Theriva Biologics Inc (TOVX) 2020 Q2 法說會逐字稿

Good afternoon, and welcome to Synthetic Biologics 2020 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?

Thanks, Danielle, and good afternoon, everyone. Welcome to Synthetic Biologics' 2020 Second Quarter Investor Conference Call. Today, I'm joined remotely by our Chief Executive and Financial Officer, Steven Shallcross; Dr. Michael Kaleko, Senior Vice President of Research and Development; and Dr. Vince Wacher, Head of Product and Corporate Development. Synthetic Biologics issued a press release this afternoon, which provided operational highlights and reported our financial results for the quarter ending June 30, 2020. The release can be found in the Investor Relations section of our website.

During our call today, we'll provide an operational update on our GI- and microbiome-focused clinical programs and 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 terminology, 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 Steve. Steve?

Thanks, Vincent. Good afternoon, everyone, and thank you for joining our 2020 second quarter investor conference call. On behalf of Synthetic Biologics, we hope you are safe and in good health.

I'm glad to be with you this afternoon and look forward to sharing important updates on our strategy for advancing our portfolio of GI- and microbiome-focused clinical development programs during today's call.

Today, we'll review our 2020 second quarter operational highlights and financial results, and provide an update on our clinical development strategy as we continue to navigate the global health and economic crisis sparked by the COVID-19 pandemic.

Our focus now and in the past is the safety and well-being of the patients we aim to serve, our clinical research and development partners and of course, the dedicated team here at Synthetic Biologics.

As the nationwide response to the COVID-19 global pandemic evolves, we continue to inform our decisions based on recommendations made by local governments, hospitals and health care organizations, many of which continue to focus resources towards battling the pandemic in their regions.

During our last call, I outlined our revised operational framework, which was -- which has allowed us to navigate the COVID-19 crisis and advance our clinical programs in the second quarter.

Specifically, enrollment in the investigator-sponsored Phase IIb clinical trial of SYN-010 has restarted following a temporary halt during the second quarter, due to the COVID-19 global pandemic.

We submitted an IND application with the FDA and received a study-may-proceed letter to conduct a Phase I single ascending dose study in healthy volunteers intended to evaluate SYN-020 for safety, tolerability and pharmacokinetic parameters.

We expanded our collaboration with Massachusetts General Hospital in the form of an exclusive option agreement to license intellectual property and technology to commercially develop SYN-020 through the treatment and prevention of metabolic and inflammatory diseases associated with aging. And we remain in close contact with Washington University, as they continue to evaluate opportunities, which may allow us to initiate the planned Phase Ib/IIa clinical trial of SYN-004 in allogeneic HCT patients in the face of the ongoing COVID-19 pandemic.

Importantly, these initiatives have been conducted with a sharp focus on prudent cash management and financial stewardship, which will allow us to preserve our cash runway through at least the first quarter of 2021.

With that backdrop, I'd like to provide an update on our late-stage emerging clinical programs, beginning with our SYN-010 program. SYN-010 is designed to target an underlying microbial cause of constipation in IBS-C patients with the goal of normalizing bowel habits without the diarrhea and nausea often associated with over-the-counter and prescription therapies.

Last year, we began enrollment in a Phase IIb investigator-sponsored clinical trial of SYN-010 in collaboration with our research partner, Cedars-Sinai Medical Center, to further evaluate the efficacy and safety of SYN-010 in IBS-C patients. We designed this clinical trial with 3 specific objectives in mind: first, to generate a data set of the highest quality in order to provide additional insights into dose response and length of treatment for future potential pivotal trials; second, to allow us to reengage with prospective partners who found the Phase IIa data compelling yet inconclusive enough to justify significant investment for Phase III development; and importantly, number three, to generate this data set in a cost-effective manner.

During the second quarter, patient enrollment was temporarily halted as a result of the impact of the global COVID-19 pandemic, which required Cedars-Sinai to temporarily limit certain nonessential activities. During this time, Cedars-Sinai implemented steps, which allowed actively enrolled patients to complete their full 12-week treatment period. Importantly, data from this active group was collected in accordance with the clinical trial protocol.

At this time, Cedars-Sinai has restarted new patient recruitment and enrollment remains ongoing. However, their ability to continue to enroll new patients remains contingent upon the impact of the COVID-19 pandemic. A data readout in the form of an interim futility analysis is anticipated during the third quarter of 2020, and top line data is anticipated during the first quarter of 2021, subject to COVID-19.

