Theriva Biologics Inc (TOVX) 2014 Q3 法說會逐字稿

Good morning and welcome to the Synthetic Biologics third-quarter 2014 investor conference call. (Operator Instructions). Please note this event is being recorded.

At this time, I'd like to turn the call over to Kris Maly, Vice President and Corporate Communications at Synthetic Biologics. Kris, please go ahead.

Thank you, Emily, and good morning everyone. Welcome to Synthetic Biologics third-quarter 2014 investor conference call. Today I'm joined by our CEO Jeff Riley and our CFO Evan Ballantyne.

Pre-market this morning, Synthetic Biologics issued a press release reporting its third quarter 2014 financials and summarizing recent operational highlights. That release can be found on the investor section of our website.

During our call today, Jeff will provide an update on our C. difficile, C-IBS and pertussis programs and review upcoming milestones for the Phase II Trimesta program for the treatment of MS. Evan will then provide a brief overview of our financial statements for the three and nine months ended September 30, 2014. After the formal portion of the call, we will offer an opportunity for Q&A.

In addition to the phone line, this call is being streamed live over the Internet today and the webcast replay will be archived on our website for 30 days.

During this call, we will be making forward-looking statements regarding Synthetic Biologics' current expectations and projections about future events. Generally the forward-looking statements can be identified by terminology such as may, should, expects, anticipates, intends, plans, believes, estimates and similar expressions. These statements are based on current beliefs, expectations and assumptions and are subject to a number of risks and uncertainties including those set forth in Synthetic Biologics' filings with the SEC, many of which are difficult to predict.

No forward-looking statements can be guaranteed and actual results may differ materially from such statements. The information on this call is provided only as of the date of this call and Synthetic Biologics undertakes no obligation to update any forward-looking statements contained on this conference call on account of new information, future events or otherwise, except as required by law.

With that, I'd like to turn the call over to Jeff.

Thanks, Kris, and good morning everyone. Thanks for joining us this morning for our third-quarter 2014 corporate update. Synthetic Biologics has had a very productive quarter across the board and I'll go through everything here over the next 10 or 15 minutes.

We finalized clinical trial plans for our pathogen-specific programs, strengthened our IP, initiated many factor-in programs, held a successful IBS investor day in New York, reported expanded data on the unique neuroprotective properties of our MS candidate, and raised net proceeds of $18.9 million in a registered direct offering to support our a clinical development programs through key inflection points in 2015.

Of particular note is that roughly 1/2 of the total capital raise was invested by the new institutional investor, BreakPoint Partners, a strong and highly regarded biotech investment fund, with an additional three existing investors participating in the remainder of the ramp.

This capital infusion is a clear vote of confidence from our new investor as well as the investors that increased their existing positions. We appreciate the support from this group and from our ongoing shareholder base. For those of you on the call today for new investors, let me welcome you, and also take a moment to briefly review for everyone the business and scientific mission of Synthetic Biologics.

We believe that Synthetic Biologics is at the forefront of ushering in a new class of pathogen specific therapies for serious infections and diseases with a specific focus on protecting the microbiome. We are moving the needle of science beyond that province for traditional antibiotics, whose broad use of the past 80 years has rendered many antibiotics of little value today, especially against increasing aggressive pathogens, so-called superbugs that daily defy the weapons of current medicine.

The stage is set for a major change in the medicine cabinet away from the broad (technical difficulty) antibiotics with therapies that target specific pathogens and neutralize them without disrupting the good bacteria we all need to have in the proper balance to survive in good health.

Thought-leading physicians have recognized the growing limitations of current antibiotics for years. Now the government is acting. Special regulatory paths have been established and continue to be established to put new provisions in place for extended market exclusivity to reward successful innovators such as us.

Synthetic Biologics programs aimed at this new national health care pathway cover three indications of high unmet need: C. difficile infections, irritable bowel syndrome, and whooping cough, which unbeknownst to many is on the rise the United States and deadly for up to 300,000 infants worldwide every year.

In addition to our pathogen specific programs, our research collaborators are working to wrap up the compilation and review of data from the recently completed investor data Phase 2 trial of our MS drug Trimesta. I will get into more detail on the MS program a little later on the call.

As I mentioned at the start, we made a lot of progress with our programs since our last quarterly call. I'll begin with our clustered and difficile program.

We remain on track to begin dosing patients in Phase1a and 1b clinical trials in the next few weeks of our oral enzyme SYN-004. This novel compound is designed as a prophylactic to prevent the onset of C. difficile infections in hospital patients receiving IV drips of certain beta-lactam antibiotics.

