Oncolytics’ (ONCYF) Signs $87 Million Deal with Adlai Nortye

By John Vandermosten, CFA


Oncolytics Biotech (OTC:ONCYF) (TSX:ONC.TO) announced a licensing deal with Adlai Nortye (NEEQ: 870946) to provide upfront licensing and milestones of $21.2 million to support the Phase III effort for REOLYSIN.  There are additional amounts totaling $65.4 million that will be paid upon achieving clinical, regulatory and commercialization milestones.  The deal also provides double digit royalties to Oncolytics from sales in the region.  

In return for the funds, Oncolytics will grant Adlai Nortye a regional license that covers China, Hong Kong, Macau, Singapore, South Korea and Taiwan.  Adlai is responsible for all clinical, regulatory and commercialization efforts in its licensed areas. 

Adlai Nortye is a Chinese biotech firm with several molecules in preclinical stages focused on the cancer space.  They are also cooperating with a Chinese academic institution to develop a PD-1/L1 inhibitor; a checkpoint inhibitor that could potentially be used in conjunction with REOLYSIN.  REOLYSIN will now become Adlai Nortye’s lead product.  The partner is expected to pursue additional indications and, given the successes that have been observed in pancreatic cancer, we anticipate that this may be one of the areas where Adlai will begin.  

This deal will enable Oncolytics to begin registration of its Phase III study for REOLYSIN, which we expect to begin mid-year 2018.  The funding from Adlai will provide about 75% to 90% of the patient cost  throughout its duration.  Oncolytics continues to pursue additional relationships for development in Europe and Japan, which should begin to accelerate now that they have consummated a deal.  

Agreement Details (in $USD)

➢ Upfront licensing and milestone payments of $21.2 million
o Upfront of $5.3 million
o Two milestones of $8 million comprised of callable share purchase warrants
➢ Clinical, regulatory and commercialization milestones of $65.4 million
➢ Double digit royalties from REOLYSIN sales 
➢ Regulatory milestones of $7.9 million

Concurrent with the Adlai deal and communications with other potential partners, Oncolytics is interacting with the EMA to obtain additional input for trial design prior to an anticipated mid-2018 launch of this global study.  At this point, we anticipate that there will be trial sites in the US, China and Europe, of which about 10% will be contributed by Adlai.  

Key Milestones

➢ End of Phase II Meeting with the FDA (completed)
➢ MUK Eleven study first patient treated (September 2017)
➢ File for BTD with FDA (September/October 2017)
➢ Final analysis of REO 024 (REOLYSIN with Pembrolizumab) for pancreatic cancer
➢ Pursue additional collaborations for Phase III trial for metastatic breast cancer
➢ Launch Phase III trial for HR+/HER2- mBC (mid-2018)


Oncolytics inked a deal to access the notoriously difficult Chinese market through partner Adlai Nortye which has provided additional validation for REOLYSIN and capital to support the Phase III registrational trial.  The company is also concurrently interacting with the EMA and other potential partners to develop other regions and obtain financial support for REOLYSIN.  The company has made clear that they intend to pursue a co-development deal in the North America, with royalties comprising a large part of the agreement.  The Adlai Nortye licensing agreement is a beneficial deal in our opinion and we believe it may accelerate other negotiations in place.


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