CALGARY, April 27 /PRNewswire-FirstCall/ - Oncolytics Biotech Inc. (“Oncolytics”) today announced its financial results and highlights for the three month period ended March 31, 2007.
First Quarter Highlights - Received approval for two U.K. clinical trials; one investigating REOLYSIN(R) in combination with gemcitabine and the other investigating REOLYSIN(R) in combination with docetaxel; - Presented results from a number of preclinical studies that show that the reovirus kills cancer cells directly, and also primes the immune system to fight cancer cells exposed to reovirus; - Presented preclinical results at the 4th International Conference on Oncolytic Viruses as Cancer therapeutics in Carefree, Arizona, showing that reovirus has a synergistic effect when used in combination with cisplatin or cyclophosphamide; - Appointed Ms. Mary Ann Dillahunty as Vice President, Intellectual Property; - Closed a financing and over-allotment option that provided gross proceeds of $13.8 million to the Company; - Secured two additional U.S. patents in the quarter, with a third issued just subsequent to the quarter end; - In April 2007, announced the initiation of a U.S. Phase II sarcoma clinical trial; and, - Presented preclinical results at the American Association for Cancer Research Annual Meeting in April showing the synergistic combination of reovirus and gemcitabine.
“Oncolytics is pleased to have initiated its Phase II REOLYSIN(R) clinical program both in the U.S. and the U.K.,” said Dr. Brad Thompson, President and CEO of Oncolytics. “We are looking forward to continuing to further expand our clinical program in 2007.”
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 months ended March 31, 2007 and 2006, 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, 2006. 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 2007 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 the 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 First Quarter of 2007
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
We currently have six clinical trials ongoing of which three are actively enrolling patients and three have been recently approved.
Clinical Trials - Actively Enrolling
During the first quarter of 2007, we continued to enroll patients in our phase II and Phase Ib combination REOLYSIN(R)/radiation clinical trials in the U.K. and in our Phase I/II recurrent malignant glioma clinical trial in the U.S.
Clinical Trials - Recently Approved to Commence
Along with our U.K. REOLYSIN(R) in combination with paclitaxel and carboplatin clinical trial, we received approval to commence two additional co-therapy clinical trials in the U.K.
U.K. REOLYSIN(R) in Combination with Docetaxel
In the first quarter of 2007, we announced we had received a letter of approval from the U.K. Medicines and Healthcare products Regulatory Agency (“MHRA”) for our Clinical Trial Application (“CTA”) to begin a clinical trial using intravenous administration of REOLYSIN(R) in combination with docetaxel (Taxotere(R)) in patients with advanced cancers including bladder, prostate, lung and upper gastro-intestinal. The principal investigator is Professor Hardev Pandha of The Royal Surrey Hospital, U.K. Docetaxel is used in patients with lung, breast and prostate cancers, and is also used widely in the treatment of many other types of cancers.
The trial has two components. The first is an open-label, dose-escalating, non-randomized study of REOLYSIN(R) given intravenously with docetaxel every three weeks. A standard dosage of docetaxel will be delivered with escalating dosages of REOLYSIN(R) intravenously. A maximum of three cohorts will be enrolled in the REOLYSIN(R) dose escalation portion. The second component of the trial will immediately follow and will include the enrolment of a further 12 patients at the maximum dosage of REOLYSIN(R) in combination with a standard dosage of docetaxel.
Eligible patients include those who have been diagnosed with advanced or metastatic solid tumours such as bladder, lung, prostate or upper gastro-intestinal cancers that are refractory to standard therapy or for which no curative standard therapy exists. The primary objective of the trial is to determine the maximum tolerated dose (“MTD”), dose limiting toxicity (“DLT”), recommended dose and dosing schedule and safety profile of REOLYSIN(R) when administered in combination with docetaxel. Secondary objectives include the evaluation of immune response to the drug combination, the body’s response to the drug combination compared to chemotherapy alone and any evidence of anti-tumour activity.