As a note of background here, C. difficile is now listed as the CDC's top priority pathogen, ahead of MRSA in the hospital setting. The most vulnerable victims are elderly or immune compromised patients who come into the hospital, often for routine, non-life-threatening procedures and end up very, very sick with C. difficile infection, some dying of it.

The main cause of hospital acquired C. difficile is the antibiotics themselves. They of course generally do a good job of killing bacteria. The problem arises as antibiotics are released into the G.I. tract and indiscriminately wipe out both good and bad, bacteria disrupting the balance of our gut microbiome, allowing for the overgrowth of this nasty bug Clostridium difficile.

C. diff, as we say it in short, is among the worst of the bad pathogens. As it propagates and becomes more aggressive, it can cause diarrhea, colitis and may result in death. Treatments become increasingly difficult if not impossible. Current antibiotics are often ultimately ineffective, leading to 30,000 C. difficile related deaths in the United States annually.

Our drug candidate SYN-004 is designed to neutralize certain beta-lactam antibiotics that are excreted into the G.I. tract, protecting the microbiome and thereby preventing life-threatening C. diff infections. This simple and totally unique mechanism has the potential to prevent the onset of C. diff infection with the patient taking oral SYN-004 at the same time IV antibiotics are administered in the hospital.

A Phase 2 study in Europe demonstrated the ability of the first generation of our oral enzyme to keep the microbiome at a steady state. We reformulated our second-generation SYN-004 candidate for broader utility and additional patent protection. We plan to begin Phase1a and 1b testing in the next few weeks in the United States, and we intend to report Phase 1 topline data by year-end. We continue to build important infrastructure to support the development of SYN-004.

During the quarter we presented the early SYN 004 data at the 54th annual at ICAC meeting in Washington, D.C. and at ID Week in Philadelphia, which supported the ability of SYN-004 to degrade certain beta-lactam antibiotics. We also strengthened our C. diff patent protection with a notice of allowance with the US Patent Trademark Office for our first allowed composition of matter patent application directly related to this drug.

As part of our outreach to C. diff advocacy partners, I accepted an invitation to speak on innovations in C. diff therapies at the Peggy Lillis Memorial Foundation's fifth annual (technical difficulty) C. difficile fundraiser last month in New York. And Dr. Joe Sliman, our Senior VP of Clinical and Regulatory, was an invited speaker at the C Diff Foundation's Raising C. Diff Awareness Conference in Chicago earlier this month.

I'd like to switch gears now to our IBS program, specifically in constipation. Hopefully, many of you on the call today had a chance to listen to the webcast of our corporate IBS investor day we held in New York this past September. The event was held by Dr. Mark Pimentel, the G.I. motility expert at Cedars-Sinai in Los Angeles, California.

Dr. Pimentel is the scientific driver behind our SYN-010 C-IBS program, as well as the chair of our IBS clinical advisory board. It was a remarkable event and very helpful to many of us, especially in providing a clear understanding of just how conflicted treatment of IBS can be. This message has clearly underscored the very big opportunity available to innovators in this area of large unmet need.

Visitors may recall how Dr. Pimentel described the sometimes delicate balance between the diarrheal form of IBS, or D-IBS, and having the constipation form. And how the drug taken for the diarrheal form can cause constipation, and conversely, how a drug for the constipation form can cause diarrhea. In effect a medicine for either one of those indications can lead to treatment for the other.

I think it's fair to say that this ongoing dilemma in treating IBS was one of the main effects that drove Dr. Pimentel to think more deeply about this disease than those before him. This first discovery led to the indication for (technical difficulty) which appears to have all of the hallmarks of a blockbuster drug, mainly due to its use in D-IBS.

Dr. Pimentel's second discovery led to what is now our SYN-010 program, for the constipation predominant forms of IBS or C-IBS, for which we secured exclusive worldwide rights from Cedars-Sinai last year. In both cases, D-IBS and C-IBS, Dr. Pimentel didn't look at treating new stool or hard stool, diarrhea or constipation. He went to the underlying causes.

In the case of SYN-010, he discovered that most patients who present with C-IBS have high levels of naturally produced methane gas in their gut. He went on to show that reducing methane levels results in C-IBS and restored normal bowel functioning. The drug he chose to regulate gut methane is a commonly prescribed statin, originally approved as a cholesterol drug, as were all statins. We are reformulating the particular statin to achieve a new absorption profile for slower, modified release with minimal systemic exposure.

Additional worldwide patent filings covering composition of matter claims which were recently filed by Cedars-Sinai and licensed to us could extend patent protection of SYN-010 out to 2035. We expect to utilize the 505, the two regulatory pathways for SYN-010, which is typically quicker and less expensive than the regulatory requirements for a new chemical entity.

