Oncolytics Biotech Inc. (ONCY) Q4 2022 Earnings Report, Transcript and Summary

Welcome to Oncolytics Biotech’s Fourth Quarter and Full Year 2022 Conference Call. [Operator Instructions] 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 Communications. Please go ahead.

Thank you, operator and good morning everyone. Earlier this morning, Oncolytics issued a press release providing recent operational highlights and financial results for the fourth quarter and full year of 2022. A replay of today’s call will be available on the Events & 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 the company’s business prospects and the development and commercialization of pelareorep, including statements regarding the company’s focus, strategy and objectives, 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 pending clinical trials, and anticipated timing of the release of additional data, the company’s plans and expectations regarding potential registrational studies, company’s business development plans and strategies, company’s 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. Any new 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 these 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 factors detailed in the company’s filings with the SEC. Oncolytics does not undertake any obligation to update these forward-looking statements, except as required by applicable laws. Speaking on today’s call will be Oncolytics’ Chief Executive Officer, Dr. Matt Coffey; Chief Medical Officer, Dr. Thomas Heineman; Global Head of Business Development, Andrew de Guttadauro; and Chief Financial Officer, Kirk Look. I will now turn the call over to Matt to begin management’s remarks. Please go ahead, Matt.

Thanks, Jon and thanks to everyone joining us this morning. Looking back over the past year, it’s clear that 2022 was a transformational time for our pipeline and company and one that has set us up for another exciting year in 2023. Emboldened by the accomplishments that you will be hearing about on today’s call, we are advancing a pipeline that now includes two high-value registrational opportunities for pelareorep or pela, as we’ll call it, with each representing a core pillar of our business and foundation for growth. The first and longest standing of these pillars is of course our HR-positive HER2-negative breast cancer program. Last year, we completed enrollment in the program’s second randomized Phase 2 trial, BRACELET-1, which is approaching a crucial data readout that we anticipate sharing at a major medical meeting next quarter. We expect this readout, which Tom and Andrew will discuss in more detail to provide key data that will validate the program’s prior positive results and help inform the design of subsequent registrational trial. Just to provide some additional company history, our breast cancer program’s prior positive results come from IND-213, a randomized Phase 2 trial that counts as one of the two pivotal studies required for regulatory approval of pela in breast cancer for a special protocol assessment agreed with the FDA. IND-213 showed a statistically significant and clinically meaningful near doubling of overall survival in HR-positive HER2-negative breast cancer patients who received pela plus paclitaxel compared to those who received paclitaxel alone. These data build upon Phase 1 results demonstrating pela’s single-agent activity in HR-positive HER2-negative breast cancer and also inspired the AWARE-1 study, which met its primary endpoint and demonstrated how pela remodels the tumor microenvironment and trains the immune system in ways that may enhance the efficacy of a wide range of oncology treatments. With all these data in place, we believe a successful outcome from BRACELET-1 would represent a key inflection point for our breast cancer gram as it would clear the way for pela’s advancement into a registrational study and bolster our business development activities. Next, I will turn to our pancreatic cancer program, which emerged as our second core pillar late last year following some remarkable proof-of-concept data from our Phase 1/2 GOBLET study presented at 2022 SITC Annual Meeting. The pancreatic cancer cohort reported a 69% objective response rate, including a confirmed complete response in 13 evaluable patients treated with the combination of pela, the checkpoint inhibitor, atezolizumab and the chemotherapeutic agents gemcitabine and nab-paclitaxel. These results generated excitement from our team and key opinion leaders in the field, because the average response rate observed in relevant historical control trials in pancreatic cancer is only about 25%. The 69% objective response is nearly 3x that would have been expected. Based on the strength of these data as well as discussions with key opinion leaders and potential partners, we believe the most prudent next step for our pancreatic cancer program is to determine the optimal registration-enabling pathway as expeditiously as possible. To do this, we continue to engage with the FDA who granted pela Fast Track Designation in pancreatic cancer in the fourth quarter and other key stakeholders to align on the optimal design for such a study, which Tom will discuss further. Looking ahead, advancing our pancreatic and HR-positive HER2-negative breast cancer program towards a regulatory approval will be our primary focus. Alongside these efforts, we will selectively continue to evaluate pela’s therapeutic potential in additional indications through collaborations with leading industry players and academics as this was a strategy that allowed us to maintain momentum in our breast cancer program while bringing our pancreatic cancer program forward as our pipeline second core pillar. And with that, let me turn the call over to Tom and Andrew for a more in-depth discussion of our clinical programs and business development efforts. We will start with you, Tom.

