CALGARY, July 26 /PRNewswire-FirstCall/ - Oncolytics Biotech Inc. (“Oncolytics”) today announced its financial results and highlights for the three and six-month periods ended June 30, 2006.
Second Quarter Highlights - Concluded patient enrolment in the dose escalation portion of the U.K. Phase I systemic administration trial, and presented positive interim data from the trial at the American Society of Clinical Oncology (ASCO) in Atlanta, Georgia. - Presented positive data from the Canadian Phase I recurrent malignant gliomas trial at ASCO. - Presented encouraging interim data on the U.K. Phase Ia combination REOLYSIN(R)/radiation trial at the American Association for Cancer Research (AACR) Annual Meeting in Washington, D.C. - Presented a poster entitled “Reolysin(R), an unmodified Reovirus, has significant anti-tumor activity in childhood sarcomas” at the AACR Annual Meeting. - Strengthened the Board of Directors with the appointment of Dr. Ed Levy and Mr. Ger J. van Amersfoort. - Secured two additional U.S. patents covering production methods for REOLYSIN(R) and methods of identifying the susceptibility of cells to reovirus infection. - Expanded the clinical trial program subsequent to the quarter end with the approval of the U.K. Phase II REOLYSIN(R)/radiation trial and the commencement of enrolment in both the U.K. Phase Ib combination REOLYSIN(R)/radiation clinical trial and the U.S. Phase I/II recurrent malignant gliomas.
“Oncolytics made significant progress with its clinical strategy in the second quarter, announcing positive results, completing trials and preparing to initiate new trials,” said Dr. Brad Thompson, President and CEO of Oncolytics. “Looking ahead, we intend to initiate enrolment in our Phase II program in the second half of 2006.”
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This discussion and analysis should be read in conjunction with the unaudited financial statements of Oncolytics Biotech Inc. as at and for the three and six months ended June 30, 2006 and 2005, and should also be read in conjunction with the audited financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contained in our annual report for the year ended December 31, 2005. The financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“GAAP”).
FORWARD-LOOKING STATEMENTS
The following discussion contains forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements, including our belief as to the potential of REOLYSIN(R) as a cancer therapeutic and our expectations as to the success of our research and development and manufacturing programs in 2006 and beyond, future financial position, business strategy and plans for future operations, and statements that are not historical facts, involve known and unknown risks and uncertainties, which could cause our actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties include, among others, the need for and availability of funds and resources to pursue research and development projects, the efficacy of REOLYSIN(R) as a cancer treatment, the success and timely completion of clinical studies and trials, our ability to successfully commercialize REOLYSIN(R), uncertainties related to the research, development and manufacturing of pharmaceuticals, uncertainties related to competition, changes in technology, the regulatory process and general changes to the economic environment. Investors should consult our quarterly and annual filings with the Canadian and U.S. securities commissions for additional information on risks and uncertainties relating to the forward-looking statements. Forward-looking statements are based on assumptions, projections, estimates and expectations of management at the time such forward looking statements are made, and such assumptions, projections, estimates and/or expectations could change or prove to be incorrect or inaccurate. Investors are cautioned against placing undue reliance on forward-looking statements. We do not undertake to update these forward-looking statements.
OVERVIEW Oncolytics Biotech Inc. is a Development Stage Company
Since our inception in April of 1998, Oncolytics Biotech Inc. has been a development stage company and we have focused our research and development efforts on the development of REOLYSIN(R), our potential cancer therapeutic. We have not been profitable since our inception and expect to continue to incur substantial losses as we continue research and development efforts. We do not expect to generate significant revenues until, if and when, our cancer product becomes commercially viable.
GENERAL RISK FACTORS
Prospects for biotechnology companies in the research and development stage should generally be regarded as speculative. It is not possible to predict, based upon studies in animals, or early studies in humans, whether a new therapeutic will ultimately prove to be safe and effective in humans, or whether necessary and sufficient data can be developed through the clinical trial process to support a successful product application and approval.
If a product is approved for sale, product manufacturing at a commercial scale and significant sales to end users at a commercially reasonable price may not be successful. There can be no assurance that we will generate adequate funds to continue development, or will ever achieve significant revenues or profitable operations. Many factors (e.g. competition, patent protection, appropriate regulatory approvals) can influence the revenue and product profitability potential.
In developing a pharmaceutical product, we rely upon our employees, contractors, consultants and collaborators and other third party relationships, including our ability to obtain appropriate product liability insurance. There can be no assurance that these reliances and relationships will continue as required.
In addition to developmental and operational considerations, market prices for securities of biotechnology companies generally are volatile, and may or may not move in a manner consistent with the progress being made by Oncolytics.
