade, we can drop that arm and move ahead as we did. If we are seeing a betterment with the triplet, it allows for a three arm comparison, it allows us two potential ways to win either with the checkpoint blockade or without it. So, it becomes very attractive clinical design for us and potential partners because potentially it expands checkpoint franchise into an area that has not been successful for checkpoint blockade to-date. And if it doesn't, then that would hopefully a multi-billion dollar product that's applicable on second line breast cancer.

Got it. Thank you. Last question is, have any of the investigators provide any guidance in terms of timing for data reports whether Phase 2 Keytruda combo trial in pancreatic cancer, and the Keytruda and Nivolumab combo study in multiple myeloma?

These are ISTs, so I mean investigators have control over when the data get presented but Deva Mahalingam -- and I should have pointed this out, Deva Mahalingam is a very good investigator and a very good colleague. Dave actually ran the study with reovirus and gemcitabine. And what he demonstrated there was no change in PFS but landmark survival in pancreatic cancer a 50% at one year and close to 25% at two which is unheard of. I have never seen reports beyond 4% or 5% at two year in pancreatic cancer, especially in the patient population that was enrolled into that study. Now, as part of that work and as part of Deva's thinking that this was checkpoint blockade, he added Keytruda, that was actually his study design, so that small Keytruda study that we did was again Deva's thinking, and the results there was sufficiently positive that he was able to get Merck design an IST and provide Keytruda for the study that he's now running at Northwest University. So, he's taken lessons learnt from the small Keytruda study, refined it and has run it in his program. The other nice thing about Deva is Dave likes to present his data even when it’s not final. He has had a history of presenting interim results, we’re hopeful that he continues to do this. Likewise, the gentlemen running the multiple myeloma study at Emory and at the Norris Cancer Center they've all presented interim data. I mean, I think this is a good chance to get some biomarker data out, some response data and certainly with the bone marrow smears and pro-inflammatory cytokine response and enhancement of inflammation in the bone marrow. So, we strongly encourage these guys to present data early and often and to-date they've been happy to do so.

Okay. Got it. Thanks, very much.

Your next question comes from John Newman with Canaccord. Your line is open.

Hi guys, thanks for taking the question. I wonder if you can talk a little bit about the recent abstract that you released regarding the multiple myeloma combination data that we’ll see at ASH? Thanks.

Yes. That was actually work done by Craig Hofmeister and Doug Sborov. They're actually the gentlemen that are involved with the Opdivo study with BMS. What they found there is patients who had and we've seen this with other studies as well. There was very good response rates in patients who had not been very heavily previously exposed to proteasome inhibition. Those patients who respond, they were able to see an uptick in PD-L1 expression. The very heavily pre-treated group that had just failed the proteasome inhibitor had less impressive results. So, again it solidifies our thinking that the virus really benefits from a cellular stress response that this allows the virus to propagate more easily, to spread more easily, and as a result of this, get much better inflammation. Now, I should point out the slide that we used with the checkpoint inhibitors that shows the inflammation, this is actually Dr. Hofmeister work. And what's interesting about this is he's demonstrated that this massive inflammation is much enhanced by having susceptibility to the proteasome inhibitor. He looked at this as a monotherapy and we do see inflammation but it's not as striking as this. Likewise, when the patient has just failed carfilzomib and we get inflammation but it's not as dramatic as someone who has some susceptibility to the proteasome inhibitors. So, it does seem that the virus does benefit from active cytotoxicity. We've seen this on our breast cancer response. What we found in subset analysis, patients who had received taxanes very recently did not do as well as those who had not received taxanes in the previous 12 months. So, it does seem that the washout period really benefits the results of this. And this is going to be presented early December at ASH. There's some really nice figures in that. I think again it strongly supports a role for reovirus being a standardized backbone in checkpoint blockade.

And you mentioned that it seems like the patients that had not had heavy prior exposure to proteasome inhibitors should a better response when the reovirus was added. Have you seen any correlations one way or the other regarding prior IMiD reatment?

That's a good question. And I'm not sure that we've looked at that. If you're at assay, strongly encourage you to bend Dr. Hofmeister's ear, he’ll be a much better person to give you that answer.

Okay, great, thank you.

Thank you.

Your next question comes from Rahul Sarugaser with Paradigm Capital. Your line is open.

Good morning, gentlemen. Thanks for taking my question. So, thanks for the additional color on the window of opportunity study, so, just a couple of questions here. So, you mentioned that you will be biopsying based on a mastectomy after. And so, I wanted to clarify how many patients do you expect to enroll in this study? And then what is the time from administration of pelareorep to the mastectomy and biopsy?

