ONC stock has a big upside, says Leede Jones Gable

Leede Jones Gable analyst Douglas W. Loe likes the clinical progress being made by Calgary, Alberta-based cancer biologics developer Oncolytics Biotech (Oncolytics Biotech Inc Stock Quote, Charts, News, Analysts, Financials TSX:ONC). Loe delivered an update to clients on Monday where he reiterated a “Speculative Buy” rating on the stock and $8.50 target price, which at press time implied a one-year return of 290 per cent.

Oncolytics Biotech, which is developing oncolytic reovirus formulation pelareorep/Reolysin in Phase 2 cancer trials for breast and pancreatic cancer and multiple myeloma, announced on Friday its fourth quarter 2022 and full-year financials, which featured an operating cash for the quarter of $5.9 million and $23.4 million for the year. R&D expenses for the Q4 were $4.8 million and $15.4 million for the 2022 year.

A pre-revenue company, Oncolytics said its pancreatic cancer program has shown a 69 per cent objective response rate and confirmed complete response in its Phase 1/2 GOBLET trial, while its Phase 2 BRACELET-1 trial in HR+/HER2- metastatic breast cancer is on track for a randomized data readout during the second quarter of the current year.

“This is a truly exciting time for Oncolytics, as our progress last year provides pelareorep with clear and substantially de-risked paths to registrational studies in both breast and pancreatic cancer,” said Dr. Matt Coffey, President and CEO, in a press release.

Oncolytics finished the quarter with $32.1 million in cash and equivalents, which according to Loe is enough to confer some balance sheet stability on the company. He surmised that pelareorep is advancing well in its BRACELET-1 and GOBLET trials and predicted that both will generate enough response rate data by the end of the current year to support advancing into more substantive Phase 2/3 testing by the first half of 2024, with the company’s cash reserves and at-the-market offering in place to raise more equity if required.

“Oncolytics continues to have an aggressive Phase II oncology program for pelareorep and thus in our view is generating reasonable value from its own capital as ascribed to clinical R&D activities, benefiting from the multiple corporate and academic partners it has on board to share financial burden of ongoing programs,” Loe wrote.

On the share price, Loe said the market may need to see more clinical development partners in the mix before the stock heads higher.

“From a capital markets viewpoint though, we believe that ONC share value could be band-constrained until the firm identifies interest from co-development corporate partners (complementing the Asia-focused alliance with Adlai Nortye already in place) in parallel with identifying sources of partnership capital to displace ATM-derived capital to fund future Phase II/III pelareorep testing,” he said.