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Oncolytics Biotech Inc. Message Board

  • ivanprokov ivanprokov Jan 31, 2013 1:35 PM Flag

    Newb here

    I just put about $50K into this puppy from my KERX windfall. I liked what I heard on the conference call from December, but wasn't clear on how progression free and operative survival was looking. Some of the posts on here addressing progression free and operative survival are pretty complicated. Any of the more informed posters willing to help a Newb figure out the merit of this investment - how the drug seems to be performing compared to the treatment arm and anything else that may be useful? I haven't decided to stay put yet. Perifosine which was Kerx's cancer drug had some good tumor fighting effects I believe but flunked the key increased survival metric. Any insight on why people feel this is different? Also any insight into what Adam F seems to have bashed this Company in September on Twitter? Bashing will be ignored. Many thanks in advance.

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    • eitanman88 Jan 31, 2013 4:14 PM Flag

      Vanya, I see you moved over here from CLSN...
      What a hit!

    • My daughter presenting to an Invst club, here's how I summed it up for her. Long-winded, sorry.
      This is a high risk, high reward name. Downside to zero in theory is much % higher outcome than most stocks (somewhat true of research stage biotech in general). That said, upside potential is enormous as well. The upside is literally 100s of times the downside. That is a rare reward:risk ratio in the investing world. Even if you think the odds are 90% towards failure, 10% success, the Expected Return:Expected Risk profile is 10x+, extraordinarily good investment profile IMO. My personal belief is that the odds of success are closer to 50% here given the following pluses & minuses along with the preliminary neoadjuvant (pre-surgical shrinkage) measures released on Dec 12th, which were encouraging regarding hoped for metastatic results in the Ph3 trial.
      Positives: 1) Greater likelihood of Ph3 success given “control group” is well-known Carboplatin & Paclitaxil drugs that have long track records (already in generic forms), and the late stage nature of the patient population – Control Group PFS & OS should be fairly predictable, and less susceptible to placebo effect, thus less likely to provide surprisingly difficult comparison in the Ph3 study (the bane of randomized blinded studies), and greater upside upon success than other biotechs given: 2) Metastasis market is huge indication and basically unaddressed right now (no competition, I believe $20BN+ potential for this indication alone), 3) Success in one indication likely means success in several indications given the RAS pathway and kRAS angles, 4) Potential for “annuity” like revenue streams given fact patients may need to stay on reolysin, 5) Potential for pre-surgical treatments (an incremental revenue market), 6) Value to the company as the foundation of a whole new platform for big Pharma (virus biologic field, along with big IP portfolio to back Big Pharma’s entry, Amgen recently purchased OncoVex as its entry into the virus field), 6) Attractive Pharma-like margin potential (70%+ Gross Margins) given low-cost formulation, 7) Attractive cumulative safety profile from all studies.

      Negatives: 1) The viral field is new and unknown, FDA will tread particularly slowly & carefully, 2) The company’s trial sizes to date have been unusually small, 3) While trial results have been generally encouraging so far, none of results have been from a randomized blinded study, 4) The Ph3 is heavily weighted towards eastern European patient population, where pre-qualifications and predictability may be more questionable, and 5) Even without these prior negatives, odds are generally stacked against Ph3 trials (~90% failure rates), 6) It’s unclear whether other biotechs/Pharmas can circumvent the IP portfolio and develop competitive drugs with similar viruses or variants of reolysin formulation.

      My Assumptions:
      2.5MM new metastatic disease patients diagnosed globally every year. 50% go on reolysin. $18,000/year treatment = $22.5BN Revenue for primary use. No credit for other indications, neoadjuvant, recurring maintenance, etc. 70% Gross margin, 25% SG&A to sell/distribute the product. $10BN+ pretax, $6.5BN+ after taxes, 100MM shares o/s by time company reaches profitability. $65/share earnings per share. 15 multiple, discount back by 5 years required to build that business up post favorable Phase3 results at a 25% higher risk equity return requirement, $323+/share value in todays $s upon favorable results. Could easily see a $100-$200/share buyout in a year’s time by big Pharma IMO upon favorable Ph3 results. Should unfavorable results occur, still potential for neoadjuvant and other primary indications, and the IP portfolio likely worth something to others pursuing viral field, but would take substantially more dilution to reach any of these endgames. Stock likely down to ~$1s.

