Oncorus Finalizes $87 Million U.S. IPO Effort (Pending:ONCR)


Quick Take

Oncorus (ONCR) has filed to raise $87 million in an IPO of its common stock, according to an S-1 registration statement.

The firm is a clinical stage biopharma developing viral therapies targeting the immune system to increase its ability to kill cancer cells.

ONCR has achieved very early safety results with no dose limiting reactions, but we have no indication of efficacy.

The IPO may be more relevant for institutional investors as the firm is still at a ‘venture investing’ stage, so I’ll watch it from the sidelines.

Company & Technology

Cambridge, Massachusetts-based Oncorus was founded to develop an oncolytic platform leveraging the Herpes Simplex Virus as a delivery system for a greater number of ‘immunostimulatory transgenes’ to increase systemic anti-tumor immunity.

Management is headed by president and Chief Executive Officer Mr. Ted Ashburn, M.D., Ph.D, who has been with the firm since October 2018 and was previously Head of Oncology Development at Moderna (MRNA)

Below is a brief overview video of oncolytic virotherapy:

Source: Creative Biolabs

The firm has begun Phase 1 safety trials for its lead candidate, ONCR-177, in patients with different solid tumors, including breast cancer and cutaneous tumors.

Management expects to publish initial data from this trial from 2H 2021 to 2H 2022.

Below is the current status of the company’s drug development pipeline:

Source: Company S-1 Filing

Investors in the firm have invested at least $122 million and include MPM Capital, UBS Oncology Impact Fund, Deerfield Management, Arkin Bio Ventures and Cowen Healthcare Investments.

Market & Competition

According to a 2019 market research report by ResearchAndMarkets, the global market for solid tumor treatment was an estimated $121 billion in 2018 and is expected to reach $424 billion by 2027.

This represents a forecast CAGR (Compound Annual Growth Rate) of 15.0% from 2019 to 2027.

Key elements driving this expected growth are the growing incidence of breast cancer and other types of solid tumors as well as increasing awareness and treatment options being developed worldwide.

Also, North America currently accounts for 33.6% of market share, the highest by any region, while Europe trails at 30.2% and the Asia Pacific region represents 19.5% of demand.The Asia Pacific region is expected to grow at a high rate in the coming years due to increased income, developing healthcare infrastructure and increasing government programs for awareness.

Major competitive vendors that provide or are developing treatments include:

  • Amgen (AMGN)

  • Ziopharm Oncology (ZIOP)

  • BioNTech (NTGN)

  • Gritstone Oncology (GRTS)

  • Moderna Therapeutics (MRNA)

  • Replimune

  • Merck (MRK)

  • AstraZeneca (AZN)

  • Johnson & Johnson (JNJ)

  • PsiOxus Therapeutics

  • Regeneron (REGN)

  • Vyriad

  • Turnstone Therapeutics

Financial Status

Oncorus’s recent financial results are typical of a clinical stage biopharma in that it has no revenue and significant R&D and G&A expenses associated with its development programs.

Below are the company’s financial results for the past two and ½ years (Audited PCAOB for full years):

Source: Company registration statement

As of June 30, 2020, the company had $28.9 million in cash and $10.1 million in total liabilities. (Unaudited, interim)

IPO Details

Oncorus intends to raise $87 million in gross proceeds from an IPO of 5.8 million shares of its common stock, offered at a proposed midpoint price of $15.00 per share.

No existing shareholders have indicated an interest to purchase shares at the IPO price, a common element of life science IPOs.

Assuming a successful IPO, the company’s enterprise value at IPO would approximate $420.8 million, excluding the effects of underwriter over-allotment options.

Management says it will use the net proceeds from the IPO as follows:

approximately $32.0 million to advance ONCR-177 through our Phase 1 clinical trial, including monotherapy, combination therapy, and expansion cohorts, as well as additional clinical development expenses;

approximately $11.5 million to fund preclinical and clinical development expenses for a Synthetic CVA21 product candidate, including candidate nomination and IND-enabling activities;

approximately $1.5 million to fund our efforts to develop a product candidate from our second synthetic program based on SVV, through candidate nomination;

approximately $2.0 million to fund our efforts to develop ONCR-GBM, an intratumoral product candidate targeting brain cancer that is based on our oHSV platform, through candidate nomination;

approximately $18.9 million to fund a portion of the planned buildout of our manufacturing capabilities; and

the remaining proceeds for working capital and general corporate purposes.

Management’s presentation of the company roadshow is available here.

Listed bookrunners of the IPO are Jefferies, Evercore ISI and Piper Sandler.

Commentary

Oncorus is seeking public capital market funding to advance its pipeline through and into clinical trials.

The firm’s lead candidate, ONCR-177, is currently in Phase 1 safety trials in a variety of configurations but initial data readouts won’t be available until at least the second half of 2021 or as late as 2022.

The market opportunity for various solid tumor treatments is extremely large and expected to grow substantially in the coming years as the global population ages and individuals lose natural immune system function, increasing demand for cancer treatments.

The only collaboration is with Merck supplying its Keytruda drug in a combination trial that Oncorus is paying for.

The company’s investor syndicate includes noted life sciences venture capital firm MPM Capital.

As to valuation, management is seeking an enterprise value that is within the typical range for a biopharma firm at IPO, so valuation appears reasonable.

The firm recently completed a Series B private financing on the heels of a Phase 1 first cohort result of no dose limiting toxicities (3 patients only) within the first 28 days following first dose.

So, it appears its lead candidate may not have any dosing limits for safety and tolerability purposes. Dose limitations can potentially reduce the efficacy of a drug in treating the targeted disease.

Oncorus is still at a very early stage of development – it is essentially still at ‘venture investing’ stage and we don’t have even initial data from patient responses, other than very limited dose limitation results.

The IPO may be more relevant for institutional investors, so I’ll watch it from the sidelines.

Expected IPO Pricing Date: October 1, 2020.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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