REOLYSIN (R) Development Update for the Second Quarter of 2006
We continue to develop our lead product REOLYSIN(R) as a possible cancer therapy. Our goal each year is to advance REOLYSIN(R) through the various steps and stages of development required for potential pharmaceutical products. In order to achieve this goal, we actively manage the development of our clinical trial program, our pre-clinical and collaborative programs, our manufacturing process and supply, and our intellectual property.
Clinical Trial Program U.K. Phase I Systemic Administration Clinical Trial
During the second quarter of 2006, we completed patient enrollment in the dose escalation portion of our U.K. Phase I systemic delivery clinical trial and presented positive interim results at the American Society of Clinical Oncology Annual Meeting (“ASCO”) in Atlanta Georgia. The primary objective of our UK Phase I trial was to determine the maximum tolerated dose (“MTD”), dose limiting toxicity (“DLT”), and safety profile of REOLYSIN(R) when administered systemically to patients. A secondary objective was to examine any evidence of anti-tumour activity. Eligible patients included those who had been diagnosed with advanced or metastatic solid tumours that were refractory (have not responded) to standard therapy or for which no curative standard therapy exists.
A total of 30 patients were treated in the escalating frequency and dosage portion of the trial to a maximum daily dose of 1x10(11) TCID50. As of the presentation at ASCO, these 30 patients had received 65 courses of therapy, for a total of 284 daily treatments. Patients were entered into the study at the following dose levels (all TCID50): 1x10(8) for 1 day, 1x10(8) for 3 days, 1x10(8), 3x10(8), 1x10(9), 3x10(9), 1x10(10) and 3x10(10) for five days, and 1x10(11) for three days. An MTD was not reached and the treatment appears to have been well tolerated by the patients.
Toxicities possibly related to REOLYSIN(R) treatment in this trial were generally mild (grade 1 or 2) and have included chills, fever, headache, cough, runny nose, sore throat and fatigue. Transient grade 3 toxicities include lymphopenia, neutropenia and troponin I. These symptoms were more frequently observed from day two of treatment and usually lasted less than six hours.
Of the cohorts whose patients have completed treatment (seven), anti-tumour activity was noted in patients with colorectal, prostate, pancreatic, bladder, and NSCL cancer. Patients were assessed with CTR scans, and where possible tumour marker assessment, and histopathology of tumour biopsies. Two patients with colorectal cancer had tumour stabilization (one for three months, the other classified as stable disease at six months) and had CEA tumour marker reduction of 27% and 60% respectively. One patient with metastatic prostate cancer had stable disease at four months, had a 50% decrease in PSA, and had extensive product-induced necrosis with associated intratumoural viral replication in metastatic lesions in the lymph nodes. One patient with metastatic bladder cancer had stable disease at four months and had a minor tumour response in a metastatic lesion in a lymph node (reduction from 2.5 to 1.9 cm). A patient with pancreatic cancer and a patient with NSCL cancer had stable disease at four months.
Phase Ia Combination REOLYSIN(R)/Radiation Clinical Trial
During the second quarter of 2006, we completed patient enrollment and presented interim results at the American Association of Cancer Research (“AACR”) annual meeting in Washington D.C. The primary objective of this trial was to determine the MTD, DLT, and safety profile of REOLYSIN(R) when administered intratumourally to patients receiving radiation treatment. A secondary objective was to examine any evidence of anti-tumour activity. Eligible patients included those who had been diagnosed with advanced or metastatic solid tumours that were refractory (have not responded) to standard therapy or for which no curative standard therapy exists.
A total of 11 patients were treated in this Phase Ia trial with two intratumoural treatments of REOLYSIN(R) at dosages of 1x10(8), 1x10(9), or 1x10(10) TCID50 with a constant localized radiation dose of 20 Gy in five fractions. Preliminary results in the first seven patients were presented and showed that the combination of intratumoural REOLYSIN(R) and radiation was well-tolerated and an MTD had not been reached. Most toxicities were mild, generally grade 1 and 2, and included fever, sweating and skin erythema. One patient in the second cohort developed grade 3 fatigue and grade 2 flu-like symptoms and could not receive the second REOLYSIN(R) injection. There was no evidence that the REOLYSIN(R) injections exacerbated the acute reactions expected from the radiation. There was also no evidence of viral shedding in the blood, urine, stool or sputum on day eight post-REOLYSIN(R) injection.