Thanks, Matt. I’d like to kick off my portion of the call by setting the stage for what to expect from BRACELET-1’s anticipated readout next quarter. As a reminder, BRACELET-1 is a randomized Phase 2 trial to be conducted in collaboration with Pfizer and Merck KGaA. It enrolled patients with HR-positive HER2-negative metastatic breast cancer into three distinct cohorts. The first two cohorts mirror the ND-213 study that Matt referenced earlier with one cohort evaluating paclitaxel monotherapy and the other evaluating the combination of paclitaxel and pela. In addition, the third cohort evaluates a combination of paclitaxel, pela and the checkpoint inhibitor, avelumab. At a medical meeting next quarter, we anticipate reporting progression-free survival and tumor response results from this trial, which was designed to enroll a total of 48 patients. While enrollment into BRACELET-1 is complete, it should be noted that many patients continue to be followed for critical endpoints. Accordingly, some key results of the study, including overall survival will only come into focus as the data mature. Given its size, BRACELET-1 is not powered to demonstrate statistical significance between the study groups. A successful result from the trial would therefore B2C one or both of the cohorts that include pela numerically outperformed the paclitaxel monotherapy arm. Achieving this result would result in a second randomized dataset supporting pela’s ability to deliver meaningful clinical benefit to HR-positive HER2-negative breast cancer patients further derisking our program as we move towards a registrational study. As we look ahead for our breast cancer program, we are also highly encouraged by recent data presented by our partner, Adlai Nortye at last year’s San Antonio Breast Cancer Symposium. 0These data were from Adlai’s single-arm bridging trial evaluating pela plus paclitaxel in Chinese patients with HR-positive HER2-negative metastatic breast cancer. As you just heard, pela plus paclitaxel is the same combination being studied in BRACELET-1’s second cohort. Results from Adlai’s bridging trial demonstrated this combination’s favorable safety profile in Chinese patients and showed tumor shrinkage in 12 of 14 evaluable trial participants with 7 achieving a partial response. Of the 7 patients with partial responses, three had the responses confirmed by subsequent scans, while two others had potentially confirmatory scans pending. Notably, one patient continued to maintain a partial response after nearly a year following the presentation’s cutoff date. And although they are still evolving, I would like to also note that the trial’s progression-free survival results presented at San Antonio Breast Cancer Symposium showed a median PFS of 9.1 months. These interim results from Adlai’s bridging trial further demonstrate the ability of pela plus paclitaxel to drive durable clinical responses in HR-positive HER2-negative breast cancer patients. We believe this promising finding bodes well for BRACELET-1’s upcoming readout. I will now speak about our recent results in pancreatic cancer and what they mean for the program moving forward. These data were presented at the SITC meeting last year and came from our GOBLET study, which is a Phase 1/2 multi-indication trial being conducted in collaboration with Roche and AIO. The trial was designed in two stages so that any cohort that achieves a pre-specified response rate in Stage 1 maybe expanded to enroll additional patients in Stage 2. As Matt previewed, GOBLET’s pancreatic cancer cohort evaluated the combination of pela, the PD-L1 checkpoint inhibitor, atezolizumab and the chemotherapeutic agents, gemcitabine and nab-paclitaxel in first line patients with advanced or metastatic disease. We reported an objective response rate of 69% in 13 evaluable patients with 8 patients achieving a partial response and 1 achieving a confirmed complete response, which is a quite rare finding in this indication. The study combination was also shown to be well tolerated. To help provide a full understanding of these results, I’ll emphasize some key points made during the recent key opinion leader webinar, a replay of which can be found on our website. This webinar featured GOBLET’s principal investigator along with two additional pancreatic cancer experts. First, I’ll emphasize that achieving a 69% response rate in GOBLETs pancreatic cancer cohort far surpassed our expectations going into the trial. As Matt mentioned, the average response rate for pancreatic cancer trials of gemcitabine plus nab-paclitaxel is only about 25% or roughly third of what was observed when we added pela and a checkpoint inhibitor to this regimen. Moreover, a number of trials have shown that checkpoint inhibitors only improve outcomes in pancreatic cancer patients classified as MSI high who represent only about 1% of all pancreatic cancer patients. This helps explain why older chemotherapeutic regimens such as gemcitabine plus nab-paclitaxel remain the standard of care in pancreatic cancer despite providing a median overall survival of less than a year. The next point from our KOL webinar that I’ll emphasize is that goblet’s pancreatic cancer cohort included patients that are quite typical and similar to what would be expected in a randomized registrational trial. Of the evaluable patients, 13 had metastatic disease with nine having liver metastases and the average age of the patients was just over 62 years. Having achieved these very encouraging results in a representative population increases our confidence as we move our program towards a registrational study. And the last point I will emphasize is that we have a robust set of mechanistic data prior trials supporting GOBLET’s results, which suggests pela synergistic reacts with checkpoint inhibition and chemotherapy to drive tumor responses in pancreatic cancer. These data have demonstrated pela’s ability to activate and expand anticancer immune cells while simultaneously reversing immunosuppressive tumor microenvironments. Immunologic effects such as these are known to enhance the efficacy of checkpoint inhibition, highlighting the scientific rationale for the GOBLET study. Based on GOBLET’s compelling results, as well as the unmet need and current treatment landscape in pancreatic cancer, we have chosen to forego Stage 2 expansion phase for the trial’s pancreatic cancer cohort so that we can move directly towards a registrational pathway. Given the clear signal of activity we’ve seen in GOBLET’s pancreatic as or cohort to date, we believe this is the most clinically appropriate next step for the program and one that is in the best interest of patients. To enable the advancement of our pancreatic cancer program to a randomized trial, we are gathering input from regulators and other key stakeholders on the optimal design for its next trial. As we work to do this, we will benefit from our pancreatic cancer program’s recent Fast Track designation from the FDA. This designation will provide us with the opportunity to communicate more frequently with the agency about our data and planned development pathway. It also provides a degree of validation for GOBLET’s interim results since receiving Fast Track designation requires that a therapy show some advantage over available treatments such as superior effectiveness. While it’s too early to share the specifics of what pela’s next pancreatic cancer trial will look like, what I can say now is that we are envisioning a randomized Phase 2 study with an adaptive design. Ideally, this design would allow seamless progression from an interim analysis to an expansion phase designed to support a regulatory file. We look forward to our continued work designing this trial and to sharing more details once they are finalized. Lastly, before handing off the call to Andrew, I would like to remind all listening that in addition to its pancreatic cancer cohort, GOBLET also includes cohorts evaluating pela atezolizumab combinations in metastatic colorectal and advanced anal cancer. We expect to have additional updates from these cohorts over the course of the year and have been pleased with the overall enrollment to date. With that, I’ll ask Andrew to speak about our business development efforts. Andrew?

