Viralytics Clinical Trial Update

The US Phase II CALM study of intratumoural Cavatak in advanced melanoma has met its primary end point early, with a promising 33% response rate. The study remains on track for full enrolment in Q413 and should render final data by end-2014. Positive CALM data paves the way for a randomised Phase II study in late-stage melanoma and should increase partnering interest. Separately, the Phase I/II STORM study of intravenous Cavatak in advanced solid tumours is expected to start in Q413 following UK regulatory approval. Our valuation remains at A$61m.

Phase II CALM study meets end point early
The US, single-arm Phase II CALM study of intratumoural (IT) Cavatak, as monotherapy in patients with late-stage (IIIc and IV) melanoma, has met its primary end point early with an encouraging immune related Progression Free Survival (irPFS) rate of 33% (10 out of first 30 evaluable patients). Moreover, the CALM data suggest that multiple dosing with IT Cavatak is well tolerated, with relatively mild adverse events (grade 1 or 2) and no serious AEs. CALM has now enrolled 44 patients and should reach its target of 54 evaluable patients by end 2013. Although final data are awaited (late 2014), the positive early readout supports progression into a randomised Phase II study and should increase partnering interest.

UK regulatory nod for Phase I/II STORM
Viralytics, (VRACY) has received approval from the UK Medicines and Healthcare products Regulatory Agency (MHRA) to initiate the two-stage Phase I/II STORM study of intravenous (IV) Cavatak in 30 patients with advanced solid tumours (melanoma, prostate, lung, bladder). Starting in Q413, the Phase I stage will administer Cavatak as monotherapy, while the second Phase II part will combine Cavatak with standard chemotherapy (docetaxel or carboplatin/paclitaxel) in the most responsive cancer type identified in Phase I. We expect the study to render initial data in 2014, which, if positive, could see Cavatak being developed further in other solid cancers.

Valuation: A$0.69/share (undiluted)
Our base case valuation of Viralytics remains unchanged at A$61m, or A$0.69/share (undiluted), derived using a risk-adjusted net present value method in only the lead indication of metastatic melanoma, and end-June 2014 net cash of c A$200k. We currently assume a 30% (Phase II) probability of success for IT Cavatak in melanoma. There is potential upside to our base case valuation if IV Cavatak delivers positive STORM data and, thus, is developed for a range of cancers other than melanoma.

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