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Current price: ~$5
Outstanding shares: 20,298,482
Market cap: ~$ 100 million
Oncolytics Biotech Inc. was formed on April 1998 in Alberta Canada. Since its inception it has been a development stage company that has focused its efforts on the development of pelareorep, a systemically administered immuno-oncology (I-O) viral agent with the potential to treat a variety of cancers. The company has not been profitable since its inception and expects to continue to incur substantial losses. It could thus be said that ONCY is a “bio zombie”, a biopharma that has managed to survive for well over two decades despite having nothing of substance to show for its efforts. Its lead candidate pelareorep (formerly known as Reolysin) is basically a virus that is injected into the patient’s bloodstream with the hope it will help treat solid tumours and hemotological malignancies. This type of treatment has shown scant effectiveness against cancer over the last two decades in immune-oncology combination regiments, meaning that it has never been proven to be effective even when used in conjunction with other treatments. Pelareorep appears to be no exception as a quick look at its clinical trials list will show that it has nearly 30 trials to its name but is yet to be any closer to FDA approval for any of the types of cancer it has attempted to treat which include breast, colorectal, pancreatic as well as multiple mylenoma (1) .
. End 2018 Q1 2019 Q2 2019 Q3 2019
Cash and equivalents $13.7M $14.2M $12.3M $12.3M
Net loss $17M $4.9M $5.3M $3.5M
Outstanding shares 17.4M 19M 20.4M 25M
A look at ONCY balance sheet and financial statements will show a company that is not struggling for cash. All of its 2019 quarterly reports show over $12 million in cash and cash equivalents, which gives the illusion that it is not financially distressed. However, a quick look at the number of outstanding shares will reveal it has increased from 17.4 million at the end of 2018 to over 25 million by the end of September 2019. This makes a lot of sense when one realises that ONCY has averaged quarterly losses of $4.6 million.
The question is: Who is buying these shares and why?
ONCY has a history of getting involved with financial institutions that are very questionable to say the least.
One of these institutions is Lincoln Park Capital with which ONCY entered into a securities purchase agreement amounting to $26 million on September 2018. Although Lincoln Park has not had any legal issues that we are aware of, the list of other companies with whom they have had security purchase agreements should give any investor good reason for concern. One of them is Anavex life Sciences with which it inked one of such agreements for the sale of up to $50 million worth of common stock on October 2015 (2). Anavex’s share price then proceeded to increase from around $8 to over $14 in November, only for it to come crashing down to less than $4 a few days later. Anavex was later subject a complaint for violation of federal securities laws (3). Another one of these companies is Biocept, Inc. with whom Lincoln Park entered into a securities purchase agreement on September 2018 resulting in Lincoln Park having nearly 400,000 Biocept shares which were registered for sale on October 2019(4). Biocept’s share price then proceeded to decline from $2.20 to under $0.80 on December 2018 only to then violently spike to more than $3.60 on January 2018 and crash again to less than $1.20 on February 2019. Yet another company that entered a securities purchase agreement with Lincoln Park is Zosano Pharma Corp. This agreement dates back to October 2017 and amounted $35 million (5). Zosano’s share price at the time was around $16, it currently trades at less than $1.50 seeing several spikes and crashes along the way. Other examples of dubious companies that have been involved with Lincoln Park includes Tonix Pharma, BioLargo Inc and Genocea Biosciences among others.
Sadly, ONCY also has agreements in place with other dubious entities. One of these is Ladenburg Thalmann & Co. Inc. which is currently acting as the underwriter of ONCY latest public offering of over 4.6 million shares and warrants first announced in mid-2019 (6). Ladenburg Thalmann & Co. has one particularly dubious link which relates to one of its shareholders, Phillip Frost. Mr. Frost is an infamous and disgraced figure in the world of publicly traded companies due to his participation in “long running schemes that generated over $27 million from unlawful stock sales and caused significant harm to retail investors who were left holding virtually worthless stock” which resulted in him facing serious securities violation charges by the SEC. (7) . Although, Mr. Frost was forced to sell the majority of his shares in Ladenburg Thalmann & Co. back to the company and resign as non-executive chairman he remains a shareholder (8).
ONCY is little more than a “bio zombie” that relies on issuing large numbers of shares to dubious financials institutions in order to continue its attempts at getting its doomed product through more pointless clinical trials. We thus advise investors to stay away.