Biodexa Pharmaceuticals PLC (BDRX) 2018 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to today's Midatech Pharma Interim Results Call. (Operator Instructions) I must advise you that this conference is being recorded today, Thursday, 27th of September 2018.

And I'm going to turn the call over to your speaker today, Dr. Craig Cook. Please go ahead, sir.

Thank you. Welcome, everybody, to Midatech Interim through the period June 30, 2018. Thank you for everyone attending in the room and joining by phone. There is a version of presentation up on the website for those dialing in by phone.

So to get directly into it, progress in the period has seen significant change as well as advancing of the key priorities.

From an R&D perspective, our key research programs are now all in clinical development and now running according to plan. Specifically, MTD201 and MTX110, they went into the clinic May 2018. The Phase I study for Octreotide MTD201 actually has completed first period, was very favorable data, and we will touch on that during the course of the presentation.

From a business perspective, also a significant change and progress. You would have learned early on from the press announcements that we've entered into a binding offer with Barings for divestment of the U.S. operations, subject to shareholder approval. This is in line with and continues our strategy to refocus the business on R&D slowly and to get our 3 technologies through the various inflection points.

What's also clear, I think, is that the recent R&D focus and the delivery of some of these key milestones reflects the updated leadership team, knowing what we need to do, knowing how to do it and already doing what we set out to do, including the MTX110 program, the MTD201 program and the business reorganization side of things.

Usual disclaimer. In terms of the technology, most of you have seen this slide before. Honestly, this is familiar to you. But just to recap, we have 3 technologies, all focused on improving bio-delivery and bio-distribution of existing agents either via sustained release via our Q-Sphera platform or via targeted delivery via our gold nanoparticle platform or via targeted local delivery via our MidaSolve platform.

What's new to the story is each technology is now in the clinic, each technology has its own program and each technology has opportunities beyond the programs that are currently in line. And this way, we uniquely address the lethal diseases that otherwise might be very difficult or not possible.

So in terms of the strategy -- this is the strategy. This slide shows the strategy. We have 3 technologies, Q-Sphera, MidaSolve and MidaCore, 3 technologies. We have 3 programs in the clinic, MTD201, MTX110 and MTX102, all in the clinic at this point in time. We have 3 additional preclinical programs, MTD119, MTR111 and MTR -- MTX114, all in preclinical. And the other important point is all the markets that we're focusing on are substantial market areas of unmet need that need new therapies or certainly have patients that require a different approach or our sensitive medications.

Spending some time on the Q-Sphera technology, that is for the sustained release, a Midatech formulation that need to be administered as depo over time.

This is the scene of what is currently the prevalent way of producing microspheres i.e., that reactivates emulsion process, where 95% of the market use these large reactants, 3,000- to 6,000-liter reactants. The polymer is mixed and high energy stirring in these reactants. Large infrastructure require same-story building, very expensive and very inefficient.

The Midatech approach in contrast is really a continuous approach, piezoelectric printing and we electrically print these microspheres at several million droplets per second. This is the infrastructure. We put that into a single room. The big-sized room, infrastructure is very manageable, very reasonable, and this stays up in the middle, that specific area over there, that is the engine of the printing technology.

This video on the next slide shows that the -- at a market profit level, the printing in action. All of these little droplets coming down are microspheres, like 30-micron microspheres. Now the diameter of this typical hair is 200 microns. So part of these, you can put across the diameter of a hair. These come down. This is about 1 millimeter by 1 millimeter section. They're coming down from the print head. And as they come down, they're going to get this anti-solvent jetstream. At this point in time, this is going from left to right. There is a chemical reaction that converts these microspheres into the powder that's going to be administered. So these droplets come down. They undergo the transformation into microspheres and powder and they get taken out to the left -- the right side of the joint where they were actually clinical products, ready for clinical use after they've gone through the various processes.