Thanks, Tom. I’ll start by building off a point Matt made at the top of the call, noting how 2022 was a transformational year for pela’s potential licensing value proposition. By adding GOBLET’s recent data in pancreatic cancer, alongside IND-213 statistically significant results of breast cancer, we provided pela with a second registration opportunity that is significantly de-risked by differentiated clinical data. Moreover, each of pela’s potential registration programs provides a robust market opportunity for prospective partners. For HR-positive HER2-negative breast cancer, estimates indicate that there will be nearly 300,000 drug-treatable patients across the U.S., Japan and major European markets by 2028. Looking at first-line metastatic pancreatic cancer, the number of drug treatable patients is expected to reach 135,000 in the same time frame. With addressable markets of this size, and clinical data demonstrating pela’s potential to substantially improve upon the standard of care in these indications, we believe we are well positioned as we pursue a single-sensing deal for both of our breast and pancreatic cancer programs. According to feedback from our conversations with potential partners, BRACELET-1’s evolving results will be a crucial component of the data set supporting any deal. As we work towards a licensing agreement for pela’s rights in the U.S., Europe, Japan and elsewhere, we are pleased to have already partnered with Adlai Nortye on its development and potential commercialization in certain Asian territories such as Singapore, South Korea, Macau, Hong Kong, Taiwan and China, which is the world’s second largest and fastest-growing pharmaceutical market. Adlai recently took an important step to accelerate pela’s development in China, thanks to the results from the bridging trial Tom discussed earlier in the call. With these data showing pela’s plus paclitaxel is well tolerated and generated dermal responses in the study, Adlai now has the opportunity to interact with Chinese regulators to discuss potential registrational approaches for pela in this jurisdiction. In addition, the positive results of the bridging trial are expected to allow for the inclusion of data from the IND-213 and BRACEIT-1 in Adlai’s future regulatory submissions, thereby expediting pela’s path approval in China. Now before handing the call to Kirk to review our annual financial results, I’d like to reiterate our enthusiasm for the outlook of our BD prospects and remind everyone that due to nature of licensing discussions and our commitment to drive competition between prospective parties, we are unable to predict the timing of any potential portion. That said, I’ll again note that our ongoing interactions with prospective partners have indicated that showing meaningful data from BRACELET-1 would be a critical step towards reaching a deal. This is a surprising as a successful outcome from BRACELET-1 together with IND-213’s statistically significant results would give us two randomized data sets demonstrating pela’s ability to drive clinical benefit in HR-positive HER2-negative metastatic breast cancer patients. With IND-213 county is one of the two pivotal studies required for FDA approval, it would also position us to move rapidly into substantially de-risk registration study in an indication with a large market opportunity and high unmet need. As we look toward BRACELET-1’s anticipated readout next quarter, I should emphasize that we will continue to advance in a deliberate manner as the overall survival Tom mentioned matures. With several patients still receiving treatment, there is an opportunity for a truly impressive endpoint that we could sell ourselves short if we rush into a deal prematurely based on data that could improve over time. With industry leaders such as Pfizer, Roche, Merck Serono, Bristol-Myers Squibb and Insight already familiar with pela thanks to collaborative clinical trials, we intend to run a methodical and competitive process that ensures we reach the best possible outcome for our shareholders. Many of the key pieces needed to achieve our BD goals already in place, thanks to our current data and breast of pancreatic cancer, and we expect that the continued execution of our clinical regulatory strategy will bring us to a successful outcome. One final note, we continue to advance our preclinical CAR-T program in ongoing discussions with multiple potential biopharma and research partners and maintain constructive conversations on a potential clinical trial. With that, Kirk will now review our fourth quarter and full year financial results. Kirk?