U.K. REOLYSIN(R) in Combination with Gemcitabine
During the first quarter of 2007, we announced we had received a letter of approval from the MHRA to begin a clinical trial using intravenous administration of REOLYSIN(R) in combination with gemcitabine (Gemzar(R)) in patients with advanced cancers including pancreatic, lung and ovarian. The principal investigators are Dr. Johann de Bono of The Royal Marsden NHS Foundation Trust and The Institute of Cancer Research, London and Professor Jeff Evans of the University of Glasgow and the Beatson Oncology Centre in Glasgow, Scotland. Gemcitabine is used in patients with lung, pancreatic and ovarian cancers and is also used widely in the treatment of many other types of cancers.
This trial has two components. The first is an open-label, dose-escalating, non-randomized study of REOLYSIN(R) given intravenously with gemcitabine every three weeks. A standard dosage of gemcitabine will be delivered with escalating dosages of REOLYSIN(R) intravenously. A maximum of three cohorts will be enrolled in the REOLYSIN(R) dose escalation portion. The second component of the trial will immediately follow and will include the enrolment of a further 12 patients at the maximum dosage of REOLYSIN(R) in combination with a standard dosage of gemcitabine.
Eligible patients include those who have been diagnosed with advanced or metastatic solid tumours including pancreatic, lung and ovarian cancers that are refractory to standard therapy or for which no curative standard therapy exists. The primary objective of the trial is to determine the MTD, DLT, recommended dose and dosing schedule and safety profile of REOLYSIN(R) when administered in combination with gemcitabine. Secondary objectives include the evaluation of immune response to the drug combination, the body’s response to the drug combination compared to chemotherapy alone and any evidence of anti-tumour activity.
Pre-Clinical Trial and Collaborative Program
In the first quarter of 2007, an oral presentation entitled “Reovirus as a Potentially Immunogenic as well as Cytotoxic Therapy for Metastatic Colorectal Cancer” was given by one of our collaborators, Dr. Sheila Fraser of St. James’s University Hospital in Leeds, U.K. The investigators tested reovirus in vitro against recently resected colorectal cancer liver metastases. The results showed that a significant proportion of tumour cell cultures showed susceptibility to death following reovirus infection, and also demonstrated effective replication of reovirus within these cells. In addition, dendritic cells that prime the immune system to fight cancer cells were activated by exposure to the reovirus. The investigators concluded that the data supports the development of reovirus as a novel therapy for colorectal cancer, with the potential to direct the immune system to target cancer cells.
During the first quarter of 2007, an abstract entitled “In Vivo Synergy between Oncolytic Reovirus and Gemcitabine in Ras-Mutated Human HCT116 Xenografts” was made available on the American Association for Cancer Research (AACR) website at www.aacr.org. The abstract covered preclinical work using reovirus in combination with gemcitabine and showed the combination of reovirus and gemcitabine was more effective than gemcitabine or reovirus alone at killing human colon cancer cells in a mouse model.
In March 2007, Professor Hardev Pandha of The Royal Surrey Hospital, U.K. presented a poster entitled “Synergistic Antitumour Activity of Oncolytic Reovirus and Cisplatin in Malignant Melanoma” at the 4th International Conference on Oncolytic Viruses as Cancer Therapeutics in Carefree, Arizona. The results of the preclinical study showed that the combination of reovirus and cisplatin was significantly more effective than cisplatin or reovirus alone at killing melanoma cancer cells in a mouse model. The investigators concluded that the addition of chemotherapeutic agents can enhance the efficacy of reovirus therapy.
Finally in March 2007, Dr. Richard Vile of the Mayo College of Medicine, Rochester, Minnesota delivered an oral presentation at the 4th International Conference on Oncolytic Viruses as Cancer Therapeutics in Carefree, Arizona that covered a study of systemic administration of reovirus in combination with cyclophosphamide, an immune modulator. The work demonstrated that systemic administration of reovirus in combination with cyclophosphamide enhanced tumour regression in a melanoma animal model without increasing toxicity. In addition, the investigators were able to demonstrate that the addition of cyclophosphamide significantly increased the amount of reovirus replicating within the tumour. The investigators concluded that the addition of cyclophosphamide may lead to improved efficacy of REOLYSIN(R) treatment.
