Echelon Wealth Partners analyst Doug Loe thinks cancer biologics company Oncolytics Biotech (Oncolytics Biotech Stock Quote, Chart TSX:ONC) is still trading at a major discount to its industry peers. In a research note to clients on Monday, Loe reiterated his “Speculative Buy” rating and $11.00 target for ONC.

On Monday, Calgary-based Oncolytics announced that it has enrolled its first patient in its previously-announced 36-patient AWARE-1 breast cancer trial testing the company’s flagship oncolytic reovirus formulation, Reolysin/pelareorep.

Loe says that while starting the trial doesn’t by itself move the needle on his investment thesis, completing the AWARE-1 trial has become a “company-defined antecedent” to commencing pivotal Phase III testing. Thus, timely completion puts ONC on a more defined path, the analyst says.

“As we have described before, ONC shares are trading at a substantial discount to valuations ascribed to at-the-time private oncolytic virus development peer firms on acquisition by more mature oncology-focused drug developers,” says Loe.

“Recent examples include: Amgen/BioVex’s herpes virus-based Imlygic (BioVex’s take-out valuation was US$1 billion, of which US$425 million was upfront cash), or Merck/Viralytics’ coxsackievirus A1-based Catavak (take-out value US$394 million), and Boehringer Ingelheim/ViraTherapeutics’ vesicular stomatitis virus-based VSV-GP (take-out value US$244 million),” he says.

Loe expects ONC to have zero revenue over the years 2019 to 2022, with EBITDA losses of $25.5 million, $26.5 million, $22.5 million and $18.6 million, respectively. He see the company starting to generate revenue by 2023, where he forecasts royalty revenue from Reolysin of $16.8 million and EBITDA of negative $0.7 million. For 2024, he sees $95.7 million in revenue and $78.8 million in EBITDA.

Loe’s $11.00 target represented a projected 12-month return of 331 per cent at the time of publication.