Interim analysis also showed evidence of local responses and an indication of systemic effects. Amongst the first five patients that completed treatment, three patients had partial tumour responses. There was one case of progressive disease at one month, one case of stable disease at one month, two cases of partial responses at one, two and three months and one case of stable disease at one and two months, which became a pathological partial response at three months. CT scans from the treated lymph node tumour in the first patient in the trial clearly show the partial response, which has now lasted for over eight months. A metastatic tumour in this patient that was outside the radiation field also showed a partial response.
Other Clinical Trial Activity
We continued to enroll patients in our U.S. systemic delivery trial and worked with our principal investigator in an effort to commence patient enrollment in our U.S. Phase I/II recurrent malignant glioma trial (see “Recent 2006 Progress”).
Manufacturing and Process Development
We currently have sufficient REOLYSIN(R) to supply our clinical trial program presently underway. In the second quarter of 2006, we focused our process development activity on examining ways of improving process yields and increasing production scale. We then began to transfer the results of this process development activity to our cGMP (“current Good Manufacturing Practices”) manufacturer.
Pre-Clinical Trial and Collaborative Program
We perform pre-clinical studies and engage in collaborations to help support our clinical trial programs and expand our intellectual property base. We continue with studies examining the interaction between the immune system and the reovirus, the use of the reovirus as a co-therapy with existing chemotherapeutics and radiation, the use of new RAS active viruses as potential therapeutics, and to investigate new uses for the reovirus as a therapeutic.
In the second quarter of 2006, a poster by Dr. E. Anders Kolb was presented at the AACR annual meeting in Washington D.C. The investigators tested reovirus against various pediatric sarcoma cell lines in vitro and in vivo. In all tumour lines evaluated, the reovirus exhibited significant antitumour activity. The investigators concluded that REOLYSIN(R) demonstrates excellent anti-tumor activity in vitro and in vivo in childhood sarcoma cell lines, and that these promising results suggest that a clinical trial of systemic reovirus in pediatric solid tumours is warranted.
Intellectual Property
In the second quarter of 2006, two U.S. patents were issued. At the end of the second quarter of 2006, we had been issued a total of 17 U.S., five Canadian and two European patents. We also have other patent applications filed in the U.S., Europe and Canada and other jurisdictions.
Financial Impact
We estimated at the beginning of 2006 that our monthly cash usage for the year would be approximately $1,500,000. Our cash usage for the first half of 2006 was $5,561,588 from operating activities and $386,084 for the purchases of intellectual property and capital assets. Our net loss for the six month period ending June 30, 2006 was $5,982,250. We expect that our monthly cash usage will increase to be in line with our estimate towards the end of 2006 as we progress into our Phase II clinical trial program, commence patient enrollment and increase our manufacturing activities to supply our clinical trials and improve our security of supply. We now believe our average monthly cash usage will be approximately $1,250,000 for 2006.
Cash Resources
We exited the second quarter of 2006 with cash resources totaling $34,500,995 (see “Liquidity and Capital Resources”).
Expected REOLYSIN(R) Development for the Remainder of 2006
For the remainder of 2006, we expect to continue to enroll patients in our existing clinical trials and we believe that patient enrollment will be substantially completed in our two systemic delivery trials and our REOLYSIN(R) in combination with radiation therapy trial. We plan to file additional clinical trial applications in 2006 that focus on specific cancer indications and drug/treatment combinations. We believe that our additional trials will be Phase II trials and Phase II trials with an initial small safety dose escalation component.
For the remainder of 2006, we expect to finish the transfer of our updated manufacturing process to our cGMP manufacturer. Once this transfer is complete we will commence with our planned production runs in order to supply our expanding clinical trial program. We also expect to undertake activities associated with improving our security of supply.
Recent 2006 Progress
On July 18, 2006, we received a letter of approval from the U.K. Medicines and Healthcare products Regulatory Agency (“MHRA”) for its Clinical Trial Application (“CTA”) to begin a Phase II clinical trial to evaluate the anti-tumour effects of intratumoural administration of REOLYSIN(R) in combination with low-dose radiation in patients with advanced cancers.
The trial is an open-label, single-arm, multi-centre Phase II study of REOLYSIN(R) delivered via intratumoural injection to patients during treatment with low-dose radiotherapy. Up to 40 evaluable patients, including approximately 20 patients with head and neck and esophageal cancers, and approximately 20 patients with other advanced cancers, will be treated with two intratumoural doses of REOLYSIN(R) at 1x10(10) TCID50 with a constant localized radiation dose of 20 Gy in five consecutive daily fractions. Eligible patients include those who have been diagnosed with advanced or metastatic cancers including head, neck and esophageal tumours that are refractory (have not responded) to standard therapy or for which no curative standard therapy exists
The primary objective of the trial is to assess the anti-tumour activity of the combination of REOLYSIN(R) and low dose radiotherapy in treated and untreated lesions. Secondary objectives include the evaluation of viral replication, immune response to the virus and to determine the safety and tolerability of intratumoural administration of REOLYSIN(R) in patients with advanced cancers who are receiving radiation treatment.
