Oncolytics Biotech Inc. (ONCY) Q4 2021 Earnings Report, Transcript and Summary

Good afternoon, and welcome to Oncolytics Biotech's Fourth Quarter 2021 Conference Call. [Operator Instructions] Please be advised that this call is being recorded at the company's request. And I would like to turn the call over to Jon Patton, Director of Investor Relations and Communications. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone. Earlier today, Oncolytics issued a press release providing recent operational highlights and financial results for the Fourth Quarter and Full Year 2021. A replay of today's call will be available on the Events and Presentations section of the Oncolytics website approximately 2 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 our business prospects and the development and commercialization of pelareorep, including statements regarding our focus, strategy and objectives, our belief as to the potential and mode of action of pelareorep as a cancer therapeutic, design, aims, expectations and anticipated benefits of our current and pending clinical trials, our plans and expectations regarding a potential registrational study, our plans regarding the expansion of pelareorep's market and business development potential; our plans for collaborations with industry leaders, our financial runway and other statements related to 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, but 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 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'll turn the call over to Dr. Matt Coffey, President and Chief Executive Officer of Oncolytics Biotech. Matt?

Thanks, Jon, and thanks to all who are joining us today to discuss our fourth quarter corporate update. Now in addition to Jon, I'm joined by Tom Heineman, our Chief Medical Officer; Andrew de Guttadauro, our Global Head of Business Development; and Kirk Look, our Chief Financial Officer. I'm pleased to say that we had a very strong 2021 and have continued to build on our momentum in the early part of 2022. If you've not had a chance, I would encourage our investors to read the letter to shareholders that we distributed as a press release on January 11. In it, we walk you through why what we saw in 2021 is significant and why we're excited about 2022 and our upcoming milestones. We are advancing towards potential value inflection points across our pipeline with a strong historical foundational data set that demonstrates pela's ability to deliver a statistically significant survival benefit as was shown in our randomized Phase II metastatic breast cancer trial, generated a profound and concerted innate and adaptive anticancer immune response and synergized with multiple oncology treatments. Now the most significant of our expected 2022 milestones is the top line data announcement from BRACELET-1, our randomized Phase II trial evaluating pela in combination with checkpoint inhibition in HR+/HER2- metastatic breast cancer. BRACELET-1 is being conducted with collaboration with Pfizer and Merck Serono and is designed to expand upon our prior positive Phase II results in this indication by generating critical data requested by the FDA and our global pharma collaborators. Data that confirms the overall survival benefit we saw in IND-213 would serve to derisk our lead breast cancer program in broader pipeline, and we believe that data represents the last major step on pela's path to a registrational breast cancer study. As we work towards this data readout, we intend to begin discussing our plans for a registrational study with the FDA and other regulators so that we can advance the programs with efficiency. While Tom will be speaking more about BRACELET-1 and our lead breast cancer program in a bit, I will say now that the trial remains on track for full enrollment in late Q1, early Q2 with top line data in Q4, assuming no or limited impact from COVID-19. Beyond our lead program, pela's ability to generate an innate and adaptive immune response, thereby weakening tumor defense mechanisms continues to spark collaborations with industry leaders and academia. These collaborations include those underlying our ongoing trials in triple-negative breast and gastrointestinal cancers, both of which recently reported interim updates that further demonstrate the favorable safety profile of pela checkpoint inhibitor combinations. These positive updates are notable because the lack of toxicity in these large indications provides additional opportunities to expand the potential market of pela checkpoint inhibitor combinations. The opportunity for expanding beyond checkpoint inhibitors has been evident in data we reported during the 2021 year. Promising combination therapy data readouts involving CAR-T, bispecific antibodies, PARP and CDK 4/6 inhibitors are evidence of pela's differentiated and broadly applicable mechanism of action. We believe leveraging pelareorep in this fashion could address unmet needs across the spectrum of target indications, and we expect to report clinical updates supporting this hypothesis in both multiple myeloma, GI and glioblastoma at upcoming conferences. Looking ahead, we plan to utilize a partnership strategy to pursue the multitude of market and business development opportunities offered by pelareorep and its potential to act as an immunotherapy backbone. This will allow us to operate efficiently as we devote our primary focus and resources towards the advancement of pelareorep to registration in HR+/HER2- metastatic breast cancer. With that, I'll now hand it off to our Chief Medical Officer, Tom Heineman, who I could also congratulate on his well-deserved recent promotion to provide a bit more detail on BRACELET-1 in our recent highlights. Tom?

