Byron Capital analyst Douglas Loe maintains $9 target on Oncolytics Biotech

Byron Capital analyst Douglas Loe says that while there are several competitors conducting head and neck cancer studies, Reolysin is particularly well positioned because but few “truly novel” agents are in advanced clinical testing. Oncolytics Biotech (TSX:ONC) last week reported its Q2 results. The company lost $10.17-million, or $.13 cents a share, compared to a loss of $7.16-milion for the same period last year.

Oncolytics CEO Brad Thompson focused on the company’s phase three Reolysin trail, rather than the numbers: “Early in the quarter, we announced that we had completed enrolment in the first, 80-patient stage of our phase III trial in head and neck cancers,” he said, adding: “We continued to make progress on this key clinical initiative during the quarter with our independent data monitoring committee recommending the trial proceed based on a review of the safety data. We continue to await the results of an ongoing data review which will enable us to determine the next steps for the study.”

Byron Capital analyst Douglas Loe says income statement metrics are not overly material to valuation at this stage of Oncolytic’s development. He points out that even though the losses for the quarter were steeper, the company’s cash balance of $35.8 million is enough to fund Reolysin clinical programs into the second quarter of 2013. In a research update to clients yesterday, Loe maintained his Speculative BUY rating and $9.00 target on the stock.

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Oncolytics Biotech’s history goes all the way back to the early 1990′s and discoveries made in the Department of Microbiology and Infectious Diseases at the University of Calgary. The company has since poured ten of millions of dollars into the development of a cancer treatment based around a formulation of reovirus, a family of viruses that can affect the gastrointestinal system and have shown to have oncolytic, or cancer killing properties.

Reolysin is a proprietary form of human reovirus developed by Oncolytics. Reovirus is found naturally in mammalian respiratory and bowel systems. Every human is exposed to these viruses, which are found in our gastrointestinal systems and respiratory tract, but the vast majority of us do not show any symptoms from their presence there.

Decades ago, researchers began to suspect that reovirus showed potential as a cancer therapeutic because it reproduced well in cancer cell lines, specifically in those cells that display and activated Ras pathway, a characteristic that could play a role in two-thirds of all human cancers. Oncolytics Biotech has become a world leader in the area, with nearly three-hundred patents to date.

Loe says that while there are several competitors conducting head and neck cancer studies, Reolysin is particularly well positioned because but few “truly novel” agents are in advanced clinical testing.

At press time, share of Oncolytics Biotech on the TSX were even at $2.82.

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