Thanks, Andrew. It’s my pleasure to report that Oncolytics current cash resources have us in a strong financial position with an anticipated runway into 2024 based on our current projections. This runway is expected to take us past multiple potential value inflection points, including BRACELET-1’s anticipated readout next quarter. Now moving on to our fourth quarter and year end financial results. We ended 2022 with $32.1 million in cash and cash equivalents and marketable securities compared to $41.3 million in cash and cash equivalents as of December 31, 2021. General and administrative expenses for the fourth quarter of 2022 were $3.7 million consistent with $3.8 million for the fourth quarter of 2021. For the full year 2022, G&A expenses were $11.5 million compared to $13.3 million for the full year 2021. This change was mainly due to lower investor relations activities. Consistent with prior quarters in 2022, the global business conditions had negatively impacted market sentiment for the biotech industry and the overall capital markets. So we anticipate this changing in 2023, we limited our IR activities accordingly in 2022. Our research and development expenses for the fourth quarter of 2022 were $4.8 million compared to $3.7 million for the fourth quarter of 2021. For the full year of 2022, research and development expenses were $15.4 million compared to $12.9 million for the full year 2021. The changes from the fourth quarter and full year 2021 to the respective 2022 periods were mainly driven by advanced care GOBLET platform study and higher personnel-related expenses to support our R&D program. The net loss for the fourth quarter of 2022 was $8.6 million compared to $7.8 million in the fourth quarter of 2021, which equates to a net loss of $0.14 per share for both periods on a consolidated basis. And finally, the net loss for the full year 2022 was $24.8 million compared to $26.3 million in the full year 2021, equating to a net loss of $0.43 per share for the 2022 period and a net loss of $0.49 per share for the 2021 period on a consolidated basis. I will now hand the call back to Matt for some closing remarks. Matt?

