CALGARY, Nov. 3 /PRNewswire-FirstCall/ - Oncolytics Biotech Inc. (“Oncolytics”) today announced its financial results and highlights for the three and nine month periods ended September 30, 2006.
Third Quarter Highlights - Received approval from the U.K. Medicines and Healthcare products Regulatory Agency (MHRA) to begin enrolment in a Phase II combination REOLYSIN(R)/radiation trial - Commenced enrolment in both a Phase Ib combination REOLYSIN(R)/radiation clinical trial in the U.K. and a Phase I/II recurrent malignant gliomas (brain cancer) trial in the U.S. - Completed enrolment in a Phase I U.S. systemic delivery trial for REOLYSIN(R) - Presented a poster at the 1st Joint Meeting of European National Societies of Immunology entitled “Reovirus Activates Dendritic Cells (DC) and Promotes Innate Anti-Tumour Immunity.”
“Oncolytics is making significant progress in its human clinical program for REOLYSIN(R), including the completion of enrolment in our systemic administration trial in the U.S. and the recent approval to begin a Phase II combination REOLYSIN(R)/radiation trial in the U.K,” said Dr. Brad Thompson, President and CEO of Oncolytics.
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 nine months ended September 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 Third 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 REOLYSIN(R) supply, and our intellectual property.
Clinical Trial Program
During the third quarter of 2006, the following clinical trial activity occurred:
U.K. Phase II Combination REOLYSIN(R)/Radiation Clinical Trial
During the third quarter of 2006, we received a letter of approval from the U.K. Medicines and Healthcare products Regulatory Agency for our Clinical Trial Application 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. Since receiving this letter of approval, we have been working with our investigators and the clinical trial sites to initiate patient enrollment which is expected to occur in the fourth quarter of 2006.
The trial is to be 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) TCID(50) 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.
U.K. Phase Ia/Ib Combination REOLYSIN(R)/Radiation Clinical Trial
During the third quarter of 2006, we commenced 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) TCID(50) with a constant radiation dose of 36 Gy in 12 fractions.
The primary objective of our Phase Ib trial is to determine the maximum tolerated dose, dose limiting toxicity, 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.
Patient enrolment in our Ia combination REOLYSIN(R)/radiation trial was completed in June 2006. The Phase Ia trial tested two intratumoural treatments of REOLYSIN(R) at dosages of 1x10(8), 1x10(9), or 1x10(10) TCID(50) with a constant localized radiation dose of 20 Gy given in five fractions. A maximum tolerated dose was not reached and the combination treatment appears to have been well tolerated by the patients.
Interim results of the Ia trial were presented at the American Association for Cancer Research Annual Meeting in Washington, D.C. in April 2006. Preliminary analysis has demonstrated evidence of both local and systemic response.
U.S. Phase I Systemic Administration Clinical Trial
During the third quarter of 2006, we completed patient enrolment in our Phase I U.S. clinical trial investigating the systemic delivery of REOLYSIN(R) to treat patients with advanced cancers. A total of 18 patients were treated in the Phase I trial with REOLYSIN(R) at escalating dosages of 1x10(8), 3x10(8), 1x10(9), 3x10(9), 1x10(10) or 3x10(10) TCID(50). A maximum tolerated dose was not reached and the treatment appears to have been well tolerated by the patients.
The clinical trial is an open-label, dose-escalation Phase I study in which a single dose of REOLYSIN(R) is administered intravenously to patients diagnosed with selected advanced or metastatic solid tumours that are refractory (have not responded) to standard therapy or for which no curative standard therapy exists. The primary objective of the study is to determine the maximum tolerated dose, dose limiting toxicity 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.
U.S. Phase I/II Recurrent Malignant Glioma Clinical Trial
During the third quarter of 2006, 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 maximum tolerated dose, dose limiting toxicity 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.
Other Clinical Trial Activity
During the third quarter, we continued to develop our Phase II clinical trial program which included the assessment of different cancer indications and potential drug combinations, the interviewing and selection of investigators and clinical trial sites, and the contracting of Contract Research Organizations.