Manufacturing and Process Development
We continued to have REOLYSIN(R) manufactured in order to supply our current and future clinical trial program. In the first quarter of 2007, we contracted for additional cGMP (“current good manufacturing practices”) production runs. As well, we continued process development activity focused on the potential scale up of our manufacturing process.
Intellectual Property
In the first quarter of 2007, two U.S. patents were issued. At the end of the first quarter of 2007, we had been issued a total of 19 U.S., five Canadian and three European patents. We also have other patent applications filed in the U.S., Europe and Canada and other jurisdictions.
Financing Activity
During the first quarter of 2007, we issued 4,600,000 units at a price of $3.00 per unit for net proceeds of $12,068,172. Each unit consisted of one common share and one-half of one common share purchase warrant. Each whole common share purchase warrant shall entitle the holder thereof to acquire one common share upon payment of $3.50 expiring on February 22, 2010. The net proceeds from this offering will be used for our clinical trial program, manufacturing activities in support of the clinical trial program and for general corporate purposes.
Financial Impact
We estimated at the beginning of 2007 that our monthly cash usage would be approximately $1,400,000 for 2007. Our cash usage for the first quarter of 2007 was $3,747,709 from operating activities and $252,925 for the purchases of intellectual property and capital assets which is in line with our estimate. Our net loss for the first quarter of 2007 was $4,113,231.
Cash Resources
We exited the first quarter of 2007 with cash resources totaling $35,681,286 (see “Liquidity and Capital Resources”).
Expected REOLYSIN(R) Development for the Remainder of 2007
We believe that we will continue to expand our clinical trials to include studies investigating REOLYSIN(R) as a monotherapy. As well, we expect to commence enrollment in our co-therapy chemotherapy clinical trials in 2007 and to continue to enroll patients in our other trials. We believe we will complete enrollment in our U.K. Phase Ia/Ib and Phase II combination REOLYSIN (R) /radiation clinical trials by the end of 2007 and complete enrollment in our chemotherapy co-therapy studies in 2008. We expect to produce REOLYSIN(R) in 2007 to supply our clinical trial program. We also plan to complete our scale up studies in an effort to continue to improve our manufacturing process.
Based on our expected activity in 2007, we continue to estimate our monthly cash usage to be $1,400,000 per month (see “Liquidity and Capital Resources”).
Recent 2007 Progress U.S. Phase II Sarcoma Clinical Trial
On April 11, 2007, we announced that subsequent to the regulatory review period for this submission, we are proceeding with a Phase II trial to evaluate the intravenous administration of REOLYSIN(R) in patients with various sarcomas that have metastasized to the lung. The Principal Investigators are Dr. Glenn S. Kroog of the Montefiore Medical Center/Albert Einstein College of Medicine in the Bronx, New York, Dr. Laurence H. Baker of the University of Michigan Comprehensive Cancer Center in Ann Arbor, and Dr. Monica Mita of the Cancer Therapy and Research Center, Institute for Drug Development in San Antonio, Texas.
This trial is a Phase II, open-label, single agent study whose primary objective is to measure tumour responses and duration of response, and to describe any evidence of antitumour activity of intravenous, multiple dose REOLYSIN(R) in patients with bone and soft tissue sarcomas metastatic to the lung. REOLYSIN(R) will be given intravenously to patients at a dose of 3x10 (10) TCID (50) for five consecutive days. Patients may receive additional five-day cycles of therapy every four weeks for a maximum of eight cycles. Up to 52 patients will be enrolled in the study.
Eligible patients must have a bone or soft tissue sarcoma metastatic to the lung deemed by their physician to be unresponsive to, or untreatable by standard therapies. These include patients with osteosarcoma, Ewing sarcoma family tumours, malignant fibrous histiocytoma, synovial sarcoma, fibrosarcoma and leiomyosarcoma.
RESULTS OF OPERATIONS
Net loss for the three month period ending March 31, 2007 was $4,113,231 compared to $2,994,536 for the three month period ending March 31, 2006.