Thanks, Matt, and thanks to all those listening on the call today. As a reminder, BRACELET-1 and our early-stage breast cancer study AWARE-1 were designed to achieve 3 crucial objectives put forward by regulators and our pharma partners after seeing the results of IND-213, the randomized Phase II study that showed a near doubling of overall survival in metastatic HR+/HER2- breast cancer patients treated with paclitaxel combined with pelareorep. These objectives were to: first, confirm that pelareorep works through an immunotherapeutic mechanism of action. This would indicate that it stimulates long-lasting anticancer effects and explains the survival benefit seen in IND-213. Second, determine whether pelareorep synergizes with immune checkpoint inhibitors. This could lead to an enhancement of the survival benefit seen in IND-213 in breast cancer patients and could also potentially provide more effective treatment options for patients with many other types of cancer. And third, determine if changes in peripheral blood T cell populations could potentially serve as a novel blood-based biomarker to predict patient responses to pelareorep therapy. This could improve our chances of success in future studies by allowing the selection of patients most likely to benefit from therapies that include pelareorep. Now on past earnings calls, we detailed data from AWARE-1's first 2 cohorts, which exclusively enrolled patients with the HR+/HER2- breast cancer subtype. These data showed that AWARE-1 met its primary endpoint with pelareorep reversing immunosuppressive tumor microenvironments and generating and expanding T cell clones and upregulating PD-L1 expression. It led to increases in CelTIL score and tumor infiltration of CD8+ and T cells, 2 metrics that are known to correlate with improved clinical outcomes. Additionally, we found that several of these positive effects were enhanced when a checkpoint inhibitor was combined with pelareorep and the changes in peripheral blood T cell populations correlated with CelTIL score and tumor-infiltrating CD8 T cells. Taken together, these promising findings indicate that we are well on our way to achieving the 3 key objectives mentioned earlier. They clearly show that pelareorep has an immunologic mechanism of action and demonstrated synergy with checkpoint blockade. Moreover, they indicate that changes in peripheral blood T cell populations may service a predictive biomarker. With these objectives in mind, we designed BRACELET-1, a study that is very similar to IND-213 with 2 notable exceptions. First, BRACELET-1 exclusively enrolls HR+/HER2- metastatic breast cancer patients, the population that demonstrated the most pronounced overall survival benefit in IND-213. And second, in addition to having study arms evaluating paclitaxel alone and paclitaxel plus pelareorep, BRACELET-1 also includes a third study arm in which paclitaxel and pelareorep are combined with Pfizer and Merck Serono's anti-PD-L1 checkpoint inhibitor, Bavencio. We are pleased with the progress being made in BRACELET-1, and we expect to complete enrollment later this month or early in the second quarter. Approximately 16 weeks after enrollment has concluded, the final patient scans required for assessment of the study's primary endpoint will be completed. Once the results of the scans are available, we will compile and analyze the data and then discuss these results with the relevant parties as we continue to plan for our next steps on the path to registration. Considering all of this, we anticipate announcing the top line results of the trial in the fourth quarter of this year. I'd now like to take a minute to set the stage for what to expect from the BRACELET-1 study. Data from earlier studies give us some insight into what to expect from both the paclitaxel alone and paclitaxel plus pelareorep arms of the study. However, now based on the AWARE-1 study results, we have a much clearer understanding of the immunologic effects of adding pelareorep, including increasing PD-L1 expression and the infiltration of CD8+ T cells into tumors. Moreover, the AWARE-1 study provided extensive insights into the potentially beneficial immunologic effects of combining pelareorep with a checkpoint inhibitor. These include reversing the immunosuppressive nature of the tumor microenvironment and enhancing the development of potentially protective innate and adaptive immune responses. The IND-213 study gave us a clear reason to expect that the addition of pelareorep to chemotherapy may benefit metastatic breast cancer patients. Now based on the AWARE-1 results, we are hopeful that the synergistic effects of adding a checkpoint inhibitor pelareorep will further benefit patients in the BRACELET-1 study. In addition to collecting data on overall response rate and survival, we are also collecting progression-free survival, safety and biomarker data from the BRACELET-1 study. I should note, however, that we do not plan to present the entirety of the BRACELET-1 results during the anticipated fourth quarter announcement and that we expect to present additional updates at medical meetings in 2023, including updates on PFS and overall survival. Additionally, I should point out that due to the size of the BRACELET-1 trial, which is expected to enroll a total of 48 patients, it is not powered to detect statistically significant differences in overall response rates between the study groups. Therefore, we will be evaluating numerical differences between BRACELET-1 study groups to support the statistically significant survival benefit previously observed in IND-213 and to inform the design of the Phase III study. We thus view BRACELET-1 as the last major step on pelareorep's path to a registration study and believe the anticipated Q4 data announcement represents a major potential inflection point for the company. Now that I've provided you with a refresh of our AWARE-1 program and an overview of our BRACELET-1 study, I'll hand it off to Andrew to speak a bit more about our partnership strategy as well as our broader business development efforts. Andrew?