      Regarding PFS & OS. We can only speculate but we have clues…They still have not unblinded the Ph 3 study which has Overall Survival (OS) as it’s primary endpoint goal, and Progression Free Survival (PFS) as a secondary goal, but one which will give them a statistically significant early read on OS (and could have palliative benefit in its own right). Rather, the company took a preliminary check at 6 weeks that did not include peaks at PFS or OS, but reflect endpoints you’d measure to determine whether treatment made sense prior to surgeries (tumor size measurements looking for shrinkage or stable size, different sizing criteria - tighter limits). Recall, they’ve now split the Ph 3 into two groups, local regional (more primary tumor like) and metastasized. Also recall the September unblinded results showed PFS medians at over 2x as good in the metastacized group (120 days) than local regional. This recent test showed zero tumor growth at 6 weeks in the separate control groups at ~67% of patients, with a 98% correlation to each other in the 2 control groups (statistical equals), suggesting the control groups are on the same trajectory local regionally and metastasized given just the chemo. The tumor-sizing curve looked better for the Reo + chemo in the local regional group, but not significantly, suggesting activity but not statistical significance yet (but just 6 weeks into treatment). The curve looked better in the Reo + chemo for the metastasized group, with 86% of patients showing no tumor growth at 6 weeks. This was statistically significant. So, this quick read gives us two important clues to the puzzle. 1) The company looks like it’s on the right track looking at metastatic cancers (with no competition), the likely focus of the next part of this Phase 3, and all of their other current randomized studies are metastatic diseases (pancreatic, lung, ovarian, prostate, I think). 2) The meaningful PFS improvement we saw in the unblinded metastatic group in September is unlikely to be due to better control group statistics (the bane of randomized trials), suggesting it is likely due to reo. In which case, the reo PFS in metastacized should be 2-3x better than control group, which would be indicative of an extremely favorable result likely to be at least doubling expected lifespan (OS). Expect an initial unblinding in the next 30 days or so, and also expect to see results in a few of the other randomized studies soon (including pancreatic which I’m particularly optimistic about). So, no true confirmations yet, but encouraging clues regarding progress.

      Sentiment: Strong Buy

      • 5 Replies to gilly_vanilli
      • Great analysis Vanilli.

        A little too late to jump in for me, the stock is already priced in and can't take the hit if things do not go according to plan.

        Reminds me of KERX and Perif.

        Are you looking at other co's at the moment? ASTX looks very nice $100+ mm cash with 5 drugs in pipeline.

        Sentiment: Hold

      • Thank you Vanilli! Geez very helpful. Ok I'm in for the unveil. :)

      • Nice, comprehensive, levelheaded view.

        Minor comments:
        $200 share within a year? Even if things go swimmingly and results justify that price I doubt we'll get that high. (at least not within a year's time) IMO.

        All prudent DD would suggest the historical norms for PFS/OS are reasonably reliable. But two things that might result in the dreaded "control group surprise": We are measuring mets-only taxane-naive patients in our control arm where they are getting current SOC and there is only scant evidence to match that in any previous trial.

        And recently published studies revealed a distinct inhibition of mets in diabetic patients taking metformin. Type II diabetes is not uncommon among middleaged+ patients. And our published protocol does not list them as exclusionary.

        Both are unlikely wildcards (I said minor comments) but nonetheless - until we're certain the extended PFS is reo mediated - maybe worth mentioning.

        Again, very nice summary.

      • eitanman88 Jan 31, 2013 4:26 PM Flag

        Great post, Thank You!
        What is your short term outlook on this one?

      • Wow that was quite an in depth answer and fast response time.

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