Research and Development Expenses (“R&D”) 2007 2006 $ $ ------------------------------------------------------------------------- Manufacturing and related process development expenses 1,838,193 843,141 Clinical trial expenses 721,617 546,767 Pre-clinical trial expenses and collaborations 106,281 155,086 Other R&D expenses 552,146 371,328 ------------------------------------------------------------------------- Research and development expenses 3,218,237 1,916,322 ------------------------------------------------------------------------- -------------------------------------------------------------------------
For the first quarter of 2007, R&D increased to $3,218,237 compared to $1,916,322 for the first quarter of 2006. The increase in R&D was due to the following:
Manufacturing & Related Process Development (“M&P”) 2007 2006 $ $ ------------------------------------------------------------------------- Product manufacturing expenses 1,748,417 643,423 Process development expenses 89,776 199,718 ------------------------------------------------------------------------- Manufacturing and related process development expenses 1,838,193 843,141 ------------------------------------------------------------------------- -------------------------------------------------------------------------
Our M&P expenses for the first quarter of 2007 increased to $1,838,193 compared to $843,141 for the first quarter of 2006.
In the first quarter of 2007, our production and vial filling activity increased compared to the first quarter of 2006. In the first quarter of 2007, we commenced additional production runs to manufacture REOLYSIN(R). As well, we incurred costs associated with the vialling of our production runs that were completed at the end of 2006. In the first quarter of 2006, we were completing the production runs that had started at the end of 2005.
Our process development expenses for the first quarter of 2007 were $89,776 compared to $199,718 for the first quarter of 2006. In the first quarter of 2007, our main process development focus was on our scale up studies. In the first quarter of 2006, our process development activity included scale up studies and the validation of the fill process used in our manufacturing process.
We still expect that our overall manufacturing and related process development expenses for 2007 will decrease compared to 2006. We expect to complete our planned 2007 production runs in the third quarter of 2007. As well, we expect to continue our process development activity that is examining the potential scale up of our manufacturing process.
We are also examining ways to reduce our economic dependence resulting from having only a single cGMP manufacturer. This might include building up a level of inventory, increasing the scale of each production run, engaging another cGMP manufacturer or manufacturing REOLYSIN(R) ourselves. Depending on how we mitigate our risk of economic dependence our expectation of our 2007 M&P expenses may change.
Clinical Trial Program 2007 2006 $ $ ------------------------------------------------------------------------- Direct clinical trial expenses 683,107 499,633 Other clinical trial expenses 38,510 47,134 ------------------------------------------------------------------------- Clinical trial expenses 721,617 546,767 ------------------------------------------------------------------------- -------------------------------------------------------------------------
During the first quarter of 2007, our direct clinical trial expenses increased to $683,107 compared to $499,633 for the first quarter of 2006. In the first quarter of 2007, we incurred direct patient costs in our three ongoing clinical trials along with start up costs associated with our three U.K. co-therapy clinical trials that were approved to commence at the end of 2006 and at the beginning of 2007. In the first quarter of 2006, we incurred direct patient costs in our three ongoing clinical trials.
We still expect our clinical trial expenses in 2007 will increase compared to 2006 as we expect to commence enrollment in our U.K. co-therapy trials in 2007. As well, we expect to continue to expand our clinical trial program to include additional Phase II trials.
Pre-Clinical Trial Expenses and Research Collaborations 2007 2006 $ $ ------------------------------------------------------------------------- Research collaboration expenses 106,281 155,086 Pre-clinical trial expenses - - ------------------------------------------------------------------------- Pre-clinical trial expenses and research collaborations 106,281 155,086 ------------------------------------------------------------------------- -------------------------------------------------------------------------
During the first quarter of 2007, our research collaboration expenses were $106,281 compared to $155,086 for the first quarter of 2006. Our research collaboration activity continues to focus on the interaction of the immune system and the reovirus and the use of the reovirus as a co-therapy with existing chemotherapeutics and radiation. As well, we will also examine the use of new RAS active viruses as potential therapeutics and investigate new uses of the reovirus in therapy.