Thanks Kirk. First, let me extend my gratitude to our clinical trial participants, employees, partners, investigators and shareholders for their contributions towards our progress over the past year. This progress has brought us to an exciting and crucial point in our corporate evolution. In our HR-positive, HER2-negative breast cancer program, the continued advancement of BRACELET-1 has us closing in on a critical data readout that is positive will bolster our BD prospects and accelerate pela’s path into a registrational study in this indication. And alongside BRACELET-1’s advancement, we collaborated with Roche and AIO to generate compelling data in pancreatic cancer, providing pela with a second clear path towards the registrational study. In addition, our recent data in pancreatic cancer provide a blueprint for how we can efficiently enhance pela’s value proposition by adding near-term value drivers to our pipeline without taking focus away from its core pillars. We will continue to follow this blueprint as we move forward as our primary internal focus will be the advancement of our breast and pancreatic cancer programs so that we can move into a registrational environment with multiple shots on goal and reduced risk of binary events. In parallel, we will use collaborative studies to advance pela in additional highly prevalent indications and to further demonstrate pela’s immunotherapeutic mechanism of action positions it as a platform molecule with expansive therapeutic potential. With world-class collaborators and a talented team that provided their ability to execute the strategy over the last year, we believe we are well positioned for continued success as we work to improve the lives of cancer patients through pela’s development. With that, we will now open up the call for Q&A. Operator?

[Operator Instructions] Your first question comes from John Newman from Canaccord Genuity. Please go ahead.

Hi guys. Thanks for taking the question. I just wondered if you could talk at all about potential design for the two-arm study following GOBLET in pancreatic cancer. Just curious mostly on the control arm, just sort of what you are thinking about there, just in general terms for that study? I know that some of the agents that we rely on in other cancers have not worked as well in pancreatic cancer, so it might not be as suitable for control, but just curious if you can talk about that.

Sure. It’s Matt, and then I will pass it off to Tom. GOBLET the pancreatic arm looked at pela in combination with nab-paclitaxel, gemcitabine and atezolizumab, and that’s where we saw the 70% objective response rate. The standardized backbone in this population would be FOLFIRINOX or gem- nab-paclitaxel. I think the question really comes is do we look at a third-arm where we had added atezolizumab to the chemo backbone and compare that to that same triplet with the virus added. What we have heard from KOLs is because checkpoint inhibitors have been so well studied in the context of chemo backbone, whether it would be FOLFIRINOX or nab-paclitaxel, that they really haven’t seen any activity with regards to objective response, PFS or OS. So, a lot of our collaborators still would be an ethical to do that triplet without the addition of pela or even to run it as a control-arm because it’s known not to be active, and it is known to be toxic. So, I think we could either just run a simple two-arm study of gem-nab-paclitaxel versus that plus pela plus atezolizumab, we may have to run, we will call it, 15 patients or so of the checkpoint inhibitor plus the chemo just to show a futility just again to reproduce the fact that it’s not active and that it is toxic. But we are hoping ethics and regulators would look at the historical and realized it’s not an active drug combination and allow us not to go forward with that. Tom, do you have anything to add to that?

