Theriva Biologics Inc (TOVX) 2017 Q2 法說會逐字稿

Good morning, and welcome to Synthetic Biologics' 2017 Second Quarter Investor Conference Call. (Operator Instructions) Please note, this event is being recorded.

At this time, I would like to turn the call over to Vincent Perrone, Director Corporate Communication at Synthetic Biologics. Vincent?

Thank you, Rocco, and good morning, everyone. Welcome to Synthetic Biologics' 2017 Second Quarter Investor Conference Call. Today, I'm joined by our CEO, Jeff Riley; and our CFO, Steve Shallcross.

Synthetic Biologics issued a press release this morning, which provided operational highlights and reported our financial results for the quarter ending June 30, 2017. The release can be found on the Investor Relations section of our website.

During our call today, Jeff will provide an operational update on our microbiome-focused clinical programs, and Steve will summarize our financial results. We'll take questions after our prepared remarks.

In addition to the phone line, this call is being streamed live via webcast, which will be archived on our website, www.syntheticbiologics.com for 90 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 terminologies such as may, should, expects, anticipates, intends, plans, believes, estimates and similar expressions. These statements are based upon 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. Jeff?

Thanks, Vincent. Good morning, everyone, and thanks for joining our 2017 Second Quarter Investor Call. It continues to be an exciting time for Synthetic Biologics as several important milestones during the second quarter continue to drive our progress and momentum in and out of the clinic. A few years ago, we began developing 2 discovery-stage programs centered on ideas of what was then known about the human microbiome. In a short time, we have been successful in taking both programs through proof-of-concept studies. In the same period, Synthetic Biologics has undergone significant change, evolving from an early-stage company focused on clinical development to a leader and pioneer in translatable microbiome-focused research and clinical development. Despite the clinical success we've enjoyed, our goal remains unchanged: To continue to develop novel, innovative and simple solutions to complex and unmet medical needs while building long-term value for our shareholders. In this pursuit, we're more focused than ever and continue to work tirelessly on the advancement of our GI microbiome-focused assets and portfolio pipeline programs. We believe more than ever that our programs have the potential to significantly improve the health outcomes for millions of underserved patients all over the world.

During today's call, we will provide a clinical update on ribaxamase, our oral enzyme designed to degrade certain IV beta-lactam antibiotics within the GI tract to protect and preserve the natural balance of the gut microbiome from C. difficile infection, overgrowth of pathogenic organisms and the emergence of antimicrobial resistance. And SYN-010, our compound designed to reduce methane production in the gut to treat the underlying cause of the symptoms commonly associated with irritable bowel syndrome with constipation.

Before we dive into our clinical update, I'd like to turn the call over to Steve Shallcross, our CFO, who will provide an update on our financial results for the year. Steve?

Thanks, Jeff. During the second quarter of 2017, we continued to effectively utilize our cash as we continue to deploy our capital in support of our 2 lead Phase III ready clinical programs. We remain confident in our ability to continue to manage overhead, while focusing the majority of our financial and human resources on the continued advancement of ribaxamase and SYN-010.

Synthetics Biologics 2017 second quarter financials were included in the press release, which was distributed over the Newswire earlier this morning. The company's 10-Q for the quarter ended June 30, 2017, was also filed with the SEC earlier today.

The 3 months ended June 30, 2017, general and administrative expenses decreased 23% to $1.6 million, compared to $2.1 million in the same period in 2016. This decrease is primarily the result of higher salary expense and related benefit cost incurred in 2016, in connection with the transition of the administrative and financial office to our Maryland headquarters along with reduced travel and legal expenses. Included in these numbers were charges related to stock-based compensation of $539,000 for the 3 months ended June 30, 2017, compared to $507,000 for the same period in 2016.

Research and development expenses decreased 33% to $4.8 million for the 3 months ended June 30, 2017, compared to $7.2 million for the same period in 2016. This decrease is primarily the result of lower ribaxamase program cost. In addition, there were reductions in our research and development activities including our SYN-010 program offset by indirect cost primarily for medical affairs. Research and development expenses include a charge of $331,000 related to stock-based compensation for the 3 months ended June 30, 2017, compared to $400,000 for the same period in 2016.

