Oncolytics Biotech’s latest results are promising, Paradigm Capital says

New research results from clinical-stage oncology company Oncolytics Biotech (Oncolytics Biotech Stock Quote, Chart, News: TSX:ONC) show potential in the lucrative sector of immuno oncology (I/O), says Rahul Sarugaser, analyst with Paradigm Capital, who on Thursday reiterated his “Speculative Buy” recommendation and 12-month target price of $3.25.

This week, Oncolytics Biotech presented preclinical data on its lead drug candidate REOLYSIN (REO) at the annual meeting for the American Association for Cancer Research, with the drug showing “compelling improvements” in overall survival during its Phase 2 trial in metastatic breast cancer patients, according to Sarugaser, who also points out that REO’s tumour infiltrating, immune cell alerting mechanism of action has recently shown potential to treat previously unreachable cancers. In effect, the results make Oncolytics a potential partnering target.

“Importantly, the diseases in which REO demonstrated this mechanism of action were pancreatic and brain cancers, each representing new clinical avenues for ONC to pursue and areas of significant unmet need,” says the analyst. “Together, these data position ONC as an attractive partnering target for big pharma companies looking to access new, lucrative, and currently unaddressed I/O areas.”

“ONC is positioning itself as a key enabler of I/O drugs to treat ‘cold’ tumours, which, currently, do not respond to I/O therapy: ~80% of all cancers,” he says. “We look forward to seeing ONC produce more data in this new, hot mode of cancer treatment.”

Abernethy projects that ONC will produce revenue and EBITDA of $2.0 million and negative $10.9 million, respectively, in FY2018. His 12-month $3.25 target represents a potential return on investment including dividend of 351 per cent.