The statin selected for modification by Dr. Pimentel has been used by more than 1 million patients around the world for more than 40 years. It has a large safety database and is well known to the FDA. We expect to file an IND in the first quarter of next year and initiate Phase 2 testing in the first half of next year.

We have tremendous confidence in Dr. Pimentel's expertise. Dr. Pimentel shared with us that studies he has conducted at the clinic at Cedars-Sinai have thus far confirmed the safety of SYN-010 and demonstrated mechanistic features in regulating gut methane and restoring healthy bowel conditions.

I'd like to move on now to our third program for pertussis, SYN-005. It combines two synergistic humanized monoclonal antibodies designed to target and neutralize the pertussis toxin. You are likely aware of the increased mention of pertussis in the national media of late due to its rising incidence.

Pertussis is a highly contagious disease caused by the bacteria Bordetella pertussis; symptoms that include severe coughing and subsequent breathing difficulties. Antibiotic use does not have a major effect on this disease course. While it can eliminate the deep pertussis bacteria from the respiratory tract, it does not neutralize pertussis toxin. This secreted toxin is a major cause of disease virulence as it paralyzes the immune system, causes the white blood cell count to increase sometimes to levels that block blood flow through the lungs, and predisposes infants to severe pneumonia.

Pertussis can be fatal in infants. Therefore, attacking pertussis toxin in infants is an urgent unmet medical need. According to the World Health Organization, D-pertussis causes up to 300,000 deaths worldwide each year, primarily among unvaccinated infants.

At the ICAC meeting in September, our research collaborator, Dr. Jennifer Maynard of the University of Texas in Austin, presented data from in vivo studies and efficacy data from non-human primate studies that demonstrate the exceptional potential for SYN-005 to treat pertussis and diminish the morbidity and mortality of this devastating disease to infants.

We are also happy to report that SYN-005 recently received US orphan drug destination for the treatment of pertussis from the FDA. This has a regulatory benefit and may also to extend market exclusivity upon approval.

Development of more effective treatment is a high priority for world healthcare organizations such as the Gates Foundation and Wealth & Trust. We are initiating discussions with groups such as these to explore non-dilutive funding pathways to complete the development and registration of SYN-005 to solve this very critical and urgent need. We expect to initiate Phase 1 clinical trials in the second half of next year to evaluate this product.

Now I'm going to switch gears to our larger program for multiple sclerosis, Trimesta. In addition to our pathogen-specific programs, our research collaborators continue the intense work it takes to analyze patient MRI brain scans from the investigator-initiated Phase 2 study of Trimesta in combination with Copaxone in women with relapse and remitting MS. Relapse and remitting MS is the most common forms of the disease at the time of patient diagnosis. And Trimesta may provide extremely significant value for the MS community, as currently approved therapies remain insufficient.

The latest clinical data update on Trimesta occurred at the ACTRIMS-ECTRIMS meeting in Boston in September in a presentation by the trial's lead investigator. The expanded efficacy and safety results presented provided further compelling positive results on cognitive and disability scores at 12 months, attesting to Trimesta's unique neuroprotective properties.

To our knowledge, no MS drug in the market today has demonstrated the ability to improve cognition in MS patients. This potentially provides a totally unique positioning for Trimesta in the $14 billion a year worldwide MS drug market, and has been a key driver in our ongoing discussions with potential strategic partners.

Our plan with Trimesta going forward, as stated previously, is to fund the anticipated Phase 3 program with a partner. We've had multiple productive meetings with the principal players in the MS space, including several groups in Frankfurt last week, just with additional meetings schedule during the remainder of this year, and report that there's very strong interest from both global and regional pharmaceutical companies while we are all waiting for the completion of the topline data from the MRI brain scans, which we anticipate will be ready in the first quarter of next year.

We get a fair number of questions about the importance of completing the analysis of these scans, so I'd like to spend a few minutes describing why they are important. The scans themselves evaluate changes in the white matter and gray matter of the brain in response to therapy. Positive white matter changes typically correlate to improvement in the MS patient's relapse rate. The regulatory approval of every MS drug on the market today is based on relapse rate improvement.

The changes in gray matter involves the assessment of the rate of brain atrophy, which correlates with changes in cognition and disability. The analysis of the results of MRI white matter changes have been completed and presented previously by the lead investigator with a good, strong correlation to improvement in relapse rate related to Trimesta.