Other income was $2.2 million for the 3 months ended June 30, 2017, compared to other income of $3.5 million for the same period in 2016. Other income for the second quarter of 2017 is due to non-cash income of $2.2 million from the change in fair value of warrants that resulted from decrease in our stock price from the prior quarter. Cash and cash equivalents as of June 30, 2017 remained relatively unchanged at $13.4 million, a small decrease from the prior quarter. During the quarter, we raised approximately $5.6 million in net proceeds, utilizing our at-the-market facility. Future use of the ATM will depend largely on market conditions and the potential outcome from ongoing partnering discussions. Looking ahead, we anticipate cash utilization to remain relatively steady through the third quarter of 2017, due to diminished clinical cost and our ability to effectively manage our overhead expenses. At this time, I'll turn the call back over to Jeff.

Thanks, Steve. Synthetic Biologics remains uniquely positioned amongst our biotech peers with 2 late-stage unencumbered and potentially best-in-class Phase III ready assets targeted at addressing a largely unmet medical need. We remain focused to the advancement of SYN-010, our program designed to target and treat the underlying cause of IBS-C. In previously reported studies, methane production in the gut was shown to be the primary cause of the factor of the symptoms associated with IBS-C. By reducing methane production in the gut, we believe we can treat an underlying cause of the pain, bloating and constipation associated with IBS-C. Following the successful completion of Phase II clinical trials, which demonstrate the clinically significant improvements in bowel movements, abdominal pain and bloating, we met with the FDA to discuss the path forward for SYN-010's late-stage clinical development. The outcome of the FDA's review of our Phase II clinical data was their approval of the Phase IIb/III adaptive design pivotal trial intended to further evaluate the efficacy and safety of SYN-010. With the foundation of our Phase IIb/III pivotal study in place, we continue to work on solidifying its infrastructure with a focus on identifying, evaluating and delivering opportunities to move this program forward in a manner consistent with the best interest of our shareholders. As we continue to evaluate and engage in ongoing discussions with several potential pharma partners, we intend to initiate this trial only at a time when the requisite components of its clinical and financial infrastructure are in place to ensure its full, timely and successful completion.

Switching gears now to SYN-004 or ribaxamase, our first-in-class oral enzyme designed to degrade certain IV beta-lactam antibiotics excreted into the GI tract. The presence of a healthy robust and well-balanced gut microbiome acts as a system of checks and balances to protect against the threat of infection by blocking the overgrowth of opportunistic microbes. When species of microorganisms are eliminated or sharply reduced in the gut, a byproduct of antibiotic use that worsens with more frequent antibiotic usage, this ecosystem is disrupted. The use of intravenous beta-lactam antibiotics, including cephalosporins, is an important risk factor for the development of gastrointestinal infections such as Clostridium difficile. These antibodies can be excreted into the intestine where they remain active and disrupt the balance of the gut microbiome, potentially leading to the growth of opportunistic pathogens like C. difficile and the emergence of antimicrobial-resistant organisms. Ribaxamase is designed as a first line of defense against this disruption. Ribaxamase is engineered to protect and preserve the naturally occurring gut microbiome by degrading IV beta-lactam antibiotics as they are excreted into the GI tract to prevent the overgrowth of pathogenic organisms and the onset of CDI and the emergence of antimicrobial resistance.

Ribaxamase is specifically formulated to survive passage through the stomach and avoid systemic absorption, which means it is expected not to interfere with the ability of the antibody to effectively fight against primary infections. In our successful Phase IIb proof-of-concept clinical trial, ribaxamase achieved its primary end point of significantly reducing the incidents of CDI in patients compared to placebo. Patients administered ribaxamase experienced a 71.4% relative risk reduction of developing CDI versus patients receiving placebo. Results from this trial also demonstrated that patients administered ribaxamase demonstrated comparable cure rates for the treatment of primary infection compared to the placebo group. Importantly, results from this trial also demonstrated that when compared to placebo, ribaxamase significantly reduced the incidents of new colonization by vancomycin-resistant enterococcus or VRE, an organism, which does not respond to the powerful antimicrobial vancomycin.