On July 11, 2006, we announced that we began patient enrolment in our clinical trial to investigate the use of REOLYSIN(R) for patients with recurrent malignant gliomas. This clinical trial is an open-label dose escalation Phase I/II trial in which a single dose of REOLYSIN(R) is administered by infusion to patients with recurrent malignant gliomas that are refractory to standard therapy. The administration involves the stereotactically-guided placement of a needle into the tumour, through which REOLYSIN(R) will be administered or infused into the tumour mass and surrounding tissue using a pump. The primary objective of the study is to determine the MTD, DLT and safety profile of REOLYSIN(R). Secondary objectives include the evaluation of viral replication, immune response to the virus and any evidence of anti-tumour activity.
On July 10, 2006, we announced the commencement of patient enrolment in our Phase Ib U.K. clinical trial investigating REOLYSIN(R) in combination with radiation therapy as a treatment for patients with advanced cancers. The Phase Ib trial will treat patients with a range of two to six intratumoural doses of REOLYSIN(R) at 1x10(10) TCID50 with a constant radiation dose of 36 Gy in 12 fractions. The primary objective of the Phase Ib trial is to determine the MTD, DLT, and safety profile of REOLYSIN(R) when administered intratumourally to patients receiving radiation treatment. A secondary objective is to examine any evidence of anti-tumour activity. Eligible patients include those who have been diagnosed with advanced or metastatic solid tumours that are refractory (have not responded) to standard therapy or for which no curative standard therapy exists. An additional group of patients is planned to be treated at the maximum dose regimen reached in the Ib trial.
SECOND QUARTER RESULTS OF OPERATIONS
(for the three months ended June 30, 2006 and 2005)
Net loss for the three month period ending June 30, 2006 was $2,987,714 compared to $2,954,720 for the three month period ending June 30, 2005.
Research and Development Expenses (“R&D”) 2006 2005 $ $ ------------------------------------------------------------------------- Manufacturing and related process development expenses 648,351 1,022,235 Clinical trial expenses 685,265 549,505 Pre-clinical trial and research collaboration expenses 235,302 179,735 Other R&D expenses 391,701 299,232 ------------------------------------------------------------------------- Research and development expenses 1,960,619 2,050,707 ------------------------------------------------------------------------- -------------------------------------------------------------------------
For the second quarter of 2006, R&D decreased to $1,960,619 compared to $2,050,707 for the second quarter of 2005. The decrease in R&D was due to the following:
Manufacturing & Related Process Development (“M&P”) 2006 2005 $ $ ------------------------------------------------------------------------- Product manufacturing expenses 124,110 949,169 Technology transfer expenses 273,214 - Process development expenses 251,027 73,066 ------------------------------------------------------------------------- Manufacturing and related process development expenses 648,351 1,022,235 ------------------------------------------------------------------------- -------------------------------------------------------------------------
Our M&P expenses for the second quarter of 2006 decreased to $648,351 compared to $1,022,235 for the second quarter of 2005. Our process development studies, that had been ongoing since 2005, resulted in improvements in virus concentrations within a more robust production process. Consequently, in the second quarter of 2006 we focused on transferring the production process changes to our cGMP manufacturer prior to commencing new production runs. As a result, our product manufacturing expenses for the second quarter of 2006 decreased to $124,110 compared to $949,169 for the second quarter of 2005 which was offset by increases in technology transfer and process development expenses to $273,214 and $251,027, respectively compared to $nil and $73,066, respectively for the second quarter of 2005.
Clinical Trial Program 2006 2005 $ $ ------------------------------------------------------------------------- Direct clinical trial expenses 643,786 463,812 Other clinical trial expenses 41,479 85,693 ------------------------------------------------------------------------- Clinical trial expenses 685,265 549,505 ------------------------------------------------------------------------- -------------------------------------------------------------------------
During the second quarter of 2006, our direct clinical trial expenses increased to $643,786 compared to $463,812 for the second quarter of 2005. In the second quarter of 2006, we incurred direct patient costs in our three ongoing clinical trials compared to only two enrolling clinical trial studies in the second quarter of 2005. As well in the second quarter of 2006, we incurred clinical site start up costs associated with our U.S. recurrent malignant glioma trial.