Manufacturing and Process Development
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 U.K. Phase II combination REOLYSIN(R)/radiation clinical trial and our existing Phase I clinical trials. At the same time, our process development activity helped improve virus yields from our manufacturing process. We completed the transfer of these improvements to our cGMP manufacturer at the beginning of the third quarter of 2006 and began production runs under this improved process. These production runs are expected to provide sufficient REOLYSIN(R) to expand our Phase II clinical trial program. Our process development activity has now shifted focus to the examination of the potential scale up of our manufacturing process.
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 chemotherapeutics and radiation, the use of new RAS active viruses as potential therapeutics, and to consider other uses for the reovirus as a therapeutic.
Financial Impact
We estimated at the end of the second quarter of 2006 that our monthly cash usage for the year would average approximately $1,250,000. Our cash usage for the nine months ending September 30, 2006 was $8,456,752 from operating activities and $581,661 for the purchases of intellectual property and property and equipment. Our net loss for the nine month period ending September 30, 2006 was $9,407,419. We expect that our monthly cash usage will continue to increase through the fourth quarter of 2006 as we complete our ongoing production runs, continue to enroll patients in our ongoing clinical trials, and expand our clinical trial and collaborative programs. We now believe our average monthly cash usage will be less than $1,200,000 for 2006.
Cash Resources
We exited the second quarter of 2006 with cash resources totaling $31,495,254 (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. We also expect to conclude enrollment in the expanded maximum delivered dose cohort in our U.K. Phase I systemic administration clinical trial. Also, along with our existing REOLYSIN(R)/radiation Phase II clinical trial, we plan to move into REOLYSIN(R)/chemotherapy co-therapy Phase II clinical trials and REOLYSIN(R) monotherapy Phase II clinical trials. The REOLYSIN(R)/chemotherapy clinical trial program will consist of small dose escalation Phase I studies to assess the safety of each co-therapy drug combination followed by Phase II clinical trials.
Recent 2006 Progress
On September 9, 2006 a poster, prepared by one of our collaborators, entitled “Reovirus Activates Dendritic Cells and Promotes Innate Anti-Tumour Immunity” was presented at the 1st Joint Meeting of European National Societies of Immunology. The poster highlighted the researchers’ use of isolated human cells to examine whether the use of the reovirus as a direct tumour killing agent might also activate the innate immune system to play a role in the killing of tumour cells. The innate immune system is the broad, short-term and non-specific first-line immune response to an infection. The research showed that the reovirus can infect and activate immature human dendritic cells. The reovirus-activated dendritic cells triggered anti-tumour cytotoxicity when co-cultured with two other types of immune cells, natural killer cells and autologous T-cells. The researchers concluded that the reovirus may support early innate anti-tumour immunity as well as inducing direct tumour cell death.
THIRD QUARTER RESULTS OF OPERATIONS
(for the three months ended September 30, 2006 and 2005)
Net loss for the three month period ending September 30, 2006 was $3,425,169 compared to $3,509,503 for the three month period ending September 30, 2005.
Research and Development Expenses (“R&D”) 2006 2005 $ $ ------------------------------------------------------------------------- Manufacturing and related process development expenses 1,259,716 1,767,524 Clinical trial expenses 688,435 372,825 Pre-clinical trial and research collaboration expenses 301,165 64,611 Other R&D expenses 456,430 613,103 ------------------------------------------------------------------------- Research and development expenses 2,705,746 2,818,063 ------------------------------------------------------------------------- -------------------------------------------------------------------------
For the third quarter of 2006, R&D decreased to $2,705,746 compared to $2,818,063 for the third quarter of 2005. The decrease in R&D was due to the following:
Manufacturing & Related Process Development (“M&P”) 2006 2005 $ $ ------------------------------------------------------------------------- Product manufacturing expenses 896,776 1,655,390 Technology transfer expenses 184,761 - Process development expenses 178,179 112,134 ------------------------------------------------------------------------- Manufacturing and related process development expenses 1,259,716 1,767,524 ------------------------------------------------------------------------- -------------------------------------------------------------------------
Our M&P expenses for the third quarter of 2006 decreased to $1,259,716 compared to $1,767,524 for the third quarter of 2005. In the third quarter of 2006, we completed the technology transfer that commenced in the second quarter of 2006. Our process development studies, that had been ongoing since 2005, resulted in improvements in virus yields. Once this technology transfer was completed we began production runs that will be used to supply our expanding Phase II and Phase I/II clinical trials. During the third quarter of 2005, we were in the midst of a multiple run supply contract, producing REOLYSIN(R) for our Phase I trials and did not incur technology transfer related costs.
