ONCY Recovering Slightly From Wednesday’s Clinical Trial Delay For Reolysin

Updates from two clinical trials are playing into shares of Oncolytics Biotech (NASDAQ:ONCY) Thursday morning, with some good news perking up the shares after Wednesday’s bad news. The company provided an update on its Phase III clinical trial for Reolysin in head and neck cancer yesterday, in which the company has chosen to revise the design of the ongoing trial, based on blinded data and a consultation with the FDA. Expectations were for the company to report preliminary results (Stage 1 of a 2-stage trial) including response rates (RR) and progression-free survival (PFS) data, and importantly, a decision on whether to progress to Stage 2 of this key Phase III trial. After further examination of the study subjects, the company determined that it was enrolling two distinct populations in the trial: 1) Those patients for whom only metastatic disease was being measured by clinicians, and 2) those who had local regional head and neck disease. According to the company, these two patient “subsets” were responding differently to treatment, and given that the trial was not designed to separately analyze these groups, it is amending the Phase III trial protocol.

Based on the proposed changes, Oncolytics will: 1) Increase the number of patients from 80 to 160 in Stage 1 of the trial; 2) De-couple Stage 1 and Stage 2 from a statistical analysis standpoint; and 3) Make Stage 2 a full registrational Phase III study, with Stage 1 serving as a supportive study. Analysts are citing this event as a modest negative, given that changes to a late-stage trial protocol increase uncertainty, although some suggest that the changes could focus the trial toward the best chance for success (the metastatic subset had PFS of 120 days, a favorable result). The timeline for the Phase III trial is the biggest negative, with the second Stage of the trial not starting until mid-2013, if the first Stage shows positive results.  In kind, some analysts lowered their price target on the stock, given the delay, but most are standing their ground with long-term Buy ratings.

Providing an offset to the Phase III trial delay, Thursday morning the company reported good news for its Phase II trial of Reolysin in squamous cell carcinoma of the lung (SCCLC). These are preliminary data (Stage 1 of a 2-stage trial) testing the use of Reolysin in combination with carboplatin and paclitaxel. In the first stage, up to 19 evaluable patients with SCCLC were to be treated and if four or more patients demonstrated a partial response (PR) or better, the study would then proceed to Stage 2, with up to 55 patients planned for treatment in the entire study. The endpoint in Stage 1 was met, according to the company, after 15 evaluable patients were enrolled, with 5 of the 15 patients showing a PR (four confirmed, one unconfirmed), and an additional eight patients demonstrating stable disease (SD), for a disease control rate (complete response [CR] + PR + SD) of 87%. Given the success in Stage 1, the company noted that it will move to Stage 2 of the SCCLC study.

Overall, the pushback of the Phase III head and neck cancer trial was viewed as a negative, but today’s good news from the Phase II trial in SCCLC could move the stock higher, as Reolysin continues to demonstrate efficacy signals in significant cancer indications.