For the remainder of 2007, we still expect that pre-clinical trial expenses and research collaborations will decline compared to 2006. We expect to continue with our various collaborations in order to provide support for our expanding clinical trial program. As well, we may expand our collaborative activities to include other viruses.
Other Research and Development Expenses 2007 2006 $ $ ------------------------------------------------------------------------- R&D consulting fees 91,776 32,955 R&D salaries and benefits 372,389 321,125 Quebec scientific research and experimental development refund - (52,344) Other R&D expenses 87,981 69,592 ------------------------------------------------------------------------- Other research and development expenses 552,146 371,328 ------------------------------------------------------------------------- -------------------------------------------------------------------------
During the first quarter of 2007, our R&D consulting fees were $91,776 compared to $32,955 for the first quarter of 2006. In the first quarter of 2007, we incurred consulting activity associated with our ongoing clinical trials and assistance with our clinical trial applications. In the first quarter of 2006, our consulting activity related to our ongoing clinical trials.
Our R&D salaries and benefits costs were $372,389 in the first quarter of 2007 compared to $321,125 in the first quarter of 2006. The increase is a result of increases in salary and staff levels along with the hiring of our Vice President of Intellectual Property in 2007.
We now expect that our other research and development expenses for the remainder of 2007 will increase compared to 2006. We expect that salaries and benefits will increase to reflect increased compensation levels and the salary and benefit costs for our Vice President of Intellectual Property. Our R&D consulting fees are expected to remain consistent with 2006. However, we may choose to engage additional consultants to assist us in the development of protocols and regulatory filings for our additional combination therapy and phase II clinical trial studies, possibly causing our R&D consulting expenses to increase.
Operating Expenses 2007 2006 $ $ ------------------------------------------------------------------------- Public company related expenses 581,876 834,720 Office expenses 324,839 283,216 ------------------------------------------------------------------------- Operating expenses 906,715 1,117,936 ------------------------------------------------------------------------- -------------------------------------------------------------------------
During the first quarter of 2007, our public company related expenses were $581,876 compared to $834,720 for the first quarter of 2006. In the first quarter of 2006, we incurred financial advisory costs that were not incurred in the first quarter of 2007.
During the first quarter of 2007, our office expenses were $324,839 compared to $283,216 for the first quarter of 2006. Our office expense activity has remained consistent in the first quarter of 2007 compared to the first quarter of 2006 with increases mainly due to increased compensation levels and a general increase in office costs.
Commitments
As at March 31, 2007, we are committed to payments totaling $1,623,000 during the remainder of 2007 for activities related to clinical trial activity and collaborations. All of these committed payments are considered to be part of our normal course of business.
SUMMARY OF QUARTERLY RESULTS
The following unaudited quarterly information is presented in thousands of dollars except for per share amounts:
------------------------------------------------------------------------- 2007 2006 2005 ------------------------------------------------------------------------- March Dec. Sept. June March Dec. Sept. June ------------------------------------------------------------------------- Revenue - - - - - - - - ------------------------------------------------------------------------- Interest income 268 286 320 335 292 160 211 168 ------------------------------------------------------------------------- Net loss(3), 4,156 4,890 3,425 2,988 2,995 3,941 3,510 2,955 ------------------------------------------------------------------------- Basic and diluted loss per common share(3) $0.11 $0.13 $0.09 $0.08 $0.08 $0.12 $0.11 $0.09 ------------------------------------------------------------------------- Total assets (1),(4) 41,775 33,566 37,980 40,828 43,660 46,294 34,538 38,081 ------------------------------------------------------------------------- Total cash (2),(4) 35,681 27,614 31,495 34,501 37,687 40,406 28,206 31,975 ------------------------------------------------------------------------- Total long-term debt(5) - 150 150 150 150 150 150 150 ------------------------------------------------------------------------- Cash dividends declared(6) Nil Nil Nil Nil Nil Nil Nil Nil ------------------------------------------------------------------------- (1) Subsequent to the acquisition of Oncolytics Biotech Inc. by SYNSORB in April 1999, we applied push down accounting. See note 2 to the audited financial statements for 2006. (2) I