Thanks, Tom, and thanks to all who have joined us on today's call. I'd first like to touch on some of the recent progress in our IRENE and GOBLET trials, which are examples of how we're collaborating with industry leaders to develop pelareorep in combination with checkpoint inhibitors and expand its potential therapeutic impact. As you may recall, IRENE is a Phase II trial evaluating pelareorep in combination with Incyte's PD-1 checkpoint inhibitor retifanlimab in metastatic triple-negative breast cancer. At the most recent San Antonio Breast Cancer Symposium in December, we are pleased to report that the combination is well tolerated in each of the 5 patients enrolled at that point in the trial. The trial remains ongoing and we look forward to its continued progress. We also recently provided a positive safety update from our Phase I/II GOBLET trial, which is a valued pelareorep in combination with Roche's PD-L1 inhibitor, atezolizumab, in patients with advanced or metastatic pancreatic, colorectal and anal cancers. We were pleased to report in February that an independent review of the trial's pancreatic cancer safety run-in noted no toxicity concerns and that the Data Safety Monitoring Board recommended the trial proceed as planned. The trial also includes a safety run-in for its third line metastatic colorectal cancer cohort, which remains ongoing with an update expected in the first half of the new year. Now one point I'd like to emphasize is how IRENE and GOBLET takes a similar approach to try and address the pressing unmet need. While checkpoint inhibitors have been commercially successful, less than 1 in 5 patients respond to these therapies due to several different resistance mechanisms that can be addressed by pelareorep's clinically demonstrated immunotherapeutic effects. As Tom mentioned earlier, pelareorep has shown the ability to remodel the tumor microenvironment, causing PD-L1 upregulation in addition to increase in CD8+ cells and memory T cells. Outcomes like these are appealing to industry leaders because pelareorep has demonstrated it can increase the proportion of patients eligible for therapies like checkpoint inhibitors and increase the benefit derived from combination therapies. The ultimate goal is to secure a global clinical and commercialization partnership and past deals have typically been preceded by research collaborations similar to the trials Tom and I have discussed on this call. Next, I'd now like to provide another update on the additional progress made since our Q3 call with Adlai Nortye, our partners working to develop and commercialize pelareorep in China, Hong Kong, Macau, Singapore, South Korea and Taiwan. In October, Adlai dosed the first patient or bridging safety trial, evaluating the safety, tolerability and preliminary pelareorep-paclitaxel combination therapy in Chinese patients with advanced or metastatic breast cancer. This trial follows the design that's similar to the pelareorep-paclitaxel cohort in IND-213. Now in January, Adlai announced that they had advanced the second dose escalation cohort of the trial. This is significant because the second dose cohort is equivalent to what was administered to patients in IND-213, which showed a near doubling of survival in metastatic HR+/HER2- breast cancer patients. The initiation of this cohort is an important step that reflects the positive safety findings from the trial's first dose escalation cohort where no toxicity concerns were noted. The ultimate goal of the bridging trial is to satisfy Chinese safety requirements and thereby accelerate pelareorep's development in Adlai's principal jurisdiction. Subsequent studies will include data from IND-213 and BRACELET-1 in future regulatory submissions and trial design decisions. Data from these studies and regulatory requirements from the Chinese authorities will dictate what a Phase III study will entail as the Phase III design has not yet been determined. Results from BRACELET-1 will factor heavily when considering whether a checkpoint inhibitor will be included in the Phase III study in China. Pelareorep's advancement in these jurisdictions is significant as China alone has the world's second largest pharmaceutical market with rapid growth expected over the coming years. By leveraging our partnership with Adlai, we have positioned ourselves to capitalize on the significant market opportunity with minimal risk and clinical costs. Finally, before I hand the call over to Kirk, I'd like to reiterate a point Matt made earlier regarding our efforts to develop pelareorep as an enabling technology for therapeutic agents beyond checkpoint inhibitors. To efficiently pursue this goal, we are seeking high-quality partners to lead this development pathway and assume its associated costs. We are supported in these efforts by emerging preclinical data and our clinical results, demonstrating pelareorep's ability to reverse immunosuppressive tumor microenvironments and recruit cancer-finding T cells into tumors. These have led to collaborations by technology companies and key opinion leaders of premier academic institutions. Since I've discussed positive safety readouts for TNBC and gastrointestinal cancer plus a pelareorep dose escalation in breast cancer today, I'd like to take a moment to remind our investors that pela's favorable safety profile is an important factor when we have discussions with new and existing biopharma partners. Being able to provide clinical safety data across multiple indications and tumor targets, in addition to combinations of multiple oncology therapies broadens the overall addressable market opportunity for pelareorep. As such, it shows the pharma world that pelareorep really does have the potential to be an immunotherapy backbone since it is so versatile. While we are eager to see data from these collaborative efforts generate, we remain steadfastly committed to preserving the company's primary focus on our lead breast cancer program and the execution of our stated clinical objectives. Our relationships with distinguished collaborators such as Roche, Pfizer, Merck Serono, BMS, Incyte and Adlai Nortye, helped to maintain this focus and should serve us well as we work to execute on our goals. We look forward to the continued maturation of these relationships, which together with our talented team and robust data set leave us well-positioned for sustained success. With that, I'll turn the call over to Kirk Look, our CFO, to discuss our financial results for the fourth quarter. Kirk?