This is the 21-gauge hypodermic needle for comparison, and the millimeter scale gives you good context of the size that we're dealing with. So this is really microscopic level very unique technology. And from our perspective, this is the next generation of microsphere production and manufacture.

So what does that mean in reality? Well, precision, control and performance. From a precision perspective, each sphere is produced under identical conditions and exposure times. From a control perspective, the size, the drug loading, the homogeneity of the spheres are controlled to -- down to the micron in effect, and these have knock-on effects when they get into the clinic in terms of the profile, reconstitution, injection and wastage. And on the next slide, we'll actually go through some of the data that speak to each of those parameters.

For those dialing in, we're on Slide 10 now. The first indication or application of the sustained release technology is carcinoid tumors and acromegaly. This is a $2 billion market dominated by Novartis for the past 20 years, but still they're fifth largest selling drug. These tumors have high mobility and mortality. They are basically neuroendocrine hormonal secreting fat tumors.

Octreotide is the mainstay of medical treatment for both carcinoid and for acromegaly. And given the size of this market, even if we assume a 5% market share, that's a substantial market, $100 million product for Midatech.

So here are some of the data from the recent study. This is looking at the pharmacokinetics, in other words, the octreotide levels in the blood. The top graph is looking at all of the subjects, the mean of all the subjects combined. You take the Y-axis is a plasma octreotide concentration, the X-axis is the number of days of the treatment. Here, we're looking at the first 7 days. The orange tracing is Sandostatin LAR, and the blue tracing is MTD201, the Midatech product.

What's clear here is, on the Novartis profile, there is a very distinct bimodal peak trajectory starting with an initial burst where -- when this gets put into -- administered into the human body and uploads a whole lot of octreotide that's sitting on the surface and dumps that into the system, so to speak. Then reduces -- and then there is a secondary as it starts to find this is -- and start to settle out for the extended duration. The Midatech profile hardly any burst, smooth trajectory and upgrades for the time. So that's all subjects together.

The bottom 2 graphs, look at the individual plots for each of the patients. They're yet not all consolidated individual plots. If you look at the 201, very fast, very linear, very predictable kinetics. If you compare it to Sandostatin LAR, very loose and highly variable. And these are important characteristics in clinical performance.

So to recap, the MTD201 definitely lower intra-, inter-subject variability, a smooth trajectory with half initial burst and an ideal sustained release profile for the longer term.

And this continues out to day 63. So once again is looking at all subjects out to day 63. That's the full duration of the study. The blue plot is the Midatech plus. The orange plot is a Sandostatin plus. Here we see the bimodal peak for Sandostatin at the beginning and for modest activity, a huge profile, nice and predictable over time for the full 63 days.

And remember, this is the Phase I study. This formulation can only get better as we fine-tune and make additional improvements to this over time. The trajectory has independent data monitoring board on the study phase. I said this is the ideal sustained release profile for any product.

What about pharmacodynamics? So this is looking at therapeutic effects of the drugs. So the effect is actually on growth hormone. And growth hormone -- you actually see the growth hormone is the problem. That's the cause of the pathology. In this study, growth hormone releasing hormone was administered to these healthy volunteers and then the profile monitored on 3 different occasions in the Tier 1 group versus Sandostatin LAR.

You looked at area under the curve, so that's the full profile and the area under the curve, so the entire duration of the study as well as the peak growth hormone response and both of these are referring to reduction. Remember, we kind of reduced it back to normal. And we comparable, it's not better than the Sandostatin LAR in terms of the Phase I growth hormone.

What about injectability? So the clinical profile in key injectability is also important, and there is 2 key parameters on the injectability side of things, reconstitution time as well as needle size.

