The VLA Coin Toss

“It is not a case of choosing those [faces] that, to the best of one’s judgment, are really the prettiest, nor even those that average opinion genuinely thinks the prettiest. We have reached the third degree where we devote our intelligences to anticipating what average opinion expects the average opinion to be. And there are some, I believe, who practice the fourth, fifth and higher degrees.”

Keynes, General Theory of Employment, Interest and Money, 1936


Things are getting interesting in the Viralytics (ASX : VLA) shareholder camp in the lead-up to the much anticipated (and hyped) end-October news from the FDA about T-Vec. In April 2015, the U.S. Food and Drug Administration’s (FDA’s) Oncologic Drugs Advisory Committee (ODAC) and Cellular, Tissue, and Gene Therapies Advisory Committee (CTGTAC) voted to recommend approval of Amgen’s T-vec for advanced melanoma, a decision that a lot of Viralytics shareholders are hoping will pave the way for CAVATAK and also potentially re-value the company in the eyes of those who are leading the immuno-oncology charge.

An excellent ASCO Post article back in July, intelligently titled “Oncolytic Immunotherapy in Melanoma: It’s Not All About PD-1” spells out very nicely why we need to keep an open mind about many other kinds of novel therapies that might have a profound effect on treating aggressive cancers, not just checkpoint inhibitors. But then again, just to spite us – hot off the press – we have the potentially $1.74Bn ($350m up-front) Five Prime-BMS deal for combination Opdivo-CSF1R, demonstrating that combination product deals with Checkpoint inhibitors are still alive and well, especially for sexy targets/mechanisms of action.

The question you should be asking yourself in the next 10 days or so is “are you a betting (wo)man”? When you ask yourself that question, you should do it in a gritty Dirty Harry voice. Sneer a lot. Look at yourself in the mirror when you do…

dirty harry

VLA’s stock price has gone from 93c back in June to 52c earlier today. This signals to me that momentum in other parts of the immuno-oncology space isn’t rubbing off on VLA’s slightly long-in-the-tooth asset. That fall has even taken place with a lot of fairly significant positive news flow around the company’s activities. As I have previously reported, I think the CAVATAK data is actually quite nice and shows more than a little potential. But can a second-place oncolytic viral therapy generate enough excitement on the back end of a positive T-Vec PDUFA outcome? Moreover, can it really shine brighter than deals like Five Prime/CSF1R?

I think not.

Thus I think those holding on for a storm surge on the back of T-Vec are in for disappointment. I’m not a “betting man” in the way that many people are who trade in ASX-listed biotechs, and so the rationale that VLA trade opportunity around the 27/28th of October represents a Keynesian “average opinion” isn’t how I think. I simply believe that an artificial valuation of CAVATAK can’t be sustained by a frothy and fickle retail market that believes in fairy dust and Hail Marys. VLA’s valuation can only be benchmarked by the genuine and committed attention of those leading the industry, and they haven’t – as yet – appeared to show a whole lot of interest.

44 thoughts on “The VLA Coin Toss

  1. Thanks for this update on VLA, Chris.

    I love Keynes’s idea that investing is a bit like participating in a beauty contest with a funny twist!

    Here’s how Wikipedia explains the analogy in simple terms (Keynes is a boring writer!)

    “Keynes described the action of rational agents in a market using an analogy based on a fictional newspaper contest, in which entrants are asked to choose the six most attractive faces from a hundred photographs. Those who picked the most popular faces are then eligible for a prize.
    A naive strategy would be to choose the face that, in the opinion of the entrant, is the most handsome. A more sophisticated contest entrant, wishing to maximize the chances of winning a prize, would think about what the majority perception of attractive is, and then make a selection based on some inference from his knowledge of public perceptions. This can be carried one step further to take into account the fact that other entrants would each have their own opinion of what public perceptions are. Thus the strategy can be extended to the next order and the next and so on, at each level attempting to predict the eventual outcome of the process based on the reasoning of other rational agents.”

    Keynes apparently made a fortune on the stock market by reading the Financial Times every morning and buying into stocks with the sexy stories that he thought would attract lots of buyers.

    He called these stocks as “castles in the air” stocks.

    So, is VLA a good contender to win one of Keynes’s beauty contests?

    I’ve decided to take a bet. I ‘m betting that people will buy up VLA before 28 October, hoping for a favourable FDA decision, which will then trigger a nice price jump in VLA.

    I wonder what the odds are of the FDA approving T-vec?

    In their previous meeting they voted 22 to 1 (?) to proceed to the next stage: the approval meeting. And I think I read somewhere that usually a strong vote like that leads to improved odds of a favourable FDA approval — but I’m not sure.

    From memory the T-Vec results were messy: both good and bad, so I guess the decision could go either way.

    Perhaps I could protect myself by selling up the day before the big decision!

    So much guessing!

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      • Hi Chris I doubt you or us punters would have a clue if VLA have had any Pharma interest.The company does not leak.As for the share price just looks like your typical retail holder movement.People get bored and move on.Much bigger volumes going up than back down.Been holding for 6 years and by Xmas we get a result via trial results.Looks promising to me and Iam hoping for another SRX. Cheers . Ps I would be interested in your view on the massive option grab.