No, not really. I agree. I think the most straightforward path and probably the most valuable to the clinicians would be simply to run a control arm of gemcitabine and nab-paclitaxel. And as Matt alluded to, any design we would have to discuss with our investigators and the regulators first. But I think that would be the path we would prefer to go down as the simplest and probably the most meaningful.

Okay. Great. Thank you.

[Operator Instructions] Your next question comes from Patrick Trucchio from H.C. Wainwright. Please go ahead.

Thanks. Good morning. My first question is around BRACELET-1. I am just wondering if you can discuss the numerical separation you will be looking for PFS and tumor response. And also if you could tell us when you would expect a mature data on overall survival? And if it’s the data set expected next quarter or the mature data that would help guide the path forward for the program. And separately, I am wondering if you can remind us about that agreement with Pfizer. How does it impact the path forward for breast, the timing of when Pfizer can decide to move forward with the program or when you can decide to seek a different collaboration partner for a potential registrational program?

Tom, I will let you take the first part of the question, and then I will ask Andrew to take the one regarding the relationship with Pfizer and where we are in that process.

Okay. So, the – I mean it’s impossible to say exactly what numerical difference we would consider meaningful. But I think we would obviously want a difference that is a clear separation between the arms, 6 months versus 6.2 months or something would not move the needle, but a separation that is, I think substantial on a proportional level would be very meaningful. And so that’s what we would be looking for. With regard to the – that, by the way, applies to both objective response and the PFS because we are looking at both of those endpoints in the media readout that’s coming along. For the overall survival, it’s impossible to predict when that will be mature precisely because patients – it depends on how patients do on the study. But I think that it’s likely that those data would be available in the first quarter, second quarter, third quarter of next year, something in that timeframe.

Tom, could you maybe speak to how that affects our decision-making process in terms of looking at our Phase 3?

Sure. Yes, sure. Sorry. Yes. I think that in breast cancer, historically, both objective response rate and even more so, PFS have been very predictive of the overall successive treatments in PFS, as you were probably aware, is in and of itself, a licensable endpoint based on prior experience. So, we would view any objective response and PFS data is very impactful in moving forward and would not consider it necessary to wait for overall survival data to move on to the next step in that program.

Great. And then just as just as a reminder in terms of how the agreement with Pfizer, how that impacts potential collaboration going forward?

Andrew…?

Sure. They had – Pfizer has a period of review where they can review the data before it can be shared with anybody else under confidentiality. That period is over. But that doesn’t mean that Pfizer isn’t still looking at the data because the data is still maturing as Tom mentioned. So, we are now outside that period, so we can under confidentiality agreement, also share the data with other parties besides Pfizer.

Got it. And then earlier just discussed having a competitive process for a potential collaboration, I am wondering if you could elaborate a little bit more on that level of engagement with these potential partners, especially after the initial GOBLET data. And if there is particular interest in breast or pancreatic, and so could one data set or the other be more impactful driver of these collaboration discussions?

I think both are equally critical. If I had to bet, I would say breast is a little more so just because we have a broader body of data, but Pfizer – the panc-data really drove some interest in BD. So, we have quite a few companies that are looking at the data across both pancreatic and breast. And I think it’s the fact that you have two shots on goal actually strengthens both your credibility of the data overall, but also allows you to basically drive more interest. So, there are certainly certain companies that are breast or in GI cancers that have more of a bias towards one or the other. But I would say anybody who is interested in one is also asking about the other. I have yet to see anybody who just wants to review panc or breast.

Great. Thank you very much.

Thank you. There are no further questions at this time. You may proceed.

Thanks operator. So, let me conclude by thanking all listening and stressing how pleased we are with our recent progress as well as our excitement for what lies ahead. We look forward to providing an additional updates in the future and wish everyone a great day.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.