For Sandostatin LAR, from the time you take it out of the fridge to the time that you administer it, takes 40 minutes, and those have to be there all the time. And as soon as it's ready to be administered, it has to be administered, cannot leave it lying around. So the problem there is that let's look at the errors because it's 40 minutes, very difficult process, and there is a number of failures, the product itself congeals. And the nurses' time is tied up all the time because they can't go off and do anything else for fear of the product congealing or not being administered -- being able to be administered. So the Midatech product affects us typically 5 to 7 minutes to get it done. And then there is a 2-hour window, in which, the dose can be administered, far more flexible. We don't have the errors. We don't have the congealing. It's just a simple drug to administer as a baseline, very important from a practicality perspective.

From a needle size perspective, the Midatech formulation uses a fine 21-gauge needle, almost pediatric size needle, whereas Sandostatin requires a 19-gauge needle at best. Because anything smaller than that will block, and that is the injection is wasted. The effect of that obviously is that -- and you've seen this is basically the stronger study that lies in bone is that the lower injection site pain, 8% for MTD201 versus 25% for Sandostatin and far less injection site tenderness, 8% versus 83%. That's substantial base, that's powerful data on the usability side of this.

So in summary, this is a powerful and positive proof of concept for the program itself, for MTD201 itself, but also a very solid validation for the Q-Sphera technology platform. Briefly, to recap, clinically favorable dose with SLAR, so very well-tolerated growth hormone suppression, suppression favorable, comparable. You don't have any burst, no dose dumping and far less variability. That's the clinical profile.

From a usability perspective, smaller needle size, much simpler and much quicker reconstitution, less errors, no wastage and the avoidance of needle blockages according to that we have been informed by key opinion leaders. Sometimes, it results in Sandostatin being wasted 30% of time -- of the time. We don't have that issue.

The technology, I've gone through before, but as you can see, this package is starting to work. We're delivering on it, and it has a lot of potential moving forward. Also what this slide talk to, there is a number of follow-on opportunities just to briefly illustrate the point. There is one that we're already working on in-house over and above 201, as well as potential partnership opportunities. That could give us R&D-based formats, looking for SR formulations or improved SR formulations of the drug, looking to get into the Sandostatin market potentially. We have generic companies that -- which love to get into a $2 billion market or supergeneric company. And then, we -- of course, we have market leaders themselves, such as Novartis.

Next step is intent to meet with the FDA and expect there are feedbacks from them by the end of November, to commence regarding the follow-on study, which expected to commence in 2019, and NDA is probably on track for 2020 -- during the course of 2020.

Moving on to MidaSolve. So here, we say -- we basically solubilize insoluble drugs that illustrate their kind as soon as the drug you can take orally. You could also mix it in water, so a soluble. The drug that we work on you can take it orally, but you cannot mix it in water, you cannot administer it in any other way, shape or form. We take the MidaSolve technology, and we solubilize that drug so that it can be administered in liquid form. In this case, directly into the tumor using a drug called [amavenistat].

The first application that we are focusing on with this technology in DIPG, a devastating brain cancer in children shatter their lives, shatter family lives. Median survival of 9 month plus and no therapies whatsoever. No therapies to treat this. All therapy is palliative and doesn't make it -- does move the needle in terms of survival.

So there is a real opportunity here to establish or develop a new treatment paradigm. Some animal data that we have recently been able to generate. This is our first animal data that we've generated on this program. This looked at MTX110 at 100 micromolar -- a concentration of a 100 micromolar, administered by a CED into the brain of the animals. And it was compared to control. And what we see -- what clearly is that there is a specifically significant survival, p-value less than 0.03 of 64 days for MTX110 versus 52 days for control. And this is at 100 micromolar. We know as we've assessed these type of therapeutic index for MTX110 is 1,000 -- maybe even higher than 1,000. So the window between the 100 micromolar and the 1,000 micromolar gives us a lot of flexibility to increase the dose even further, effective drug animal dose and it's the first animal dose that generated gives us indication with any drugs that we are aware of.

In addition to that, there is also some data that started to come out in GBM. As you know, that's another focus of MTX110. So preclinical, this was published by the University of Bristol, established that the drug is safe, number one; and number two, that is well distributed throughout the brain. We have additional ongoing programs looking at that in disease models, and we expect some data read-outs shortly.

