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OncoSec’s unique story one to watch in the next year

San Diego-based OncoSec Medical Inc. (OTC:ONCS) began operations in March 2011 through a reverse merger with parent company Netventory Solutions, which had changed its focus from online inventory services to the biomedical industry. Technology acquired from Inovio Pharmaceuticals on March 14th formed the core of OncoSec’s new business.

The assets purchased from Inovio included non-DNA vaccine technology and intellectual property relating to electroporation technology to facilitate delivery of chemotherapy agents, or nucleic acids encoding cytokines for the treatment and diagnosis of tumors. In return, the company is obligated to pay Inovio $3,000,000 in scheduled payments over the period of two years from the closing date of the asset purchase and a royalty on commercial product sales related to the technology. The transaction closed on March 24, 2011. An upfront payment of $250,000 was made with four scheduled payments to follow- the final one on March 24, 2013.

The electroporation technology OncoSec acquired, called the OncoSec Medical System (OMS), is based on the same system Inovio is using for its DNA vaccine programs. It in essence, applies electrical pulses to cells, increasing the permeability of cell membranes, allowing greater uptake of injected therapies. OncoSec is applying the OMS technology to deliver either an approved chemotherapeutic agent or DNA plasmid encoding a cytokine. It calls the chemotherapy approach OMS ElectroChemotherapy and the cytokine treatment OMS ElectroImmunotherapy.

In May 2011, the company announced plans to initiate Phase II trials in metastatic melanoma, Merkel cell carcinoma, and cutaneous T-cell lymphoma (CTCL). All three trials will test treatments with IL-12 DNA plasmids administered by electroporation.

IL-12 has been used previously as an agent to stimulate the immune system, typically administered as a protein directly into tissue. This procedure has been shown to induce an innate immune response capable of destroying cancer cells. However, it suffers from toxicity issues due to the body’s rejection of the foreign IL-12 protein.

DNA IL-12 plasmids solves the toxicity issue by having the body’s own cells generate IL-12 protein. This self-generated IL-12 has the same ability to induce a tumor-killing immune response. With the addition of electroporation, plasmids are taken up by cells at a much higher rate, resulting in an increase in IL-12 gene expression of 1,000 fold and a 100 fold increase in immune response.

OncoSec, though newly formed, was able to jump straight into Phase II trials by referencing previously conducted Phase I data. They are also all physician-sponsored studies, allowing the company to save on the costs of clinical trials.

The metastatic melanoma trial will enroll about 25 patients with the primary endpoint of objective response at six months and secondary endpoints including duration of response and overall survival. Data presented at ASCO in June of the Phase I results showed the treatment to be safe and well tolerated with good signs of activity. Moreover, 53% (10 of 19) of patients saw at least a partial regression or stabilization of disease, with 15 % (3 of 19) demonstrating a complete response to the treatment suggesting the local treatment elicited a systemic immune response to metastatic tumors.

Additional work has led to the discovery of two possible biomarkers to determine subjects most likely to benefit from treatment with IL-12 DNA plasmid therapy. If confirmed, these biomarkers can aid in recruiting patients, improving the odds of a successful trial. In practice, they provide the means to produce companion diagnostic tests, allowing healthcare providers to screen for patients who will benefit from the treatment.

The other two indications being pursued are in very rare cancers. According to the company, Merkel cell carcinoma only afflicts 1,500 individuals each year while CTCL affects about 3,000 people. The Phase II Merkel cell carcinoma trial will enroll 15 patients; primary endpoint is IL-12 gene expression, secondary endpoints are objective response rates, time to progression, and overall survival.

The CTCL trial will be slightly larger with 27 patients and measure objective response as the primary endpoint followed by safety and progression-free survival as secondary endpoint measures.

OncoSec’s second treatment platform, called OMS ElectroChemotherapy, uses the OMS electroporation delivery technology to enhance the intracellular uptake of a commonly used chemotherapeutic agent, bleomycin. Through its asset acquisition, OncoSec has accumulated a significant database of clinical data in a variety of tumor types using the OMS ElectroChemotherapy therapeutic approach.  To date, OMS ElectroChemotherapy has been tested in several clinical trials ranging from Phase I through Phase IV conducted in 13 countries across over 50 sites. 

Human data has been collected in over 400 patients with cancers ranging from basal and squamous cell carcinomas, melanoma, adenocarcinoma, Kaposi’s sarcoma, pancreatic, hepatic, oral, and head and neck cancers. OncoSec has begun analysis of available data from the Phase III and IV, conducted in the United States and Europe, respectively, and recently announced preliminary results from the Phase IV European trials, indicating that treatment of recurrent head and neck cancer using OMS ElectroChemotherapy is comparable to definitive surgery, with an 86% survival rate two years following treatment. The focus now seems to be on DNA IL-12 plasmids, but on the basis of this data, OncoSec plans to identify and engage potential regional partners to develop and commercialize the chemotherapy treatment approach.

OncoSec raised $1,092,000 on March 18 through the private placement of 1,456,000 units priced at $0.75 each just as it became a public company. Each unit consisted of one share of common stock and a warrant to purchase another share at $1.00 by March 18, 2016. The company managed to raise an additional $3 million in June through a second stock and warrants sale; investors picked up 4,000,000 shares for $0.75 per share and received warrants to purchase an additional 4,000,000 shares at $1.20 within five years.

Fully diluted, OncoSec has a market cap of $32.5 million, relatively low for an oncology company at this stage of development. But OncoSec is a unique story and there is certainly a wariness toward reverse-mergers. Management appears to be moving things along quickly; this little company is worth keeping an eye on.