During the second quarter, we announced additional supportive results from several exploratory end points from this study, demonstrating ribaxamase successfully protected and preserved the naturally occurring composition of gut microbiomes from the harmful effects of IV ceftriaxone.

Compared to placebo, patients receiving ribaxamase demonstrated significantly better maintenance and recovery of microbial diversity. Simply put, the gut microbiome ribaxamase patients entered the study with was comparable to the gut microbiome ribaxamase patients exited the study with when compared to placebo.

Under a contract awarded to Synthetic Biologics by the CDC, the Center of Disease Control in Atlanta, we have been examining the gut resistome or the content of the antimicrobial-resistant genes of the gut microbiome from patients in our Phase IIb clinical study with ribaxamase. DNA extracted from approximately 350 longitudinal fecal samples collected at screening and again at 72 hours following ceftriaxone treatment were analyzed using whole-genome shotgun sequencing. The DNA sequences were then interrogated against the comprehensive antimicrobial-resistant database known as CARD to determine the AMR antimicrobial resistant genes present in the samples at screening and again at the 72-hour time point following ceftriaxone administration. A statistical analysis was then performed to compare the change in relative abundance of AMR genes of interest in the ribaxamase group versus the placebo group. While this represents just the first of a III-stage analysis, our research identified AMR genes have significantly changed from the screening sample to the post-antibiotic samples. These changes included AMR genes that significantly increased and decreased following ceftriaxone treatment. There were approximately fourfold more genes that changed significantly in the placebo group as compared with the ribaxamase group. Let me repeat that, there were approximately fourfold more genes that changed significantly in the placebo group as compared with the ribaxamase group. Among the genes that significantly increased in the placebo group are a family of 5 beta-lactamase genes, which is consistent with the selective pressure from the ceftriaxone administered during the study. There were also several vancomycin-resistant genes that increased in the placebo group, which is consistent with the significant increase in colonization by VRE seen in the placebo patients. The genes that decreased were mostly tetracycline- and erythromycin-resistant genes that are associated with normal gut flora. These data are consistent with ribaxamase degrading ceftriaxone in the upper GI and thus relieving the selective pressure of the antibiotics on the gut microbiome. Ribaxamase may have the added benefit of reducing the selective pressure of IV-administered beta-lactam antibiotics on the gut microbiome reducing the emergence of AMR in treated patients.

Stage II of our analysis will entail quantitative PCR to determine actual changes from selective AMR genes over time in a subset of 100 samples while Stage III will seek to make correlations between the AMR data from the stages I and II and the clinical data from the Phase IIb study. Upon completion of this research, we intend to present our findings to the CDC in order to determine what role ribaxamase may potentially play in reducing the emergence and proliferation of antimicrobial-resistant organisms in susceptible real-world settings.

We have also been asked alongside our microbiome-focused peers to participate in one of CDC's sponsored antibiotic-resistant outcomes initiatives. This particular program brings together members from government, academia and the industry to focus on the development of microbiome indices intended to better understand the role of the gut microbiome in human health. An in-person meeting is scheduled in September where we intend to present results from our Phase IIb study for ribaxamase, including research findings generated under the CDC contract.

We look forward to sharing additional data from this study focused on determining ribaxamase's ability to prevent the emergence of antimicrobial-resistant organisms in the gut microbiome at several upcoming conferences.

The important research and successful clinical outcomes generated from our Phase IIb clinical trial is perhaps best illustrated by the FDA's granting a breakthrough therapy designation to ribaxamase during the second quarter.

Ribaxamase is the first ever development-stage drug candidate to receive breakthrough therapy designation for the prevention of Clostridium difficile infection. FDA breakthrough therapy designation is intended to expedite development and review time lines when clinical evidence indicates that a drug may demonstrate substantial improvement on 1 or more clinically significant end points over available therapies for serious or life-threatening diseases.

