Company Overview: OncoSil Medical Ltd (ASX: OSL), formerly known as NeuroDiscovery Ltd, is a medical device company, which focuses on the development of brachytherapy for the treatment of pancreatic and liver cancers in Australia. The headquarter of the company is situated in North Sydney, Australia and the group is being currently headed by Mr. Daniel Kenny – Chief Executive Officer and Managing Director. It offers various treatment options for patients with pancreatic cancer including surgery, external radiation therapy, chemotherapy, and chemo-radiation therapy. Its lead product includes OncoSil, a brachytherapy device that emits beta radiation and is implanted directly inside the cancerous tumor during an endoscopic ultrasound guidance procedure. It is progressing towards the commercialization of the product. The device is currently undergoing clinical studies in leading academic sites globally. The clinical data will be used for regulatory submission within targeted markets including Europe, the United States, Australia, and Asia.
 

OSL Details

PanCO study - Positive Result to Date: OncoSil Medical Ltd (ASX: OSL) has recently reported an important update regarding the progress of its Global Pancreatic Cancer clinical programme for the treatment of advanced pancreatic cancer wherein it has successfully completed patient recruitment for its PanCO study across all participating sites in Australia, UK, and Belgium. It was reported that 5 of the initial 20 study participants have undergone surgical resection with curative intent and 50 patients have now enrolled in PanCO clinical study, with 41 successful implants completed to date with the OncoSil device and strong clinical performance achieved across multiple metrics. Of these 50 patients, 6 patients have undergone surgical resection with curative intent and 9 patients have achieved a Partial Response related to the reduction in a tumour longest diameter of at least 30% from the baseline. The key clinical performance and safety findings for the OncoSil device reported Excellent Local Disease Control Rate (DCR) of 100% for week 8 and 87% for week 16. A substantial tumour volumetric reduction of up to 73% for week 8 and up to 80% for week 16 was reported. The positive current trials are said to be informing future trials wherein the company can explore its clinical study options in resectable, borderline resectable and locally advanced pancreatic cancer indications. The final decision on future studies is to be taken based on data received from ongoing studies and feedback from US FDA. Therefore, we expect that the group has unhindered opportunity in years to come at the back of receiving positive results from its PanCO clinical trial which suggested that the medical device product OncoSil is safe, secure and can be deployed through endoscope without inconveniences and can reduce tumour ailment when combined with chemotherapy.
 

Substantial tumour volumetric reduction (Source: Company Reports)

Quarterly Cash Flow Update (30 June 2018): The Company released its Quarterly Cashflow report for the quarter ended 30 June 2018 wherein cash outflow from operation recorded US$2.88 Mn which was up by around 6.5% as compared to the previous quarter. The rise in cash outflows was mainly related to research and development cost, staff costs, administration and corporate costs during the same period. The Company had $15.20 Mn in cash at the end of the June 2018 quarter. Further, the group estimated cash outflow for the next quarter of approximately $3.2 Mn, comprising of R&D expenses ($1,500k), employee cost ($1,400k), and administrative and corporate costs ($300k).


Estimated cash outflows for next quarter (Source: Company Reports)

Fully funded to Achieve CE Mark and commence pivotal phase of OncoPac-1 trial: During the year, the group has successfully completed an institutional Placement event which was supported by both major existing shareholders and several new institutional investors and closed as oversubscribed status. The placement raised the capital of $12.7 Mn at an issue price of $0.12 per share. Under the share repurchase plan (SPP), all eligible shareholders were invited to invest up to $ 15,000 per shareholder at the issue price of $ 0.12. In the response, the company exceeded the aggregated capped amount of A$4 million and created 33.3 million new share units. The purpose of the SPP was to provide an opportunity for its existing shareholders to enhance their shareholding in the company. Funds raised through Institutional Placement and Share Purchase Plan will be used for completing the preliminary phases of its PanCO and OncoPac-1 trials, support European commercialization and commence a global, registration-directed randomized controlled trial under an Investigational Device Exemption from US FDA, and other business developments such as innovation, licences, etc.