The study design, majority of you would have seen this one. This is just to update you on where we are in the current study at UCSF and Memorial Sloan Kettering. Remember, there is a safety phase or dose-escalating phase of 5 doses, and then there's an efficacy phase once we get those to recommended Phase III dose. This is not a traditional 3 x 3 design. In fact, this is an accelerated titration design. The way that works is, the first patient comes in at dose level 1. If that's safe, second patient comes in at dose level 2. If that's safe, the first patient goes up to dose level 3. If that's safe, the second patient goes up to dose level 4 and so on. If there is any safety problems or dose-limiting possibility with any of those doses, then additional patients need to get added in the traditional 3 x 3 approach.

Right now, we are at the dose level 4. The drug has been very well tolerated, and the study -- this part of the study, if it carries on like this, it may need to decide at Christmas.

The next step is to complete the U.S. clinical study in this regime. And depending on the outcome of that, commence discussions with the regulators. And in GBM, we're looking to complete the preclinical and potentially start an IND enabling program.

Our third technology is MidaCore. This is the gold nanoparticle technology. There is another first, as far as we know, the smallest particles in biomedical use, and we use it to deliver chemotherapeutics and/or immunomodulating agents.

Programs ongoing, the majority of them are preclinical. Type 1 diabetes is a clinical program started about 18 months ago, looking at using the gold nanoparticle technology to preserve beta cells. We expect data to read out from that by end of this year or early next year. So the rest of these programs are all preclinical in terms of liver cancer, where the -- using anti-tubulin cytotoxic drugs, especially gold nanoparticle; and then vaccine in childhood brain cancer and adult brain cancer; psoriasis, repurposing of methotrexate as the immunosuppressive that we started in collaboration with the University of Zurich. And then Emergex which had licensed the gold nanoparticle technology for use as a vaccine in viral diseases, new viruses or other flaviviruses like Dengue, West Nile, Zika and also Ebola.

And you may have seen the announcement at some point from Emergex that they’ve entered into a substantial collaboration with the Brazilian government, a very comprehensive program. Because Brazil is obviously one of the areas where some of these diseases are endemic such as Zika, Dengue and other such viruses.

So lots going on here, most of it preclinical, but certainly encouraging, and the next steps clearly, we want to finish this type 1 autoimmune study in diabetes, important readout for us by the end of this year or early next year. We want to complete the preclinical program in the other indications, including the vaccines for brain cancer in kids and adults and also complete the preclinical package for psoriasis.

Hand over to you, Nick, for the financial part of it.

Thank you, Craig. Good afternoon, everybody. First thing to highlight on the financials is the basis of preparation unusually bad. So with the announcement this morning that we are selling our U.S. commercial operation, as at the 30th of June of this year, we're required to present our financials under an accounting standard called IFRS 5, which essentially requires us to strip out all of the results associated with that U.S. Commercial operations. So what you see in the main body of our income statement, our balance sheet, cash flow, et cetera, refers to the ongoing European R&D business. The U.S. Commercial operation on the income statement is presented as a single line, although there is a note further into the interim accounts that provides a little bit more detail of those U.S. financial results.

So the highlights you see, this relates to the remaining European R&D business.

Revenues for the 6 months to June 2018, a little over GBP 0.5 million, up 17% in the corresponding period from last year. A lot of that growth is attributed to the increased activity on the Emergex collaboration program that Craig referred to earlier.

Emergex is an organization we signed a collaboration agreement with them late '16. They were fairly slow, I think, in getting their funding in place. So there wasn't a whole lot that happened during 2017. But activity had significantly increased this year so that we've been able to record a decent increase in collaboration income for the period.

Craig has described the progress that's been made more broadly on the R&D platforms with the positive data on the Q-Sphera platform from the Q-Octreotide program. And then the fact that the other 2 platforms are also now into humans, we are optimistic that we'll be able to generate significantly more collaboration income going forward, and obviously, with the refocusing of the business on R&D, this is a more important area for us than it may have been in the past.