Thanks, Andrew, and good afternoon, everyone. It's my pleasure to report that on Oncolytics remains well capitalized as we advance our lead breast cancer program towards a registrational study and execute on additional clinical and corporate objectives. We ended 2021 with cash and cash equivalents of $41.3 million compared to $31.2 million at the end of 2020. Based on current projections, we expect our current cash resources to provide a financial runway into 2023, taking us through BRACELET-1's top line data announcement and additional clinical readouts. Our operating expenses for the fourth quarter of 2021 were $3.8 million, remaining relatively consistent with the fourth quarter of 2020 operating expenses of $4 million. For the full year 2021, our operating expenses were $13.3 million compared to $12.5 million for the prior year. This change largely related to a rise in public company costs, including an increase in our directors and officers insurance premiums and an increase in our Investor Relations activities. Research and development expenses for the fourth quarter of 2021 were $3.7 million compared to $4.1 million for the same period last year. This change was largely due to a decline in our AWARE-1 related expenses as a large majority of patient enrollment occurred back in 2020. As well, our manufacturing-related expenses were lower, given we completed a product fill back in the fourth quarter of 2020. Now this was partly offset by higher R&D compensation-related expenses as we continue to invest in and support our expanding clinical development program. Research and development expenses were $12.9 million for the full year 2021 and 2020. Now for 2021, in addition to our continued investment in our clinical program and our R&D team, we also increased our translational science activities this year, focusing on CAR T therapy and bispecific antibody opportunities. This was offset by lower manufacturing activities as we had sufficient product supply from the production run and product fills completed in 2020, lower intellectual property costs due to the lapsing of patents in certain jurisdictions and foreign exchange fluctuations. The net loss for the fourth quarter of 2021 was $7.8 million compared to $9.3 million for the fourth quarter of 2020, equating to a net loss of $0.14 per share for the 2021 period compared to $0.21 per share for the prior period. The net loss for the full year 2021 was $26.3 million compared to $22.5 million for 2020, equating to a net loss of $0.49 per share for 2021 and a net loss of $0.56 per share for 2020. Now with that, I'll hand it back to Matt. Matt?