At this point, we are interested in evaluating if changes in the gray matter related to Trimesta therapy explain the significant benefits seen clinically. Clinicians have demonstrated that in MS patients, the brain atrophies much faster than a healthy person's -- around 5 to 10 times faster -- which means that by age 50 or 60, a significant portion of the gray matter of an MS patient would atrophy, leading to considerable disabilities and cognition deficits. The real problem is that while the brain atrophy is generally slow at about 1% per year, each step of the way, the cognition deficits and disabilities increase in a currently unstoppable downward cycle.

No molecular entity before Trimesta, either experimental or approved that we are aware of, has been shown to stop or significantly slow the loss of gray matter in the MS setting, let alone reverse it. Based on improvement in cognition and disability, Trimesta could have a very differentiated label, filling a major unmet need in a very large market.

Cognition and disability improvement could be a total new indication for an MS drug. We look forward to updating shareholders on the investigators' continued analysis as we continue our discussions with potential partners and await the results from the full analysis of the MRI scans due early next year.

In the meantime, separate Phase 2 trial focused exclusively on cognition, utilizing Trimesta with a variety of currently marketed MS drugs including Copaxone, Avonex, Betaseron, Extavia, Revisk, Gilenya, Aubagio and Tecfidera is enrolling patients at four sites in the United States.

At this point, I'll turn the call over to Evan for our third-quarter financial results. Evan?

Thank you, Jeff, and thanks everybody for attending our call today. Synthetic Biologics third-quarter 2014 financials were included in our press release which was distributed over the newswire earlier this morning. The Company's 10-Q for the quarter ended September 30, 2014 will be filed with the SEC later today.

Cash at September 30, 2014 was $3.3 million compared to $14.6 million at December 30, 2013. As Jeff mentioned earlier, we successfully completed a registered direct offering on October 16 with a select group of institutional investors for net proceeds of approximately $18.9 million.

For the three and nine months ended September 30, 2014, our general and administrative expenses decreased to $1.2 million and $4.2 million. Included in these numbers were non-cash charges related to stock-based compensation of $377,000 and $1.3 million for the three and nine months ended September 30, 2014.

Research and development expenses increased to $3.7 million and $9.2 million for the three and nine months ended September 30, 2014. These increases of 150% and 144% are primarily the result of increased program costs associated with expanded research, development and manufacturing activities within our pathogen-specific pipeline, including our C. diff, C-IBS and pertussis programs.

Non-cash charges related to stock-based compensation were $232,000 and $550,000 for the three and nine months ended September 30, 2014.

Jeff, I'd like to turn the call back to you.

Thanks a lot, Evan. To conclude my formal remarks today, I'm going to summarize each of our programs one more time. Each of our pathogen-specific programs is on deck to enter the clinic or produce topline data in the near term. We plan to have two additional multibillion-dollar drugs in Phase 2 trials in the next six months, in addition to our Phase 2 MS drug candidate, which is also a potential multibillion-dollar opportunity.

With our recent financings, we have the capital to fund these programs through key clinical milestones next year. For Clostridium difficile, Phase 1a and Phase 1b trials are on track to initiate this quarter. Topline Phase 1 results are expected to be released before year-end. Let me remind you, there is currently no drug on the market or under development that we are aware of, designed to prevent versus treat C. diff infections.

Annual addressable market is the approximately 118 million doses of SYN-004 susceptible IV beta-lactam antibiotics administered to hospital patients, suggesting a blockbuster drug opportunity.

Our C-IBS program is expected to enter Phase 2 in the first half of next year following our IND submission early next year. Dr. Pimentel's groundbreaking work in IBS and its expertise in G.I. motility provide great confidence in the clinical development of SYN-010 and its potential to significantly improve the lives of those suffering from C-IBS.

Keep in mind, we are treating the underlying cause and not just the symptoms of that terrible disease. The mandate to develop an effective treatment for pertussis or whooping cough needs no further characterization, and to remind you that up to 300,000 kids die from the disease each year. And the incidences of pertussis are increasing right here in our homeland.

Preclinical testing of our synergistic antibody combination suggests a solution of this critical unmet need is close at hand. We are hopeful that the US orphan drug designation that SYN-005 received from the FDA can accelerate development and further encourage funding sponsorship by one of the world healthcare organizations we mentioned earlier.

For our MS program in Trimesta, we expect topline data from the Phase 2 MRI brain scans in the first quarter of the coming year. With this long-awaited piece in place, we would expect to enter final negotiations with one or more groups we are currently speaking with to proceed with a Phase 3 program.

Again, to our knowledge no other drug has demonstrate similar neuroprotective and cognitive benefits observed thus far in the Phase 2 trial; an enormous patient benefit not available for any MS drug, and we expected to drive significant value for Synthetic Biologics.

At this time, I'll turn it back over to Kris.