Clinical pathway overview (Source: Company Reports)

Robust Partnership with 15 leading cancer centres: The company has plans to scale-up its business operation with the help of innovation, partnership with leading cancer centres, excellent results of its clinical trials, efforts for securing licencing agreements, broader distribution, and capital and market support. At present, the group has a potential partnership with 15 leading cancer centres for the commercialization of its products in the selected countries. These partners are: MD Anderson (Texas), Johns Hopkins (Maryland), Moffit Cancer Centre (Florida), Cedars Sinai Hospital (LA), Guy’s & St Thomas’ (London), University of Leicester, Hammersmith (London), Addenbrookes (Cambridge), Monash (Melbourne), St Vincent’s (Sydney), Westmead Hospital (Sydney), RNS Hospital (Sydney), Royal Adelaide, The Austin Hospital (Melbourne), and Jules Bordet Institute Hospital (Brussels). In view of the ongoing strategies and developments, 2018 can be a transformative year that seems to be marking the journey in terms of commercialization of OSL medical devices into the market with the help of its strategic partnerships in the unique geographic regions.

 
Partnership with leading cancer centres (Source: Company Reports)

Financial Performance: During the half-year period, the Company provided an overview of promising early study results, indicating excellent local disease control and safety, at the European Association of Nuclear Medicine (EANM) Congress. The loss for the Group after providing income tax amounted to $4,533,345 for the period ending 31 December 2017 (31 December 2016: $3,111,923) and it reported an increase in revenue ($1,824,191) that is up by 72.7 per cent as compared to the same period in the prior year. Cash and financial assets balance as at 31 December 2017 was $5.2 million and the group received R & D Tax Refund of $3.4 million for FY17 (2016: $2.3 million). Early positive study data results have been consistent with previously completed studies. The group expected to receive a refund of $4.0 million in FY18. Moreover, the company had a debt-free status along with cash & cash equivalent reserve of 5.19 Mn as at 30 December 2017. The current ratio stood at 4.47x in 1HFY18, representing adequate liquidity to fulfill any shortcoming liability in near future.


1HFY18 – Consolidated Profit and Loss Statement (Source: Company Reports)

Positive Outlook: We are optimistic on the company at the back of balance sheet position, securing strategic partnerships and licensing agreements in all key geographical regions, broader distribution channel, capital and market support and exposure, de-risking events relating to CE Mark, pivotal trial success, FDA approval, and corporate activities.

Stock Performance: There is an opportunity for the company to become a standard of care in combination with Chemotherapy. The OncoSil medical device has shown some interesting safety and efficacy signals in single-arm, pilot clinical trials. Resultantly, disease control rates and volumetric tumour reduction look superior to standard of care alone. Hence, we maintain our positive outlook on the company performance as the trial continues to produce high-quality data and start commercial sales in Europe this year, pending regulatory clearances. Meanwhile, the stock was up by 33.33 per cent in the past six months but down by 12.20 per cent in the past one week as at August 09, 2018. It is worth noting that the stock was up by 104.55 per cent in the last five years. However, ROE for 1HFY18 recorded at (55.8 per cent) against (22.9 per cent) of 1HFY17, the stock’s movement is subject to positive outcomes of its clinical trials. The key catalysts for growth for CY18 entail targeting CE Mark certification, EU first sales this year, continued recruitment into the Global Pancreatic Cancer clinical study program, OncoPaC-1 trial in progress, strategic partnerships and licensing agreements in key geographies, additional licensing partners in unique geographies, and planned new clinical studies for CY2019 which will drive clinical adoption in EU & at global level and secure US FDA approval. Based on the aforesaid facts and trading level, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.175.
 

OSL Daily Chart (Source: Thomson Reuters)

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