Oncolytics Biotech Inc. (ONC) Stock Is Significantly De-Risked After End-of-Phase II Meeting with FDA, Cheers Canaccord

Analyst lifts price target on Oncolytics with new clarity from the FDA on Reolysin's path forward to approval.


How did the outcome of Oncolytics Biotech Inc.’s (TSE:ONC) end-of-Phase II meeting with the FDA fare for the drug maker? Shares are climbing almost 11%, so clearly investors like what they heard. The agency has given the heads up that ONC’s lead asset Reolysin in combination with paclitaxel is clear to stride towards a single pivotal Phase III trial in metastatic breast cancer.

Notably, the FDA has offered guidance that should Oncolytics succeed in meeting its primary endpoint in this next trial, no other trials will be demanded for the drug maker to win a future Biologics License Application (BLA) in the U.S.

Canaccord analyst Neil Maruoka is bullish as the “FDA sheds light on the path forward,” and a promising one at that. Not only does Maruoka take this as “a very positive step toward the potential approval of Reolysin” thanks to newfound “clarity” from the agency, “significantly reducing clinical and regulatory risk,” but the analyst cheers the Phase III trial should “significantly shorten the development timelines for this drug.”

Consider that the firm’s lead asset “could fit well with other immunotherapies for cancer and could therefore represent an attractive asset for big pharma/biotech,” asserts the analyst, who believes now that registration pathway guidance is loud, clear, and compelling, these partnering chats could “intensify.” With this clarity likely acting as a “catalyst,” as shares are already stepping up the market ladder today, and “Fast Track designation [as] an incremental positive” for Reolysin’s road to commercialization, Maruoka is more confident than ever on Oncolytics’ opportunity.

In reaction, the analyst reiterates a Buy rating on ONC stock while bumping up the price target from C$1.50 up to C$2.50, which implies a close to 310% upside from where the stock is currently trading. (To watch Maruoka’s track record, click here)

“Further, the FDA supports evaluation in HR+/HER2- metastatic breast cancer (mBC) patients, which was a population that responded very well in the recent Phase II study; we believe a trial in these patients also lowers clinical risk,” elaborates Maruoka. With a guide that Phase III success could translate to approval for the drug maker, the analyst bets a Special Protocol assessment could be within reach, lessening any regulatory risk factor even more. For now, the analyst looks to a prospective partnership for the firm to explore dotted line details for Phase III protocol.

Overall, “We view the company‚Äôs described clinical plan as a good strategy, but one that will likely require additional resources or a biotech/pharma partnership to complete. We would nonetheless remain buyers of Oncolytics, as the company has re-emerged with greater focus and a sharper strategy to advance its lead product,” surmises Maruoka.Chart