Let me preface this by saying that investing in the biotech sector can sometimes be nothing more than speculating. The fortunes of a biotechnology can turn on a dime based on numerous factors that can include how many clinical trials it’s currently running, how many diverse drugs account for those trials, whether or not any partnerships exists, and how much available cash a company has on hand.
We’ve witnessed first-hand what a crapshoot the space can be. Four years ago, Pharmacyclics, Inc. (NASDAQ:PCYC) looked like just another biotechnology company that was going to waste away into nothing with its share price trading for less than $1. In the years since, it’s forged nearly a $1 billion licensing partnership with Johnson & Johnson (NYSE:JNJ) for its relapsed/refractory mantle cell lymphoma and chronic lymphocytic leukemia drug hopeful, Ibrutinib, and delivered some of the strongest overall response rates ever witnessed in trials for these two diseases. Shares of Pharmacyclics, Inc. (NASDAQ:PCYC) closed yesterday above $80 per share.
On the other hand, Affymax, Inc. (NASDAQ:AFFY) went from hero to nearly zero when its anemia drug Omontys was voluntarily pulled from market following the death of three patients. Because Omontys is Affymax’s only drug approved by the Food and Drug Administration, and its only two ongoing clinical trials also included Omontys, the company is literally a shell of its former self.
With this in mind, I feel it’d be prudent of biotech-savvy investors to give Oncolytics Biotech, Inc. (USA) (NASDAQ:ONCY) a closer look.
The big risks
I’m quite aware that there are a lot factors that’d raise a red flag with Oncolytics. Similar to Affymax, Inc. (NASDAQ:AFFY), you could say that Oncolytics has put all of its eggs in one basket with its lead experimental drug, reolysin. According to Oncolytics Biotech, Inc. (USA) (NASDAQ:ONCY)’s website, including its U.K., Canadian, and U.S. studies, reolysin as either a monotherapy or combination therapy is the basis for all 31 clinical trials! Obviously, if reolysin proves ineffective or unsafe, Oncolytics is going to be a world of hurt.
Another factor worth considering here is that history isn’t on Oncolytics Biotech, Inc. (USA) (NASDAQ:ONCY)’s side. Developed by TheStreet.com’s senior columnist Adam Feuerstein and University of Chicago oncologist, Dr. Mark Ratain, the Feuerstein-Ratain Rule noted that of numerous late-stage cancer compounds over the past decade, no company with a market cap of less than $300 million had successfully had a drug approved by the FDA. In fact, the Feuerstein-Ratain Rule is now a perfect 23 for 23 in predicted the failure of late-stage cancer drugs. With Oncolytics Biotech, Inc. (USA) (NASDAQ:ONCY) below that $300 million threshold, history is certainly against it.
… and the potentially huge reward
However, there exists plenty of promise as well, if you can get over these concerns. Possibly the most unique and differentiable factor for Oncolytics Biotech, Inc. (USA) (NASDAQ:ONCY) is the pathway by which its drug works. Unlike normal cancer-fighting agents, reolysin is actually made from a naturally occurring virus, making its treatment a cancer vaccine. The reovirus is often non-pathogenic in humans, meaning it may cause an infection, but rarely with any symptoms. In normal cells, detection of the reovirus triggers an immune response that disallows the virus from replicating. In cancer cells, however, no immune response is triggered and eventually the reovirus replicates until it kills the cell. Better yet, the resulting symptoms often resemble nothing worse than flu-like symptoms.