In the third quarter of 2006, we incurred process development activity primarily associated with scale up compared to virus yield studies in the third quarter of 2005. Clinical Trial Program 2006 2005 $ $ ------------------------------------------------------------------------- Direct clinical trial expenses 639,719 371,768 Other clinical trial expenses 48,716 1,057 ------------------------------------------------------------------------- Clinical trial expenses 688,435 372,825 ------------------------------------------------------------------------- -------------------------------------------------------------------------
During the third quarter of 2006, our direct clinical trial expenses increased to $639,719 compared to $371,768 for the third quarter of 2005. In the third quarter of 2006, we incurred direct clinical trial expenses in four clinical trials that were actively enrolling patients along with clinical site start up costs associated with our Phase II combination REOLYSIN(R)/radiation clinical trial in the U.K. In the third quarter of 2005, we incurred direct clinical trial expenses in only three clinical trials along with clinical site start up costs in the U.S.
Pre-Clinical Trial Expenses and Research Collaborations 2006 2005 $ $ ------------------------------------------------------------------------- Research collaboration expenses 252,460 64,611 Pre-clinical trial expenses 48,705 - ------------------------------------------------------------------------- Pre-clinical trial expenses and research collaborations 301,165 64,611 ------------------------------------------------------------------------- -------------------------------------------------------------------------
During the third quarter of 2006, our research collaboration expenses were $252,460 compared to $64,611 in the third 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 chemotherapeutics and radiation, the use of new RAS active viruses as potential therapeutics, and to consider other uses of the reovirus as a therapeutic.
Other Research and Development Expenses 2006 2005 $ $ ------------------------------------------------------------------------- R&D consulting fees 70,323 384,725 R&D salaries and benefits 299,224 187,035 Other R&D expenses 86,883 41,343 ------------------------------------------------------------------------- Other research and development expenses 456,430 613,103 ------------------------------------------------------------------------- -------------------------------------------------------------------------
During the third quarter of 2006, our R&D consulting fees decreased to $70,323 compared to $384,725 in 2005. In the third quarter of 2005 we incurred consulting costs associated with the recruitment of our Chief Medical Officer, the activities of our scientific advisory board and consulting activity in support of our clinical trial activities. In the third quarter of 2006, we only incurred consulting fees associated with our clinical trial activity.
Our R&D salaries and benefits costs were $299,224 in the third quarter of 2006 compared to $187,035 in the third quarter of 2005. The increase is a result of increases in compensation and staff levels along with the hiring of our Chief Medical Officer in the third quarter of 2005.
Operating Expenses 2006 2005 $ $ ------------------------------------------------------------------------- Public company related expenses 507,828 390,473 Office expenses 258,790 195,127 ------------------------------------------------------------------------- Operating expenses 766,618 585,600 ------------------------------------------------------------------------- -------------------------------------------------------------------------
During the third quarter of 2006, our public company related expenses increased to $507,828 compared to $390,473 for the third quarter of 2005. During this period we engaged additional investor relations services compared to the third quarter of 2005. Our office expenses in the third quarter of 2006 increased to $258,790 compared to $195,127 in the third 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 34,671 4,173 ------------------------------------------------------------------------- -------------------------------------------------------------------------
Stock based compensation for the third quarter of 2006 increased to $34,671 compared to $4,173 for the third quarter of 2005. In the third quarters of 2006 and 2005, we incurred stock based compensation associated with the vesting of previously granted options.
