By John McCamant, The Medical Technology Stock Letter

OncoGenex (OGXI) has had a busy few weeks as the stock ran to over $17 before dropping below $14. 

First, OncoGenex and its partner Teva Pharmaceutical (TEVA) announced changes to their Phase III development plan for OGX-011 (custirsen). Then, the company priced a secondary offering at $12 and raised $46.8 million.

The 30% discount was large and meant dilution for current shareholders. However, it also made a better negotiating position with potential partners for OGX-427.

In addition, there should be much better sponsorship from Wall Street if the underwriters follow thorough and recommend OGXI.  

The new trial Phase III will evaluate the ability of custirsen to improve survival for patients with prostate cancer when combined with recently approved, second-line chemotherapy, Jevtana (cabazitaxel).

OncoGenex continues to work with Teva to finalize clinical development plans for custirsen in non-small cell lung cancer and expects to initiate this program in the second-half of 2012.

Meanwhile, the SYNERGY Phase III trial, evaluating a survival benefit in first-line chemotherapy castrate-resistant prostate cancer (CRPC), continues to accrue patients and is expected to complete enrollment later this year.

The SYNERGY study (first-line CRPC patients) is on track with recruitment and data is still expected by the end of 2013.

The study has been increased from 800 to 1,000 patients with a revised hazard ratio of 0.75(previously 0.725). Thus, it could be easier to reach statistical significance.

In sum, it was a crazy few weeks for OGXI and their shareholders. However, we are pleased that the company and Teva are flexible in their development plans for OGX-011 as the treatment landscape continues to evolve in prostate cancer. 

The key is getting the drug candidate to the market as we continue to believe that it will be a success given its unique ability to counter drug resistance, particularly when used in combination with taxol. 

We know that many OGXI shareholders are frustrated that the stock’s momentum has been stopped and the offering was at a steep discount. 

We believe that longer term, the benefits of increased sponsorship and an attractive partnership for OGX-427 will more than make up from the short term pain. OGXI is a buy.

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