Synthetic Biologics is committed to the continued clinical advancement of ribaxamase and its potential to prevent the more than 500,000 cases of CDI, which result in approximately 29,000 CDI-related deaths each year in the United States. Looking ahead, we have submitted a request for a Type B meeting -- a Type B multidisciplinary meeting, which we anticipate taking place towards the end of Q3. We look forward to collaborative discussions with the FDA to discuss potential options to expedite the development and review time lines for ribaxamase's clinical advancement and path towards marketing approval.

Following the conclusion of our Type B meeting with the FDA, we anticipate being armed with additional clarity on the late-stage clinical development required for ribaxamase. We're extremely pleased and enthusiastic about the FDA's recognition of ribaxamase's potential to prevent CDI. There is a dire need to fill the current void of an approved intervention to prevent this often debilitating disease and to avoid lasting damage to patients' already fragile gut microbiomes, a well-established side effect of strong antibiotics.

Adding ribaxamase to treatment with IV beta-lactam antibiotics represents a potential paradigm shift from the current model, where an antibiotic treat the primary infection but often increases the risk for development of opportunistic infections such as CDI to a paradigm where a highly effective IV beta-lactam antibiotics can be administered with substantially reduced risk. We look forward to working closely with the FDA to move forward with this novel approach which may directly lead to more effective and efficient antibiotic therapy.

We continue to position our novel portfolio of late-stage microbiome-focused assets for Phase III development with an IM commercialization. While the broader markets continue to flourish, rhetoric and uncertainty on drug pricing, healthcare reform and tax reform are headwinds to growth-oriented companies in our sector. As we and many of our peers await solid footing with which to execute on strategic initiatives, we are committed to remain adaptive while maneuvering in this precarious environment. The creation of government-sponsored programs such as the human microbiome initiatives, CDC's antibiotic-resistant solutions initiative and organizations like CARB-X emphasize the need for additional research and funding in our area of pursuit. We continue to explore such government-sponsored initiatives, which we believe stand to benefit from our cutting-edge research expertise and insight into the gut microbiome's ability to reduce the overgrowth of pathogenic organisms and the emergence and spread of antimicrobial resistance.

As we move forward, we remain focused on: one, employing physical -- employing fiscal best practices, strengthening our clinical infrastructure, maintaining maneuverability in a rapidly shifting healthcare investment environment and exploring and evaluating opportunities to move our lead programs forward in a manner that is consistent with the best interest of our shareholders.

At this time, I'll turn the call back over to Vincent.

Thank you, Jeff. Rocco, we'd like to open the phone line to questions. Would you please describe the procedure to ask questions for our listeners?

Absolutely. (Operator Instructions) Today's first question comes from Keith Markey of Griffin Securities.

Congratulations on the breakthrough designation. Jeff, I was just wondering if you could -- given the number of benefits that usually come with breakthrough designation status, could you allude to what you consider to be the most important of the advantages of having that?

Keith, thanks for the question. I think that the biggest advantage is we can have multiple conversations with the FDA in an expedited manner. And there's no preset formula, if you will, to having those conversations. So, as we said earlier in the conference call script toward the end of this quarter, we are going to meet with the FDA for that Type B multidisciplinary meeting. We've created roughly a 35-page briefing document, which essentially has all the data that has been generated to-date in that document. We'll submit that to the FDA, we'll have -- we'll go and have that discussion with them and then we'll decide together what the next steps are at that point in time.

Fantastic. And then, I was just wondering, Steve, can you tell us a little bit more explicitly, what the cash burn rate would be for the third quarter? You had a few moving parts this time around.

So, in the last quarter call, Keith, our fix burn was about $1.2 million a month. [And we continue] to experience that. In this last quarter, we had some run-out cost from the ribaxamase trial that won't occur again in the next quarter here. But I would use about $1.2 million a month as guidance.

And our next question comes Katherine Xu of William Blair.

