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Oncolytics lung cancer drug shrinks tumors in 95 percent patients

(Reuters) - Oncolytics Biotech Inc said a mid-stage trial of its experimental lung cancer drug showed that 95 percent of the patients experienced a reduction in the size of their tumors, sending its stock up as much as 38 percent.

Shares of the company, with a market value of about C$279 million ($273 million) as of Thursday close, touched an 11-month high of C$4.94, making them among the top percentage gainers on the Toronto Stock Exchange on Friday.

The drug, Reolysin, was used intravenously in combination with chemotherapy drugs carboplatin and paclitaxel. It was tested on patients suffering from metastatic, or recurrent squamous cell carcinoma of the lung.

Squamous cell carcinomas account for about a fourth of all lung cancers, the company said.

However, Oppenheimer & Co analyst Boris Peaker said in a note the single-arm study was inconclusive and the spike in the company's stock price associated with this news was not warranted.

"Since the chemotherapy itself is highly active, it is difficult to estimate the impact that Reolysin is making," said Peaker, who kept his "perform" rating on the stock.

The company said the results further suggest that Reolysin may have potential use in pre-surgical settings.

"Based on these findings we intend to continue to look at Reolysin as a treatment for cancers of the lung and cancers that metastasize to the lung," Chief Executive Brad Thompson said.

Calgary-based Oncolytics said in September the first part of a mid-stage trial of its lung cancer drug met the main goal of showing patient response.

The company's U.S.-listed shares rose 38 percent to $4.93.

($1 = 1.0020 Canadian dollars)

(Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Sreejiraj Eluvangal, Maju Samuel)

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