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  2. I don’t think their viral delivery is gonna cut the mustard. I expect the data release will provide the cover for some kind of hatchet job. ACL MkII style.

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  3. Is it not standard practice for trial results to be vetted for integrity by a third party before the company is allowed to release them to market? I think this is in the AusBiotech managerial handbook.
    Point being the window of opportunity exists for those in the know to leak to those that want to know. Which makes anne’s comment of, I‘m betting that people will buy up VLA before 28 October, hoping for a favourable FDA decision, which will then trigger a nice price jump in VLA, look like the perfect exit opportunity.

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  4. The data has been outstanding as has the safety profile.I don’t see it as a sell.The option grab looks to me like they have a idea what they can receive or license for and want a heathy return.More importantly they would have a expectation on clinic results. If nothing else its getting to the interesting phase.

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    • Many promising drugs have failed…

      The science behind CAVATAK is very good but ultimately it is a product of the previous immune-oncology cycle (like T-vec) and that doesn’t place it foremost in the current strategy. Just because Amgen has developed an oncolytic virus therapy doesn’t mean it will succeed either.

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    • Galileo I don’t know what you mean or anything about ACL.As for not being apart of the current strategy is that like,disregard a drug that works for a 1/3 of patients with no grade 3 or 4 adverse. affects for something that has not been invented.? Regards,

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  5. I would think Amgen could be a buyer of VLA.?? Mccoll said get the data then do an auction, see who’s keen.The Bladder trial is the clincher if it proves successful.No advance in that treatment for 15 years.Cavatak I ve been told is also less expensive to produce.As I said getting to the pointy end .

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      • Maybe lets address the former issue. Who apart from Amgen are ahead of VLA as far as trial progress.Things may have changed but i feel ok about reading a report 18 months ago that had VLA well placed.

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      • Gregory, this is isn’t HotCopper and it isn’t a forum to spruik stocks with no information. I have done my research and written my opinion. Now do yours.

        A good starting point is going to clinicaltrials.gov and searching for “oncolytic AND virus AND phase II. There are also several virus-based vaccines that failed in phase III (not because they didn’t work – they did – but because they struggled to recruit patients).

        You have to understand that just because Amgen has an oncolytic virus therapy, everyone isn’t going to line up to buy one. It doesn’t work that way – in fact other companies are more likely to watch what happens before buying, knowing that there are several under-funded options available.

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  6. Hi Chris, I read a report on oncolytic companies progress and I know VLA are well placed. I am only interested in those still in the game.

    I’ve done my research and have given my opinion .

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    • Is it an oncolytic company or a delivery modality developer? The coxsakie virus is delivering what exactly to the tumor? If it is an oncolytic company then I am unimpressed with progress over so many years. If it is a delivery modality developer then it needs to be compared with peers for efficacy with disclosure of payload. Peers as in other agents not necessarily other companies. For example, AAV, lenti, DPC, antibodies etc.
      So far we have not had this and I feel blinded because of it. Their other main asset, the ink jet cartridges being developed for hand held testing seems to have just disappeared. Net effect: trust factor goes out the window.

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    • That’s because you can’t back up your statements. It is long in the tooth, it’s an undeniable fact. It’s 90s technology in Phase II.

      Phase II is a pretty straightforward accomplishment in cancer because trials can be still relatively small. Phase III is the challenge and we have plenty of examples of non-mainstream drugs that have great potential but didn’t make it through not because the technology wasn’t good – but because there were not enough patients who wanted to participate. That’s the problem – it’s not that CAVATAK is bad, it isn’t, it’s that there are so many better things to back, either as a pharma company or as a patient.

      I can have it both ways. The data looks nice, but it is not a sexy asset.

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  7. the FDA approval came in for T-vec. Unfortunately VLA was not picked as a winner in the beauty contest in the lead-up to the announcement, nor in the two hours after the announcement.

    she was regarded as just too plain by those judges!

    I sold half my small stake this morning, and will hope for a better rating from the next crop of judges over the next couple of days.

    Poor VLA: probably judged harshly because she’s half-common cold virus!

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  8. As for our disagreement on VLAs position in the oncologic space it might be worth noting what Mc Coll said yesterday when asked and quoted in the latest Bioshares insight. His reply supported my view. Maybe you should back up your views before slipping the boot in Chris.???

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  9. They were inlicensed from Canon. Supposed to be developed as a on the spot diagnostic tool. One day it just never got mentioned. Has never been mentioned again.

    Look up an annual from about ten years ago and its all there.

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  10. No RTO. Name change following some kind of hostile takeover from ticker PSX to VLA. I guess it matched the change of strategy better. Check out pressers from 2006 onwards. All downhill from that point on.

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    • I keep saying, Gregory, the clinical data is very nice. I have never said anything to the contrary.

      The question is whether anyone will pay through the nose for a formulation of CVA21? It’s a big question and so far the answer is no.

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  11. Well Merck have put their toes in the water with todays announcement of combination trial in Bladder and Non small lung cancer.No financial tie up but does show there is interest from the big guys.As there should be . imo

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