Thanks, Jeff. We'd like to open the lines up for questions now. Emily, would you please describe the procedure to ask questions for our listeners?

(Operator Instructions) Daryl Weber, Wells Fargo.

Just had a couple of questions here. With respect to your Phase 1a and Phase 1b for C. diff, how many patients are you anticipating enrolling? And the topline data you'll be reporting by year-end, but what would that entail? And will it be for all the patients' cohorts?

Secondly, concerning your whooping cough program, in your recent 8-K filing, slide presentation, you guys stated that you're looking for third-party funding. I think you just mentioned briefly on your previous comments. Can you paint the picture of how that will be structured?

And at last, with regard to the Intrexon partnership, there were a number of other diseases indications you were going after a few years ago. Can you kind of update us on how those programs are proceeding? Thank you.

Thanks for the questions, Daryl. The answer to your first question, the Phase 1a and 1b will be between 12 and 20 patients. We are looking for safety in these, and obviously, we are doing a dose response as well. These are in normal patients and these are very, very quick studies to really look and see what's happening both genetically as well as PK/PD profiles of these patients. And as we said, we should have data from that by the end of this year.

We'll then be jumping directly to the Phase 2a study early next year and that will be -- at the moment we're looking at ileostomy patients to do that. Again, this particular program, similar to the IBS program, these studies are very quick -- between one week and four weeks, depending upon what we are looking at from a dose response and efficacy perspective.

So we're pretty excited about it. Stand by for some data that will be coming out here shortly (technical difficulty) press releases. And we're hopeful that our current version of this drug will be behave and we have no reason to think otherwise, just like the drug predecessor compound that went through successful Phase 2 trials in Europe.

Your second question was on pertussis. We are looking at third-party funding for this particular resource. Pertussis is an Intrexon-related program. We've worked on this program together in combination with the University of Texas.

We may fund it ourselves downstream, but right now we think that there's a significant amount of interest from nongovernmental organizations and other groups that have an interest in moving this type of product into the developing world, mostly for infant use. The current thought is it would be used as a prophylactic, but we do have evidence it works as a therapeutic.

Basically a newborn infant in the developing world, the mom and baby usually only see a doctor once and that's usually at birth. So the idea would be to inoculate the baby with a pertussis right at birth. We hope that we can show a vaccine-like effect on that child for six months or greater, in which case the infant than can receive actual vaccine after that point in time. That's the current thought process as well as developing that for -- as a therapeutic as well.

But with regard to the structure of that relationship, would that be a grant from the WHO or the World Health Organization or Gates Foundation, or would there be some sort of economics involved?

It's usually a grant, but it really depends on which organization. The Gates Foundation tends to take a piece of the action, so they may want the international world as their piece of the equation whereas we would keep the developed world -- US, Europe, Japan, etc. It really depends on who you talk to, Darrell, specifically as to what the deal terms look like.

There's obviously a fair number of grants available as well for that through the NIH and other WHO, which we are pursuing. And those would just be your classic grants to move the product forward as rapidly as possible. Does that answer your question on pertussis?

Yes.

The last question you had was with respect to Intrexon. We have two ongoing programs with Intrexon, and one that we're -- is in its nascent stages, the pertussis is the lead program we have. And that is now almost entirely in the clinical side of the equation, so that's almost entirely within our bucket as Synthetic Biologics. So Intrexon's clinical development team is adding input into that process as well.

The second product, which I didn't talk about today, is for a nasty gram-negative bug called Acinetobacter baurmanni. This is a discovery stage product, so we are still probably a good two years away from the clinic. We are making pretty good progress, though.

So we are seeking again a sniper-like approach, using the Intrexon wheat technology to find clinical antibodies that target this particular gram-negative bacteria. And Acinetobacter in particular is pretty gosh darn resistant. I think it's like 46%, 47% resistant to all existing antibiotics.

So there's a high demand for that particular program among the United States military for a variety of reasons, mostly due to blast wounds. A soldier would get a wound; a grain of sand with these bugs would get into the wound. The soldier then gets a nasty infection, and as we noted earlier, most of the antibiotics don't work on that. There is a high interest from the US military, again, on that specific program.

I didn't highlight it today because again it's an early, early-stage program. As soon as we get some antibodies that looks like we have some good in vitro/in vivo results, we'll definitely bring that program to the forefront and show folks what we are doing there; very similar to the pertussis program.

Thank you. I would now like to turn the conference back over to Kris Maly for any closing remarks.

Thanks, Emily, and thanks everyone for joining us this morning. As we head toward the end -- the close of 2014, we certainly wish everyone a happy holiday season. And we look forward to updating you again next quarter. Thank you so much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.