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Oncolytics Biotech rebounds from Wednesday slump

NEW YORK (AP) -- Shares of Oncolytics Biotech Inc. bounced back Thursday, a day after the company announced it was expanding a study of its cancer drug Reolysin, delaying the results from the trial.

THE SPARK: On Wednesday Oncolytics said it had analyzed data from 80 patients in the first part of a late-stage clinical trial of Reolysin as a treatment for head and neck cancers. The company said patients whose cancer had metastasized were responding differently than those whose cancer had remained local. Oncolytics has added 80 more patients to the study and will evaluate the results for each group of patients separately.

The company said it will take more time to get results from the expanded trial.

THE BIG PICTURE: In the trial, patients are being treated one of two drug regimens: Reolysin and two chemotherapy drugs, or the chemotherapy drugs on their own. Oncolytics said both groups of patients were doing better than expected. So far, patients with metastasized cancer had median progression-free survival — or time to either death or disease progression — of 120 days. That was significantly better than patients who had localized cancer.

The Canadian company is conducting numerous trials of Reolysin as a treatment for sarcomas, melanoma, multiple myeloma, and solid tumors. It is testing the drug with a variety of different drug regimens.

On Thursday Oncolytics also reported positive results from first part of mid-stage trial of Reolysin as a treatment for squamous cell lung cancer.

THE ANALYSIS: Stifel Nicolaus analyst Brian Klein said the expansion of the trial may make it more likely that Reolysin will meet its goals. He noted that some investors may be concerned that Oncolytics is manipulating the trial to get a more positive outcome, but he said the company's announcement suggests the drug is working.

"In our opinion the 120-day median progression-free survival is far superior than what would be anticipated," Klein wrote. "Therefore, we continue to remain confident that Reolysin will have a beneficial impact on this disease in addition to chemotherapy."

Klein maintained a "Buy" rating on the stock. He said the company will report data from studies of Reolysin as a treatment for pancreatic and ovarian cancer in 2013. Those trials include only patients with cancer that has spread to other parts of the body.

SHARE ACTION: Shares of Oncolytics Biotech rose 14 cents, or 5.7 percent, to $2.62 in midday trading. The stock fell 12.1 percent Wednesday and reached a three-year low of $2.08. Shares have lost half their value since reaching 52-week highs in early February. The stock peaked at $5.86 Feb. 3.