Thank you, Kirk. The Oncolytics family has continued to work hard to drive our programs forward. Our pharma partners have continued to provide world-class input and guidance, and our investigators and collaborators continue to share our vision for the opportunity presented by pelareorep's mechanism of action for which we are extremely grateful. We would also like to thank and acknowledge our clinical trial patients and their families for their participation in our studies and in their fight against this terrible disease. Lastly, I'd like to thank our investors who provide us with the ability to pursue these inspiring names. Oncolytics cannot have advanced to where it is without all of these stakeholders contributions. Looking towards the future, we have a truly unique immunotherapeutic agent that has provided us with exciting clinical data and continues attracting interest from significant global collaborators. Its immunotherapeutic effects can be seen across multiple indications and in combination with an array of oncology treatments. We believe these effects could have a profound positive impact on the quality of life of cancer patients worldwide and in turn provide a broad commercial opportunity of which we have only begun to scratch the surface. We will continue to further pelareorep's clinical development as there are significant opportunities worthy of pursuit. But we will still preserve our primary focus in breast cancer, while selectively engaging partners and collaborators to progress our efforts in other areas. Advancing our lead breast cancer program towards a registrational study is important to our team as it provides a meaningful foundation, which we can build upon to unlock additional value in other indications. The clinical data from AWARE-1 alone has brought us substantial insights about how pelareorep can be leveraged in many clinical settings by effectively harnessing the patient's own immune response against their disease. These learnings are crucial in advancing pela as a world-class immunotherapy. Continuing to add to that data goes a long way to expanding the potential value of this company. We have several critical milestones ahead of us in the coming weeks and throughout the year. These upcoming catalysts are highlighted by BRACELET-1 anticipated top line data readout in Q4, which represents the last major clinical step on pela's path to a registrational breast cancer study. We also expect to report a multiple myeloma study update, early results from our GI program and additional clinical data in glioblastoma at upcoming conferences. As we move towards these catalysts, we are doing so with a strong team that has consistently executed amid an ever-evolving pandemic. I believe their experience and expertise, together with the strong clinical and preclinical data set supporting our pipeline leave us well-positioned to generate shareholder value while working towards our ultimate goal of improving the lives of cancer patients. With that, I'd like to open the lines to take some questions. Operator?

[Operator Instructions]. And your first question will be from Patrick Trucchio at H.C. Wainwright.

This is Jason Shay [ph] on for Patrick. And my first question is for the BRACELET study, can you tell us what Oncolytics would like to see within the Phase II data readout for 4Q? And like how will this proceed to your Phase III pivotal study?