R&D expenditure up 10% for 6 months to June on the previous year. That increase really reflects the activity that was going into the Q-Octreotide MTD201 and MTX110 program as we got those 2 programs into the clinic. There’s obviously additional activity going on as well, particularly around the MidaCore gold nanoparticle program, but the bulk of the activity, the bulk of the spend is really on those 2 priority programs and getting those clinical trials going.

Admin costs down 22% on the corresponding period from last year. And this really just reflects some fairly stringent cost control and efficiencies that we've been able to make within the business, so a pleasing result there.

Cash at the end of June, a little over GBP 4.1 million. At the end of June, we also had a receivable R&D tax credit of approximately GBP 1.4 million. And I'm pleased to say that we were able to collect that from HMRC in the period since the end of June.

For the loss from continuing operations, so this again is the R&D business, of GBP 5.6 million. And then the loss from discontinued operations, so this is the U.S. Commercial business, of GBP 5.8 million. So that GBP 5.8 million includes a GBP 4.7 million one-off impairment charge arising on the disposal of that business. So we are required to compare the carrying values to the value that are -- of the U.S. assets that are shown on our accounts to the consideration -– the expected consideration that we are due to receive from that transaction. And unfortunately, that's given rise to this impairment charge.

Net cash outflow during the period, GBP 8.4 million. But that includes GBP 1.3 million approximately of monies that we were holding at 31st of December 2017 irrespective one of the grants -- U.K.-grant-funded programs that we are a project coordinated for. So those monies were paid out to participants in that program in January. The liability for that was also shown in our balance sheet as at the end of 2017.

The overall cash runway obviously has been extended by the sale of our U.S. Commercial business, albeit not by a huge amount. And the board is clearly looking at other sources of finance, dilutive and non-dilutive. And we will hopefully be making further announcements to shareholders and to the market more broadly in the near future.

Craig has described the progress that's been made with the R&D programs, particularly the recent progress that we've made in getting Q-Octreotide and MTX110 to clinic. We're very excited by the platforms generally, but in particular, by the advancements that have been made there, and we hope that investors will be too.

Next slide just shows the income statement in a bit more detail. I don't propose on walking through this unless anybody has any specific questions, but I would just highlight the bottom line in the table. That is the U.S. loss. The rest of the table describes the R&D business with restated comparatives for the period to June 2017.

Okay. Thanks, Nick. So in conclusion, I think it's clear we are entering a new chapter for the company. We have an updated leadership team. We're delivering -- we know what needs to be done and every intention of getting it done. Our R&D reshaping and refocusing on a strategy to deliver valuable assets and unlock the potential of our top line obviously with the divestment of the U.S. that makes a big restructuring advance in that line of approach. And the recent positive data that we've had for our programs and platforms are testament to what we are hoping to do and managing to do with the business.

We had multiple wholly owned programs, number one; number two, 3 technologies, all of those are now into the clinic and now all progressing on schedule. The markets that we focused on are compelling, underserved markets. There is a need for alternative therapies, new therapies, and we intend to do that with our therapies. And I think at the base of it, you started to see it’s testament to that fact.

The nature of our assets are such that we can keep them in-house, we can partner in. All we’re focused on right now is building valuable assets. And we're looking forward to a 18-month period hopefully with lots of rich steady inflection points during the course of that. Thank you. We'll take questions now.

Craig, regarding the pipeline for the program through the -- the priority program, as we have sort of already said. There’s one other program [which is directly related to the gel fat] Phase IV program. What percentage of that with regards the establishment of the [U. S. business], how does that fit into that [work regarding the business pipeline]?

Yes. So that's part of the U.S. divestment. So that will now be surely controlled by the U.S. Yes.

And perhaps worth noting that any costs associated with that program going forward are also [part of] the U.S.