We remain in close contact with the team at Cedars and look forward to providing additional updates as they become available.

Next, I'd like to provide a brief update on our SYN-004 or ribaxamase program. SYN-004 is our first-in-class therapeutic intervention designed to protect the gut microbiome from antibiotic-mediated dysbiosis. We believe protection of the gut microbiome may play a pivotal role in improving health outcomes for patients administered long courses of intravenous beta-lactam antibiotics as part of their treatment plan for bone marrow and solid organ transplantations.

Last year, we announced our intention to move this program forward in collaboration with our clinical development partner, the Washington University School of Medicine in St. Louis, in the form of a Phase Ib/IIa clinical trial of SYN-004 in allogeneic HCT transplant recipients.

Following this announcement, we held a Type C Meeting with the FDA to discuss the clinical program requirements needed to evaluate the safety, tolerability and potential absorption into the stomach circulation, if any, of SYN-004 in adult allogeneic HCT recipients.

We are pleased to announce that we recently received written notification from the FDA informing us they have determined that the Phase Ib/IIa clinical program protocol in adult allogeneic HCT recipients is safe to proceed as planned. Looking ahead, we plan to share the FDA-cleared clinical protocol with Washington University's Institutional Review Board, or IRB.

Upon approval by the IRB, the team at Washington University will be in a position to begin enrolling patients into this clinical trial. During the second quarter, we remain in close contact with Washington University in order to better understand how their ongoing response to the global coronavirus pandemic has impacted their ability to initiate the planned Phase Ib/IIa clinical trial of SYN-004. Wash U has informed us that although health and safety initiatives intended to slow the spread of COVID-19 have been effective, the virus continues to pose difficult and unique challenges that continue to delay certain nonessential activities.

However, they also informed us that they could potentially be in a position to initiate the Phase Ib/IIa clinical trial as early as this fall. This remains largely at the discretion of Wash U's Institutional Review Board and is contingent upon their ability to conduct this clinical program free from the impact of COVID-19, which at this time is still difficult to predict.

We will remain in close contact with Washington University and we'll be ready to proceed with this program in the event it is deemed safe to do so by the university's IRB and FDA.

However, given this continued uncertainty, we maintain our previous guidance and anticipate commencement of this clinical program during the first quarter of 2021.

We look forward to providing additional updates as they become available. Before reviewing our financials, I'd like to hand the call over to our Senior Vice President of Research and Development, Dr. Michael Kaleko. Mike will provide an update on the exciting developments and achievements we've made for our SYN-020 intestinal alkaline phosphatase program during the second quarter. Mike?

Thanks, Steve. On June 29, Synthetic Biologics filed an IND for SYN-020 and has received FDA approval to proceed with the first clinical trial, a single ascending dose study in normal healthy volunteers.

As we enter the clinical stage, it seems like an opportune time to provide some details about the program. Any published data to which I refer will be referenced on our company website. SYN-020 is a recombinant form of bovine intestinal alkaline phosphatase, which I'll refer to as IAP, produced in stem cells and formulated for oral delivery. In mammals, including humans, IAP is an endogenous enzyme produced by the cells that line the small intestine and it functions to remove a phosphate group from multiple different substrates.

IAP released by these cells is not digested. It travels through the intestine in biologically active form, and it plays a key role in maintaining gut health through at least 3 important mechanisms: first, it diminishes gastrointestinal inflammation by detoxifying multiple inflammatory molecules, probably the most important of which is endotoxin; second, it acts directly on the intestinal wall to tighten the gut barrier to diminish so-called leaky gut; third, it functions to support a healthy bacterial microbiome.

Based on these functional activities, we and others have recognized that oral administration of IAP has the potential to treat inflammatory diseases of the GI tract. And this clinical strategy is well supported by multiple animal models as well as a pilot study in humans with ulcerative colitis. But equally important by detoxifying intestinal inflammatory mediators and by preventing them from leaking out into the systemic circulation, IAP has the potential to diminish chronic low-grade systemic inflammation, which is believed to exacerbate metabolic syndrome and accelerate the progression of diseases associated with aging. More on this in a minute.

At Synthetic Biologics, we've been collaborating with Dr. Richard Hodin, Chief of the Division of General and Gastrointestinal Surgery at Massachusetts General Hospital. Dr. Hodin has been researching IAP for decades and is a world leader in exploring its efficacy in animal models of disease.

In 2013, he published a seminal paper demonstrating that IAP treatment of mice with metabolic syndrome was remarkably effective in treating disorder, dramatically reducing both the high blood sugar and the associated fatty liver disease.

