Market Overview

OncoSec Medical to Wrap up 2013 With Multiple Possible Catalysts


Lesson Learned

As I look back at my investment failures and successes for the recent past, I couldn't help but notice an ongoing theme in my choices.  I often made some good decisions via a combined approach of trading and investing in buying at dips and selling at short-term spikes (or larger dips).  However, I also see so many cases in which I would have had much better returns on my investments by maintaining my long positions through the spikes and watching them appreciate over time, as the companies' successes proved to be solid with good upside over the longer term.  I invest a portion of my funds into high-risk, high-reward development-Phase pharmaceuticals with promising drugs and medical devices on the cusp of being validated (hopefully), via early and late-stage clinical trials.  Although the upside can be substantial as the potential to tap into unmet and under-met markets in cancer, heart disease and other diseases can be lucrative, the downside must be considered as clinical or regulatory failures can send shares plummeting.  OncoSec Medical Inc (OTC: ONCS) is one of my long time favorites and epitomizes the potential for solid returns via a long-term "buy and hold" approach with much upside for the exciting pharmaceutical.

The Investment Candidate and Its Platform

I have written multiple articles mentioning OncoSec's potential as it has been developing a rapidly-advancing cancer fighting platform focused primarily on skin cancers.  The company purchased the rights it its electroporation-based approach to fighting cancer from Inovio Pharmaceuticals (INO) in March of 2011 for $3 million, due upon commercialization of the technology plus unknown royalties.  Inovio continues to develop its remaining rights to its electroporation technology for its vaccine-based approach to fighting infectious diseases and other cancer indications and has emerged as a favorite investment for small pharmaceutical traders and investors.  I encourage interested investors in either company to review Inovio's website and review recent clinical trial data, partnerships and SEC filings in order to better understand the market potential for each.

The electroporation approach both companies have been utilizing with solid success thus far is a novel and exciting approach to administering not only vaccines but also other agents of choice.  The technology lends its successes to the concept that many vaccines and other drugs utilized to fight many diseases are most efficous once they permeate the targeted cells' membranes and enter their interior.  The OncoSec Medical System(R) (OMS) is the company's platform that uses the approach of administering a electrical current via six needles (acting as electrical probes) which are inserted into targeted tumors and cancerous tissue.  The current dramatically increases the porosity of the targeted cells which allows previously-injected agents to efficiently and rapidly enter the cells' interiors.  A highly efficient approach, typical results indicate a 4,000 to 10,000-fold increase in the cell membrane's permeability while being electroporated.  Once the current is removed, the cells rapidly return to their previous state -- trapping the utilized agent inside the cells where it is not only most effective, but it also reduces the amount of free agent left to circulate the patients' bodies which would typically negatively impact the agent's safety profile.

Upcoming Catalysts

OncoSec currently has two Phase II trials underway evaluating OMS to administer its IL-12 DNA plasmid.  This agent is encoded to induce the targeted cells to produce the IL-12 cytokine (a protein).  The presence of this agent on the cell's surface triggers an immune response to destroy that cell.  A potentially potent cancer fighting agent, IL-12 is toxic at levels efficous enough to fight cancer tumors as it would be free to circulate throughout the body if directly injected into tumors via standard syringe or surgical administration.  OncoSec believes that if administered via the OMS system, the cellular uptake of the DNA plasmid and then localized production of the IL-12 cytotoxic agent and its minimized exposure to the rest of the patient's body could prove to be both effective and safe.  In the world of fighting cancer through chemotherapy and other cytotoxic agents via traditional means, there is an ever present battle of a therapy's effectiveness and safety profile. Typically, higher dosages would prove to be more effective but have less tolerable safety profiles, while lower dosages prove to have less potent anti-cancer activity but much better safety profiles.  OncoSec believes it can have the best of both worlds with its OMS platform.

On June 18th, OncoSec announced that it had completed enrollment in its Phase II trial evaluating OMS to treat metastatic melanoma.  On November 15th, 2012 the company reported promising interim data from the trial.  Interim data in the 15-patient trial noted 13 subjects were eligible for evaluation at 39 days, 9 at 90 days and 2 at 180 days. 95% of treated lesions indicated response at 39 days (14% stable disease (SD), 42% partial response (PR), 39% complete response (CR), at 90 days results were (50% PR, 45% CR) and at 180 days (33% PR and 77% CR). At 180 days, 2 patients were evaluable for ORR (per trial design, ORR is to be measured at 180 days). Of the 2 patients eligible for evaluation, 1 had a confirmed stable disease.  Particularly significant was that the second patient had a near-complete response of all treated and untreated lesions.  The untreated lesion response helps to confirm earlier data in which the systemic response throughout the patients' body was as a result of a learned immune response against the metastatic melanoma rather than just the localized response against electroporated tissue.  The June 18th enrollment completion announcement noted that the final data for the trial were expected in 6-12 months, giving investors an investment catalyst to consider as early as December of this year.  A September 24th corporate announcement noted that the company was expanding enrollment to include an additional 10 patients that would include a second treatment after three weeks (initial protocol was a single treatment and then observation/testing only for the remainder of the trial).  With an estimated 76,690 new cases of melanoma expected in 2013, the disease incidence has been increasing now for over 30 years and represents a growing area of need that OncoSec hopes to tap into.