Pre-Clinical Trial Expenses and Research Collaborations 2006 2005 $ $ ------------------------------------------------------------------------- Research collaboration expenses 235,302 179,735 Pre-clinical trial expenses - - ------------------------------------------------------------------------- Pre-clinical trial expenses and research collaborations 235,302 179,735 ------------------------------------------------------------------------- -------------------------------------------------------------------------
During the second quarter of 2006, our research collaboration expenses were $235,302 compared to $179,735 for the second quarter of 2005. Our research collaboration activity continues to focus on the interaction of the immune system and the reovirus, the use of the reovirus as a co-therapy with existing chemotherapeutics and radiation, the use of new RAS active viruses as potential therapeutics, and to investigate new uses of the reovirus as a therapeutic.
Other Research and Development Expenses 2006 2005 $ $ ------------------------------------------------------------------------- R&D consulting fees 31,371 89,865 R&D salaries and benefits 286,767 166,901 Other R&D expenses 73,563 42,466 ------------------------------------------------------------------------- Other research and development expenses 391,701 299,232 ------------------------------------------------------------------------- -------------------------------------------------------------------------
During the second quarter of 2006, our R&D consulting fees decreased to $31,371 compared to $89,865 in 2005. In the second quarter of 2005 we incurred consulting costs associated with our initial two U.S. clinical trial applications. In the second quarter of 2006, we did not incur this type of consulting service.
Our R&D salaries and benefits costs were $286,767 in the second quarter of 2006 compared to $166,901 in the second quarter of 2005. The increase is a result of increases in compensation levels along with the hiring of our Chief Medical Officer in the third quarter of 2005.
Operating Expenses 2006 2005 $ $ ------------------------------------------------------------------------- Public company related expenses 664,917 576,031 Office expenses 240,176 193,480 ------------------------------------------------------------------------- Operating expenses 905,093 769,511 ------------------------------------------------------------------------- -------------------------------------------------------------------------
During the second quarter of 2006, our public company related expenses increased to $664,917 compared to $576,031 for the second quarter of 2005. In the second quarter of 2006, we incurred executive search consulting fees associated with the appointment of our two new directors that were not incurred in the second quarter of 2005. As well, we have increased our investor relations activity in the second quarter of 2006 compared to the second quarter of 2005.
During the second quarter of 2006, our office expenses increased to $240,176 compared to $193,480 for the second quarter of 2005. Our office expenses have increased due to increased compensation levels and a general increase in office costs.
Stock Based Compensation 2006 2005 $ $ ------------------------------------------------------------------------- Stock based compensation 222,376 8,404 ------------------------------------------------------------------------- -------------------------------------------------------------------------
Stock based compensation for the second quarter of 2006 increased to $222,376 compared to $8,404 for the second quarter of 2005. In the second quarter of 2006, we incurred stock based compensation associated with the issue and immediate vesting of stock options to our two newly appointed directors and the vesting of previously granted options. In 2005, stock based compensation was recorded relating to the vesting of previously granted options.
YEAR TO DATE RESULTS OF OPERATIONS
(for the six months ended June 30, 2006 and 2005)
Net loss for the six month period ending June 30, 2006 was $5,982,250 compared to $5,331,769 for the six month period ending June 30, 2005.
Research and Development Expenses (“R&D”) 2006 2005 $ $ ------------------------------------------------------------------------- Manufacturing and related process development expenses 1,500,141 1,860,843 Clinical trial expenses 1,189,239 781,852 Pre-clinical trial and research collaboration expenses 424,531 415,925 Other R&D expenses 763,030 622,351 ------------------------------------------------------------------------- Research and development expenses 3,876,941 3,680,971 ------------------------------------------------------------------------- -------------------------------------------------------------------------
For the six month period ending June 30, 2006, R&D increased to $3,876,941 compared to $3,680,971 for 2005. The increase in R&D was due to the following:
Manufacturing & Related Process Development (“M&P”) 2006 2005 $ $ ------------------------------------------------------------------------- Product manufacturing expenses 776,183 1,795,135 Technology transfer expenses 273,214 - Process development expenses 450,744 65,708 ------------------------------------------------------------------------- Manufacturing and related process development expenses 1,500,141 1,860,843 ------------------------------------------------------------------------- -------------------------------------------------------------------------
Our M&P expenses for the six month period ending June 30, 2006 decreased to $1,500,141 compared to $1,860,843. In the first part of 2006, we completed the production runs that were ongoing at the end of 2005, providing us with sufficient product to complete our existing Phase I clinical trials. At the same time our process development activity helped improve the virus yields from our manufacturing process. This prompted us to transfer the improvements in our proce