I'm just wondering whether you could give us some color on the partnership discussions, in particular, I guess, SYN-010, given that the FDA getting the green line on the Phase IIb/III design back in January. Just curious about how that process is going. Is this a good enough of an asset to be partnered? What additional data or other things that partners might want, just to the extent that you can chat about, it'll be great to get some color?

Thanks, Katherine, for the question. We didn't want to put this in the script necessarily, but the reality is the industry as a whole has not -- there's not been a lot of deals done, period. So from a macro perspective, I would challenge you to find a lot of late-stage deals being done, the classic licensing deals or co-development deals. They just have not been deploying capital, they being in big pharmas and the big biotechs. We are talking to everybody. We are in multiple discussions on SYN-010 and ribaxamase at this stage of the game, but until the pharmas decide to start deploying capital, I think it's tough to get a deal across the line. And to be honest, I'm not going to do a crappy deal, given that we have spent a significant amount of capital to get these assets to where they are at this point in time. So I can't give you much more color than that. I can tell you that there are a lot of conversations on an almost daily basis with the variety of pharmas. The feedback I've received at the bio conference a couple of months ago from who's who of the big guys out there, is they basically have order not to do deals up until recently until there's clarity on the repatriation of their capital and just generally more clarity on the healthcare side of the equation. So until we have that, I think we -- I don't think we're going to see a lot of deals being done out there. SYN-010 itself is a fantastic asset. I don't know why we need to keep saying this, but at the end of the day, the competitive assets are linaclotide, which is the Allergan product or LINZESS, we have Synergy's new drug out there, Trulance, which is an analog, frankly, it's a me-too version of LINZESS, it's really nothing special. The majority of GI docs that we speak with don't like these drugs, so they're the only drugs available to treat irritable bowel syndrome, the constipation form. And our drug will be fantastic. Because again, it is completely safe from what we can see. It's impacting only 1 microorganism in the gut. Lovastatin is safe as can be. We're looking at EMA-related stuff now, as well as well the FDA. It's a great product and whether it's used alone or in combination with the existing drugs, we don't know. I think there is a combination therapy potential there as well. So we're looking forward to it. From a cash perspective, I mean, let's address the elephant in the room. We did use the ATM last quarter. There is no better way for us to keep our cash in line to where we need it to be at a less expensive way to do it at this stage of the game given the markets. There's just no better way to do it. So we're not raising capital to be in crazy numbers. And to be honest, we can't raise enough capital to take SYN-010 forward ourselves at this stage of the game. So we are looking specifically for a partner and we will find one when they open up their purse strings. We have several in the queue. And then we'll go forward from there. But until that point in time, we're going to be very fiduciarily responsible, not raise the lot of money on the ATM stage, stay in what I would consider within the navigational buoys and focus on ribaxamase because that is the product that we are focused on at the moment with respect to the FDA in moving that program forward.

(Operator Instructions)

Thanks, Rocco. The second quarter of the 2017 was one of tremendous progress for Synthetic Biologics. The granting of breakthrough therapy designation for ribaxamase for the prevention of C. difficile infection is a critical and important milestone for our company and, frankly, for public health as well. We look forward to working with the FDA on the continued advancement of ribaxamase and to sharing the outcomes from the conclusion of our Type B meeting later this year.

Before we close the call, I'd like to announce that Synthetic Biologics is headed to San Diego to participate in Infectious Disease Week 2017 from October 4 through the 8.

In addition, I am very proud to announce that 5 abstracts, 5, highlighting research for ribaxamase, SYN-005 and SYN-006 programs were submitted and accepted for presentation. Keep in mind that these programs are franchises or extensions of our existing ribaxamase program. You can visit syntheticbiologics.com for the dates and times and locations for each event. Members of the team will also be available at booth number 509, which is located in the exhibitors' hall if you'd like to come talk to us. Again, with 2 phase III ready programs in clinical development, the Synthetic Biologics team is more determined than ever to continue our work of advancing our cutting-edge microbiome therapies through late-stage development and towards commercialization. We're proud of the progress we've made and excited for what lies ahead. Thanks again for joining our call and have a great day.