I'll start. It's Matt Coffey. We very much think that BRACELET should fall in line with the learnings of AWARE-1. What we know from BRACELET 213 is we saw a survival advantage and at that point, it was presumably due to the immunotherapy aspect of the product. AWARE-1 really did speak to the virus itself causing a pro-inflammatory event with remodeling of the tumor micro environment and the checkpoint inhibitor leading to enhanced inflammation and enhancing the quality, which led to better CelTIL scores, which should in turn lead to better outcomes in terms of PFS and OS. We would very much hope to see something similar in BRACELET with outcomes being improved from paclitaxel only to paclitaxel plus virus. And again, we would like to see an improvement by the addition of the checkpoint blockade. Now those are wishes. Certainly AWARE-1 exceeded our expectations. BRACELET's not given a formal readout yet, but will do so in Q4. With that, I'll let the more knowledgeable Tom Heineman join in to see what his thoughts are on this.

Yes, thank you Matt. No, I mean, to be honest, I don't have any real new insights. I think that Matt expressed that perfectly, and that is we do have some sense from the previous IND-213 study what to expect with the paclitaxel-alone arm and the paclitaxel-plus-pelareorep arm. And we expect and hope based on the AWARE-1 data to see an additional immunologic effect leading to clinical benefit from the addition of a checkpoint inhibitor. And as the data come in, we look forward to being able to share those data towards the end of this year.

And kind of just a follow-up question is, are there plans in terms of progressing with Pfizer or any of your collaborators for pelareorep and for the Phase III pivotal study or will Oncolytics kind of proceed alone?

Again, that's a great question. We think there is multiple opportunities beyond breast cancer. I mean obviously, we're very excited about the GOBLET program. We're excited by what we're doing in heme malignancies and other things like GBM. With the collaborations and co-development agreements we have right now, we have brought some of the world's best and brightest pharmaceutical companies together to collaborate with us. So what we would like to see is some competitive tension between the parties as the GOBLET data becomes available, as the AWARE and BRACELET data becomes available, we would like to obviously bring in one of these world-class leaders who contributed already to continue contributing in the Phase III for breast cancer, but we would look to hopefully expand that into other indications so that we're not looking at a binary event in the Phase III environment. We would like to have multiple Phase III programs in play. And again, we would like to see that done in potential with a partner so that would be less dilutive to existing shareholders, but also so that we can move spritely through the regulatory approvals. And I think Mr. de Guttadauro would like to join in here for a second as well. Andrew, do you want to...

Yes. I just want to remind everybody, as you probably know from prior calls, from the time we provide the report to Pfizer and Merck Serono, the collaborators on BRACELET, they have 90 days to evaluate the data on their own. They may or may not need 90 days or they may need more than 90 days. But come day 91, we do have a number of other top 20 oncology companies that have expressed an interest in the BRACELET data. So we would want to get that data to those companies as well. And then, of course, as Matt mentioned, we've got the GOBLET data that should be maturing in parallel to some degree. And so we want to make sure we leverage both what's available from GOBLET as well as BRACELET and the prior final data sets from 213 and AWARE to have really a critical masses which to try and bring more than one company to the table.

Okay. Great. And kind of if I can just squeeze in one last question, and this is more just in terms of the current events. Has Oncolytics showed any disruption in their clinical trials since beginning the war in Ukraine? And has that really impacted anything with your clinical trials out in China or in Asia area?

No, not at all. Fortunately, we're not running anything in Eastern Europe. We may not be able to be as resounding in it. But our breast cancer programs are all in the U.S. What we're doing in GOBLET is all in Germany. So we've been unaffected [indiscernible].

[Operator Instructions]. And at this time, we have no further questions. I would like to turn the call back over to Dr. Coffey.

Well, thanks again, everyone, for joining us on the call. We look forward to our continued progress, and we'll keep everyone updated along the way. Thanks, everyone.

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 do ask that you please disconnect your lines.