On February 13, 2012 OncoSec initiated enrollment in a Phase II trial utilizing its OMS system to treat patients with Merkel cell carcinoma (MCC).            A total of up to 15 patients would be evaluated for the study with interim data reported out on August 12th.  At the time of the announcement, 5 patients had been enrolled with 2 dropping out of the trial due to disease progression after only received one of two treatments.  The 3 remaining patients received two treatments each with the treatment described as safe and well tolerated with minimal injection site discomfort.  The remaining 3 patients treated with at least one cycle utilizing ImmunoPulse IL-12 DNA exhibited increased levels of IL-12 expression in tumor biopsy done three weeks after treatment relative to pre-treatment biopsy levels.  This indicates a localized response and an environment in which the immune response should be strong.  One patient exhibited increased levels of the CD8+ T-cells (believed to be responsible for much of the immune response against cells expressing IL-12).  In terms of actual efficacy, one patient with progressive MCC despite multiple previous treatments of chemotherapy, radiotherapy, surgery and IT interferon had a confirmed partial response having greater than 70% tumor regression that persisted for approximately 8 months.  Approximately 1600 patients will be diagnosed with MCC in the U.S. this year.  This number makes the OMS treatment approach to fighting this small indication disease the perfect candidate for an FDA Orphan Drug Designation, as I noted in an earlier article in 2012.  Such a designation, if issued, would enable OncoSec to be much more profitable in the development and potential marketing of OMS for the indication.  Benefits would range from market exclusivity, research grants, tax credits, exemption from regulatory registration fees, protocol assistance and fast-track procedures to expedite the regulatory process as well as a 7 year market exclusivity in which the FDA would not approve another similar drug for the MCC indication.

OncoSec's third Phase II trial was initiated on July 9, 2012 for the treatment of cutaneous T-cell lymphoma.  A total of up to 27 patients will be enrolled in this trial for which no interim data has yet been released. The treatment regimen for this indication is a bit more rigorous than the other Phase 2 trials underway.  The lesions for this indication will be treated with the OMS system on days one, five and eight with an additional treatment at three months with the same treatment cycle if the patients exhibit stable disease or better treatment response.  In patients who continue to respond favorably with good treatment tolerance as well, additional treatment cycles will be repeated at three, six, nine and twelve months.  After twelve months, patients would be moved to the follow-up Phase of the trial and evaluated for response for five years.  Another possible Orphan Drug indication for OncoSec's OMS program, T-cell lymphoma annually strikes roughly 3,000 people per year in the U.S.

In OncoSec's January 15th "Milestones and Corporate Strategy" press release, the company noted that in 2013 it intends to present final data from its Phase II melanoma and Phase II MCC trials.  Although it appears that the melanoma data potentially released this year would only now contain interim data as the patient size has been expanded to include 10 more receiving a second treatment, no such announcement has been made of the MCC trial, and the year is winding down quickly.  The press release also noted that the T-cell lymphoma trial would report out interim data in 2013 as well, so the clock winds down.  With interim Phase II metastatic melanoma  and interim T-cell lymphoma data due out imminently, final Phase II MCC data and the potential for an Orphan Drug designation announcement also a possibility, the remainder of 2013 looks to be exciting for OncoSec Medical. 

OncoSec reported out it 2013 annual 10K filing for the year ending July 31, 2013 on September 27th.  As of July 31, the company had cash and equivalents of $4.9 million with expected cash burn rate of $758,330 per its stated expected 12 month cash burn rate of $9.1 million.  On September 19th OncoSec announced the closing of a $12 million public offering in which it netted $11.1 million for 47,792.000 shares offered at $0.25 per share.  Based on these projections and burn rate, the company should have roughly $13.75 million in early October with enough cash to fund operations through 2014, minimizing the need for additional dilutive financing for the foreseeable future.  An investment in OncoSec or any other development Phase pharmaceutical company is certainly not without risk as poor clinical data, particularly in its lead product candidates, can catastrophically affect share price.  Investors with higher risk tolerances can also see significant rewards on their investments if the research and regulatory processes are kind to them.  An H.C. Wainwright & Co report from September 30th was a bit of an eye-opener with the firm giving OncoSec a "buy" rating with a $1.50 price target, a significant amount above Friday's closing $0.263 share price.  I believe OncoSec Medical does offer the possibility of strong upside potential for shareholders and believe that a long-term "hold and watch" approach to this investment can be kind to shareholders' portfolios. 

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

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