Great question. This will look at triple negative, hormone receptor positive, HER2-negative, and HER2-positive patients, its roughly 12 patients per subset. Patients are biopsied at baseline. They are treated for a three week period, 21 days plus or minus five days from the mastectomy. So, the patients can get it's, well basically 21 days up to about 26 days. So, there's a window there to allow for the surgery to get in. With the full mastectomy we can get the full biopsy with immunohistochemistry. So, it's more than just a biopsy. It’s a actual disease we can look at the entirety of the mass, the normal surrounding tissue. And again what we're hoping to see is much more double stranded RNA and much more inflammation and much more lysis in the hormone-receptor-positive. We're hoping Tecentriq actually enhances this benefit. And again we're hoping to see a safety signal. We don’t expect there would be any toxicities with Tecentriq based on our limited data with Keytruda in our animal experiments. But until you do the experiment, you don’t know.

Great, that's very helpful. And in terms of then progressing to selection of biomarker and then taking that to the FDA for an amendment on the SPA. Do you have an estimate on sort of what that will take? What that process will look like and the amount of time that that would take?

And, we can start sharing the biomarker work now. As I said, we’re significant -- we're happy enough that we submitted for publication. It's done in collaboration with another group. So, we were hoping to present a little bit earlier but we had to get it through all the legal to get the press, the abstract out. I think the FDA will look at this positively. I mean, they were the group that strongly encouraged us to identify the biomarker. They provided guidance that in this area that looking at innate and adaptive responses are more easily quantifiable and have often been correlated with patient benefit. So, we looked at this with a lot of our archival tissue and actually we're able to demonstrate in an indication that this biomarker would predict for overall survival as early as cycle two-day-one. We do need to verify this in breast, but the biochemistry is the biochemistry. We're just looking at innate and adaptive response. In terms of adding that third arm, it would really be I think up to our potential strategic alliance whether we wanted to go back and do another SPA or an amendment to the SPA. The SPA typically is not required when you have an overall survival endpoint. It's more typical to see an SPA when we have a surrogate endpoint. We would still recommend the overall survival as the primary. If we were to file an amendment as I said these studies are open label. We could be seeing data here at March/April timeframe. We could be amending this SPA during the conduct of the AWARE-1 so that as soon as we had the final study reports, we hopefully would have the SPA in hand. But again, this would be -- we believe done in collaboration with our strategic partner. So, this would be in conjunction with them. So, the thinking of whether an SPA was required and the timing of any amendment to it could be as early as during the conduct of AWARE, right after but typically these SPA's have a 30 to 60 turnaround time, so, no more than two months.

Great. Thank you very much. That’s very helpful.

For them, I mean they've agreed to the activity of the agent in the phase 2. They've agreed that the results were significant enough that only a single study was made. So, it basically be their review time on adding a biomarker that will be in discussion with them and whether or not third arm is recommended.

Great. And then, one last question. And in terms of driving a partnership because you talked about that discussion happening in parallel with the FDA. So, in terms of having that enough evidence to re-incentivize the pharma partners, that you’re talked about earlier, what sort of timeline are you looking at based on the data generation from the window of opportunity study, and after that I’ll leave it there? Thank you.

You know I think there’s enough historical examples. I mean, I would point everyone to the Viralytics story. I mean they entered into the IST. They generated some results and were acquired shortly thereafter. If you look at the other one that was actually preceded by, I think the mezzanine financing, I want to say, Boehringer, I think actually participated in a mezzanine financing of viral therapeutics and acquired them within 18 months. And those are preclinical results. Pharma spend big money for these assets right now. They’re also spending big money on very limited data. The only group that really had later stage data was T-Vec and it was during the conduct of a Phase 3. So it would be very difficult to figure out what was going on. So, I think the real time data. I think, Rahul, that the biomarker results we just received them as a later or earlier this month, and they were striking enough that we were able to pull an abstract together very very quickly. We’re just communicating this now with potential partners, because again, this was something that I think everyone thought was critical to be involved in a Phase 3 program, because again it’s just significantly de-risks it. And the signal here is very very good. Whether or not, it’s going be applicable across all indications or if it’s going to be seen in the indication that where we are reporting it in yet to be seen. But I mean, it’s immune activation. So it should be applicable to all of our indications.

All right. Thank you very much.

And we are currently out of time. At this time, I will turn the call over to the presenters.

Thanks everyone. We appreciate everyone being on the call today, and look forward to updating you on our future progress. As I said, keep an eye out for us at ASH and then leading into the New Year. We’re starting the Pancreatic Cancer study imminently. We’ll be starting the Opdivo study here imminently. It’s an exciting time for us. We’re generating the data that we need for our strategic alliances, and we’re very appreciative of the patients, their families, our KOLs, and our pharma partners in moving us to the point that we are now and into a very exciting 2019

This concludes today’s conference call. You may now disconnect.