YEAR TO DATE RESULTS OF OPERATIONS
(for the nine months ended September 30, 2006 and 2005)
Net loss for the nine month period ending September 30, 2006 was $9,407,419 compared to $8,841,272 for the nine month period ending September 30, 2005.
Research and Development Expenses (“R&D”) 2006 2005 $ $ ------------------------------------------------------------------------- Manufacturing and related process development expenses 2,751,207 3,584,430 Clinical trial expenses 1,920,467 1,154,677 Pre-clinical trial and research collaboration expenses 691,553 524,472 Other R&D expenses 1,219,460 1,235,455 ------------------------------------------------------------------------- Research and development expenses 6,582,687 6,499,034 ------------------------------------------------------------------------- -------------------------------------------------------------------------
For the nine month period ending September 30, 2006, R&D increased to $6,582,687 compared to $6,499,034 for 2005. The increase in R&D was due to the following:
Manufacturing & Related Process Development (“M&P”) 2006 2005 $ $ ------------------------------------------------------------------------- Product manufacturing expenses 1,664,308 3,406,588 Technology transfer expenses 457,975 - Process development expenses 628,924 177,842 ------------------------------------------------------------------------- Manufacturing and related process development expenses 2,751,207 3,584,430 ------------------------------------------------------------------------- -------------------------------------------------------------------------
Our M&P expenses for the nine month period ending September 30, 2006 decreased to $2,751,207 compared to $3,584,430 in 2005. 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 U.K. Phase II combination REOLYSIN(R)/radiation clinical trial and our existing Phase I clinical trials. At the same time, our process development activity helped improve virus yields from our manufacturing process. We completed the transfer of the improvements in our process to our cGMP manufacturer at the beginning of the third quarter of 2006 and began campaigning production runs in order to provide us with sufficient REOLYSIN(R) to expand our Phase II clinical trial program. Our process development activity has now shifted focus to the examination of the potential scale up of our manufacturing process.
In 2005, we were focused on the production of REOLYSIN(R) to supply the clinical trials enrolling at that time and to provide a supply for the two U.S. monotherapy and the U.K. combination trials approved in the first half of 2005. Our process development activity commenced work on improving production yields in the third quarter of 2005.
We continue to believe that our manufacturing and related process development expenses for 2006 will be in line with 2005.
Clinical Trial Program 2006 2005 $ $ ------------------------------------------------------------------------- Direct clinical trial expenses 1,783,138 1,067,927 Other clinical trial expenses 137,329 86,750 ------------------------------------------------------------------------- Clinical trial expenses 1,920,467 1,154,677 ------------------------------------------------------------------------- -------------------------------------------------------------------------
During the nine month period ending September 30, 2006, our direct clinical trial expenses increased to $1,783,138 compared to $1,067,927 for the nine month period ending September 30, 2005. During this period of 2006, we incurred direct patient costs in our four ongoing clinical trials along with clinical site start up costs associated with our U.K. phase II combination REOLYSIN(R)/radiation trial and our U.S. recurrent malignant glioma trial. In 2005, we were incurring direct patient costs associated with three enrolling clinical trial studies along with clinical site start up costs associated with our U.K. Phase Ia combination REOLYSIN(R)/radiation therapy and our U.S. systemic and glioma clinical trials.
We expect our clinical trial expenses will continue to increase for the remainder of 2006 compared to 2005. The increase in these expenses is expected to arise from enrollment in our existing clinical trial program and expansion into Phase II clinical trials.
Pre-Clinical Trial Expenses and Research Collaborations 2006 2005 $ $ ------------------------------------------------------------------------- Research collaboration expenses 634,199 427,719 Pre-clinical trial expenses 57,354 96,753 ------------------------------------------------------------------------- Pre-clinical trial expenses and research collaborations 691,553 524,472