More recently, he showed that long-term supplementation with IAP in mice diminish the inflammatory and metabolic changes that occur with normal aging. Amazingly, sustained oral administration of IAP substantially prolonged the mouse lifespan.

Synthetic Biologics has an exclusive option agreement with Mass General Hospital to license the intellectual property pertaining to the prevention and treatment of metabolic and inflammatory disorders associated with aging.

I would encourage you to take a look at Dr. Hodin's papers, which encompass a multitude of animal models for other disease indications. I hope I've conveyed the message that one of the most exciting aspects of the SYN-020 product candidate is its potential utility for a broad array of clinical indications.

You might ask, why haven't other companies already developed an oral IAP therapeutic? The answer would seem to be that it's remarkably difficult to manufacture. Most of the studies in the literature have been performed with IAP derived from calf intestines. Calf IAP costs up to $10,000 a gram which is prohibitive for an oral therapeutic. And published reports with various recombinant platforms have described very poor yield, again insufficient for an oral therapeutic.

At Synthetic Biologics, we have overcome this [work]. Our unique advantage is that we've been able to generate a high-yield production cell line that at commercial scale is anticipated to enable cost-effective manufacturing. We've demonstrated that the recombinant SYN-020 is biologically equivalent to calf-derived IAP, and it was well tolerated in mouse and dog toxicology studies at doses up to 50 fold above the anticipated clinical dose.

As mentioned previously, we filed an IND that received a study-may-proceed approval from the FDA. For the initial clinical application, we looked for a niche indication that could potentially provide an accelerated path to registration. Our current top choice is the enterocolitis associated with radiation therapy for rectal and anal cancers. Since the radiation fields for these cancers includes the lower abdomen, patients frequently experience acute side effects, including diarrhea, nausea, vomiting and cramping. While these symptoms usually abate upon completion of the radiation dosing, up to 50% of cancer survivors will go on to develop the long-term complication of intestinal fibrosis, which can be debilitating and has a significant unmet medical need. There's currently no way to prevent it or to slow its course. While we will initially focus on the acute toxicities, there is a significant opportunity for SYN-020 to potentially address the long-term complication as well.

Finally, in support of this indication, oral administration of IAP was efficacious in 2 published animal models of radiation exposure and we verified that SYN-020 was efficacious in our own pilot study in mice. I would be remiss if I didn't mention that we're also exploring the utility of SYN-020 for celiac disease, which is an autoimmune disease that condemns patients to a lifelong highly restrictive gluten-free diet. Celiac is particularly intriguing because when the disease is active, it's associated with low IAP levels and gut barrier leakage. Thus, supplemental SYN-020 would seem to be ideally suited to remedy these abnormalities. To be clear, the disease can be complex with both intestinal and extraintestinal presentations. However, a clinical trial design that incorporates the gluten challenge could potentially provide an early readout on SYN-020 utility. We look forward to sharing additional updates on this in the future.

To conclude, our initial Phase I studies will be conducted in normal healthy volunteers. These safety studies will support the subsequent gastrointestinal trials, but more broadly, should also enable the pursuit of other clinical indications.

Ultimately, the goal is to leverage low-cost manufacturing and the expansive clinical opportunities offered by SYN-020 to address metabolic as well as age-related disorders. So thanks for your attention, and let me now turn it back to Steve.

Thanks, Mike. And as you can see, we're very excited about the future of this program and its potential to be a significant value-adding catalyst for our company.

With that backdrop, I'll review our financial results for the quarter ended June 30, 2020. During the second quarter of 2020, we continue to operate in a lean and efficient manner. We maintain focused on prudent cash management and have successfully identified additional areas to further reduce nonessential operating expenses. We ended the quarter with approximately $8.1 million in cash and cash equivalents. And looking ahead, we anticipate our burn to remain in line with the previous quarter. This is due primarily to the postponement of the Phase Ib/IIa clinical trial SYN-004 in allogeneic HCT recipients as, at this time, we do not anticipate additional expenses related to this program for the remainder of the year.

As a result, we anticipate that our current cash position will allow us to continue operations through at least the first quarter of 2021.

Now I'll turn to the second quarter financial results. General and administrative expenses increased by 23% to $1.3 million for the 3 months ended June 30, 2020, from $1 million for the 3 months ended June 30, 2019. This increase is primarily due to increased legal costs related to business developments, patent execution, employee contract matters as well as vacation and insurance costs.

