Biotech Buzz Post No. 2 - ONCY

Life happens too fast for you ever to think about it. If you could just persuade people of this, but they insist on amassing information - Kurt Vonnegut (1922-2007), American writer.

Oncolytics Biotech (Nasdaq: ONCY) - Where viruses are good for you

Greetings from Sydney, Australia. A few months back I got chicken pox, having somehow managed to miss the disease as a child. The literature suggests about 10% of the adult population is in the same boat I was. If you're an adult and you haven't had chicken pox get yourself vaccinated today if you know what's good for you. Having chicken pox wasn't fun but at least I got to stay home from work for a week (I was still at Bell Potter at the time) and read a couple of books. One of them was Henry Adams' autobiography, The Education of Henry Adams, a classic published in 1919 which contains among other things the the real origin of the theory we now know as 'Moore's Law' (more on this in a later post). The other was The Emperor of All Maladies: A Biography of Cancer by Siddharta Mukherjee, which won the Pulitzer Prize in 2011. It's a 'biography' of cancer in the sense that it follows the life of cancer as we have known it since antiquity and how efforts to defeat it have developed over time. For anyone involved in Life Sciences The Emperor of All Maladies is a must-read because you'll appreciate how close science is to turning cancer into a manageable disease rather than a death sentence. The book got me thinking about where the cutting edge in cancer research is today. I reckon the four main hot spots, in order of importance, are:

1) Immunotherapy - Products that get the immune system to recognise and attack cancer;
2) Signalling pathways - Drugs that tackle the aberrant pathways within cells;
3) Antibodies - Cancer antibodies have been around for a while but there's still a heap of work to be done in getting the right kind of specificity as well as cancer-killing ability;
4) Diagnostics - When we can do whole body scans and catch tiny tumours at home using our smart phones then we'll truly be in a position to get the kind of early diagnosis cancer patients really need;

There are hundreds of biotech companies working on new cancer treatments, and I reckon the above screen is a great way to select for further study those companies more likely to succeed. I rate immunotherapy as the most important area to look at because most of the time our immune systems do an outstanding job keeping us free of cancer, so if we can give it a hand when it drops the ball, it may be more likely to do a lot of the heavy lifting for us in terms of treating disease. Which is why Oncolytics Biotech, from the Canadian city of Calgary ( (TSX: ONC and Nasdaq: ONCY), and currently capped at US$236m, is one to take a look at.

Oncoytics is one of the pioneers of oncolytic virotherapy, an approach to cancer treatment in which the patient is infected with viruses specific for cancer cells, and those viruses proceed to bust up all the cancer cells they can find. I call it 'immunotherapy on the cheap' because viruses are inexpensive and easy to mass produce under GMP, and, in the act of destroying cancer cells, they may just present to the immune system the cancer antigens from those cells that had hitherto been overlooked. It could be that oncolytic viral infections are the reason whya  few patients over the years have enjoyed sudden and unexplained remissions of their cancer, and I would be willing to speculate that the anti-cancer effect of an oncolytic virus are long lasting because of the restoration of the immunovigilance which had been lost. One could even make the case that bee keepers historically had significantly lower mortality from lung cancer because they had much more vigilant immune systems after all that stinging (click here for the 1979 study)

Oncolytics' particular oncolytic virus, called Reolysin, is a proprietary formulation of human reovirus. This double-stranded RNA virus is a particularly good one to use in cancer therapy because, to get into cells, reoviruses exploits what scientists can now recognise as versions of the Ras signalling pathways, a major or minor cause of perhaps two thirds of all cancers. Oncolytics has had Reolysin in around 30 clinical trials up until now, and so far the news has been good. Back in May the company announced that a Phase II study in metastatic melanoma had seen 3 out of 14 patients experience a partial response to Reolysin treatment, with an additional seven patients showing stable disease. Oncolytics had been looking for only 3 out of 18 partial responses, so this was encouraging. Oncolytics is now in Phase III in head and neck cancers.

That the smart money is starting to bet on oncolytic viruses is indicated by Amgen's January 2011 acquisition of BioVex, a privately held company from Woburn, Ma. Amgen paid US$425 million cash for BioVex in order to get an oncolytic virus based on a herpes virus called OncoVex. Amgen promised another US$575 million in milestones. The product was then in Phase III for metastatic melanoma as well as head and neck cancer. Data from the melanoma Phase III reported in March 2013 (click here) validated Amgen's billion-dollar confidence, with 16% of OncoVex-treated patients experiencing a  durable response compared with 2% of the controls, who got plain old GM-CSF.

Oncolytics Biotech and Amgen aren't the only ones doing oncolytic virotherapy. A privately held company from San Francisco called Jennerex is also a player, as is Sydney-based Viralytics (ASX: VLA). The last-mentioned outfit reckons it has a contender for leadership in the space. Its oncolytic virus, called Cavatak, is now in an open-label Phase II in metastatic melanoma under an IND. Cavatak is a coxsackievirus (named after Coxsackie, NY, where the first case of coxsackievirus infection was noted in the 1940s), which makes it a lot smaller than Oncolytics' reovirus and therefore potentially more able to penetrate cancer tissue. It may also have an advantage over Reolysin in terms of neutralising antibodies generated by the patient. Half of all children by the age of twelve having been exposed to a reovirus and just about everyone has by adulthood. By contrast most of the population do not have antibodies to a coxsackievirus. Where Oncolytics has the advantage over Viralytics is in the reams of clinical data already generated. However, should the Viralytics study register enough responses in the current Phase II, this story could become something special. It's only capitalised at A$27m at the moment so it may be worth checking out.

Stuart Roberts, Australian Life Sciences consultant, with global focus
Nisi Dominus Frustra

+61 (0)447 247 909

sroberts2164@gmail.com

Twitter @Biotech_buzz

About Stuart Roberts. I started as an analyst at the Sydney-based stockbroking firm Southern Cross Equities in April 2001, focused on the Life Sciences sector from February 2002. Southern Cross Equities was acquired by Bell Financial Group in 2008 and I continued at Bell Potter Securities until June 2013. Over the twelve years to 2013 I built a reputation as one of Australia's leading biotech analysts. I am currently consulting to the Australian biotech industry. Before joining Southern Cross Equities I wrote for The Intelligent Investor, probably the most readable investment publication in Australia. I have a Masters Degree in Finance from Finsia. My hobbies are jazz, cinema, US politics and reading patent applications filed by biotechnology and medical device companies.

Previous Australian Biotechnology Buzz posts:
Immunomedics (Nasdaq: IMMU), 21 August 2013
Oncolytics Biotech (Nasdaq: ONCY),  22 August 2013

Disclaimer. This is commentary, not investment research. If you buy the stock of any biotech company in Australia, the US or wherever you need to do your own homework, and I mean, do your own homework. I'm not responsible if you lose money.