And also on the divestment, just -- so I think that the other answers that are related to the same performance [that says] references on 2018 and ‘19, does that imply 2 tranches for that remaining $6 million? Or is (inaudible)?

So the way the deal has been structured, there are effectively 3 earn-out elements, all 3 of which have multiple trigger points. So there's a 90% and a 100% trigger for all 3 announced in both 2018 and 2019. So if the -- if the 100% trigger is hit in 2018, then it's actually paid in full, and then that one goes away. If we only get 90% in '18 or if we miss it in '18, then it rolls to 2019. And again, we have the 90% and the 100% opportunities. So effectively, there are 4 chances, if you like, to achieve each of those 3 earn-outs. And also it's worth adding that the targets for those earn-outs are very much based on what we think the business is capable of achieving. So the purchaser hasn't come in and set us ridiculous targets.

Sorry, Nick, those are not just (inaudible).

Yes.

(inaudible)

The first thing upfront is subject to obviously to shareholder approval at the AGM. That 13 is paid. The additional 6, as I said, is broken up into those 3 chunks, each of which then has multiple opportunities to be hit.

The MTD201, what program do you think that (inaudible)? And have you got similar date on the other (inaudible)?

In cost mix, not yet, not yet. It's purely focused on growth hormone at this point in time.

Does that mean that acromegaly would be (inaudible)?

Well, if – there’s 2: the equivalent or there’s a better-than product. Both of them will use a 505(b)(2). If we end up having the same label as Novartis, the same indication as Sandostatin LAR, then automatically, we get both indications. If we have to pursue a differentiated product, then we'd have to relook at the program at that point in time. But certainly, the aim is to get the same label with the same indications using the 505(b)(2) pathway. Any more questions in the room?

The (inaudible) to the U.K., U.S. and Europe [presumably NASDAQ is falling. But if NASDAQ has been retained going forward] (inaudible)?

We have no immediate plans to get rid of that NASDAQ listing. I'm not sure we have ever been on record as providing a figure around how much that costs us. But I'm quite pleased that we maintained that listing for a lot less and I've seen other figures being bandied around by other companies.

[Can I just ask on the octreotide?] I see there the plasma concentration is much lower than the (inaudible)? Wonder what the clinical, what the therapeutic dosage is required and at what point, you’re [hitting] that? By 10, 11?

Yes, I think the...

At what point do you get [become] therapeutic?

Well, I think the therapeutic effect is when you look at the growth hormone slide. So less the therapeutic effect. I think to say that the octreotide concentration is lower -- sorry, the MTD201 concentration is lower than Sandostatin LAR, I think if you look at Slide 11, there shows that effectively, we track Sandostatin LAR. At the beginning, the variability of Sandostatin is all over the show. That -- the variability, as you see, is much higher, but that doesn't speak to the therapeutic side of it. I think the important slide is this one over here where the growth hormone reduction, if anything, is higher with the MTD201 product than Sandostatin.

And just to [get] on that one, which -- do you [deliver] with the same dose that the [underlying]…

Identical. 30 milligrams, yes. 30 milligrams.

And just on (inaudible), you mentioned in one of the slides that the [potential]. Have you got any discussion ongoing with (inaudible)? Or is that just something you might [export]?

Well, I mean, given the nature of the programs and the platforms, there's certainly interest in what we're doing. We have an active BD side of the business that have regular discussions with potential partners. But our focus is on building valuable assets and the nature of them, we can keep them in-house or we can partner them. But right now, we’re focused on valuable assets.

I think that's all the questions we have from the room.

Anyone on the phone with any questions?

(Operator Instructions) We have no questions over the phone lines, please continue.

Okay. Thank you. So I think that calls the meeting to a close. We'll be around for any other questions, if you want to have a discussion. Thanks for attending, and thanks for joining on the phone.

Thank you, everybody.

Thank you.

That does conclude our conference for today. Thanks for participating, and you may all now disconnect.

Thank you.