It was an effervescent Brad Thompson who staged a recent conference call to trumpet the news that Oncolytics Biotech had secured a worldwide licensing agreement with Pfizer Inc. to develop and market Oncolytics’ reovirus as a cancer therapy for companion animals.

But a day after the news, Thompson’s enthusiasm was dampened as investors rained on the parade.

“Quality companies are taking unreasonable hits on share price and we’re an example,” lamented the chief executive of the Calgary biotechnology company, referring to a skittish stock market.

“We get a fabulous corporate partnership with the best possible partner for an animal-health deal and we fall through the chute. As it turned out, it was bad timing.”

Oncolytics (ONC-TSE), whose primary focus is on development of the reovirus as a potential cancer therapeutic for humans, was halted at $18 for dissemination of the news on Nov. 20, but within two days it had traded as low as $11.50. By week’s end, the share price recovered to the $14.50 range, but Oncolytics still issued a news release reaffirming that there are no recent or anticipated events within the company that would account for the decline.

Oncolytics still ranks as one of Canada’s biggest success stories in biotechnology in the past year with its stock skyrocketing to $21.50 from an 85-cent initial public offering a year ago.

“I think part of the problem is that Calgary is a community that is intertwined and it’s a situation where a lot of the same investors are all in the same high-tech stories like Wi-Lan and Oncolytics,” said Thompson.

“When they’re all down at the same time, there are asset-allocation issues and margin issues. It’s an interconnected world where people who own Wi-Lan might be selling Oncolytics to make up their trouble.

“Shareholders are important. They’re the reason you’re here, but you also have to keep an eye on your milestones. We’ve met all our milestones.”

The deal with Pfizer (PFE-NYSE) will allow Oncolytics to concentrate on its Phase I human clinical trials, which began at the Tom Baker Cancer Centre in June.

Canaccord Capital analyst Wayne Schnarr noted in a research report on Oncolytics the day after the Pfizer announcement that the deal with the New York-based pharmaceutical company was a validation of the core reovirus technology.

Canaccord issued a strong-buy recommendation on Oncolytics with a 12-to-18-month target of $50.

Pfizer will be responsible for development and commercialization of the reovirus for animals. Terms of the deal were not released.

“This does not imply that we’re doing a deal with Pfizer for the reovirus for human use at this time,” said Thompson, noting there are an estimated 110 million companion pets in North America, 25 per cent of which will get cancer.

“Pfizer is the second largest animal-health franchise and hopefully we’ll get them to number one soon. What you’ll see from this deal is a reduction in the burn rate over the next two years that would be some millions of dollars.

“When we found out about the significant market for animals, we concluded that it would be a waste not to use this asset. But we’re still a human-health company. Without a corporate partner, I don’t know if we’d have proceeded (with the reovirus for animals).”

The reovirus for animals, which has already shown effectiveness in canines and other animals, will require trials and U.S. government approval.

Cannaccord projects it could reach the market by the end of 2003.

“I would anticipate the (animal) product being on the market at about the same time or prior to the human product reaching the market,” said Thompson, adding that he couldn’t project a specific timeline.

Oncolytics has yet to release any results from the human trials.

“All I can say is that we’re pleased with the progress to date,” said Thompson. “Silence is golden in this business. When you don’t hear reports, that (implies) that we haven’t had problems.”

The reovirus infects and kills cancer cells with an activated Ras pathway. Researchers believe that targeting this pathway could have broad potential in the treatment of many cancers.

Web Watch:
www.oncolyticsbiotech.com
www.pfizer.com