The charge related to stock-based compensation expense was $67,000 for the 3 months ended June 30, 2020 compared to $59,000 for the 3 months ended June 30, 2019.

Research and development expenses decreased by 38% to $1.6 million for the 3 months ended June 30, 2020 from $2.6 million for the 3 months ended June 30, 2019. This decrease is primarily the result of the response to the global COVID-19 pandemic by our clinical development partners, which has led to the postponement of the Phase Ib/IIa clinical trial of SYN-004 in allogeneic HCT recipients and a temporary halt in new enrollment in the Phase IIb investigator-sponsored clinical trial of SYN-010.

The charge related to stock-based compensation expense was $19,000 for the 3 months ended June 30, 2020, compared to $31,000 for the 3 months ended June 30, 2019. Other income was $6,000 for the 3 months ended June 30, 2020 compared to other income of $80,000 for the 3 months ended June 30, 2019.

Other income for the 3 months ended June 30, 2020 and 2019 is primarily comprised of interest income.

In closing, despite uncertainty around COVID-19, we at Synthetic Biologics remain focused on the execution of our strategy of advancing our portfolio of GI- and microbiome-focused clinical programs. We continue to coordinate and evaluate our clinical development strategies alongside our partners and as -- we have the ability to adjust and adapt when necessary to remain aligned with recommendations by the government and health care organizations leading the response against the coronavirus pandemic.

We continue to support the efforts of our clinical development partners and the health care workers around the globe who continue to risk their own health to help others battling the novel coronavirus.

On behalf of Synthetic Biologics team, I thank you. We look forward to continuing to update you on our progress in the weeks and months ahead. Now I'll turn the call back to Vincent.

Thanks, Steve. Danielle, we'd like to open the phone line to questions. Can you please describe the procedure to ask questions for our listeners?

(Operator Instructions) The first question comes from James Molloy of Alliance Global Partners.

When on the SYN-010 will the CSMC? I know that you suggested that may restart in the fall -- I'm sorry, I guess, SYN-004. The SYN-010, the restart of the trial of the interim?

Jim, this is Steve. So we're in regular contact with our partners at Cedars-Sinai, and they have started enrolling patients again in that trial. So we're happy to see that happen. There's obviously additional protocol that they had to put in place in order for this to happen. For instance, all the patients before they can come into the clinic for their screening have to pass a COVID test. So even with those additional steps that have been built into the process, things currently are back on track. I guess, as we stated in our comments, who knows what happens as we continue to go forward, but as of today, we know that patients are continuing to enroll.

And I think you mentioned in your prepared remarks as well, that sort of the level of burn, $2.8 million, about $3 million expenses in the quarter. Is that what you expect to have for the next 2 quarters going forward here in 2020? I think I'd modeled something lower thinking that COVID may delay things longer, but sounds like things got back on track sooner than expected.

Yes. I mean, the actual cash used for the quarter was around $2 million. And I think that's pretty consistent with where we're at. We've talked in the past, our fixed monthly burn is about $500,000. And then anything that we spend above and beyond that is strictly due to the programs that are ongoing. The guidance that we've given is cash through the first quarter of 2021. So as you sort of look at your model and understanding where the cash balance is today, I think you can sort of see how that works.

Indeed, you guys run a lean ship, so I guess already -- are there -- are there many rooms? Is there much room for running it leaner? That would be one question. I guess the last 2 questions would be I thought the celiac disease for 020 was a very interesting comment, I'd love to get some thoughts on what you would need to do to sort of advance along those lines?

So first, I'll just quickly answer the cash question. We're pretty lean as it is. We continue to look at every opportunity where we could still reduce our burn further. But I think in the last year, we did a pretty good job of getting our costs down. I mean we have 10 full-time employees, that's pretty lean for a company that's working actively on 3 programs. So we're feeling pretty good about where we're at in terms of staffing and our ability to manage our cash.

The celiac opportunities is real interesting. This is actually a program that we looked at several years ago, we did some extensive analysis of the market opportunity. And we had continued to keep this sort of on the radar. And now that we have the ability to go into the clinic initially with our Phase I study, it's become something that has become very, very important to us, especially with the fact that there's an unmet need in the marketplace. Our development team and our clinical folks are looking at ways that we may advance this into the clinic. Those thoughts and ideas are in various stages right now. And once I think we're a little bit more clear about how we plan to proceed, we'll have a discussion with the FDA. And then I think we could share that more broadly with our shareholder base.

I guess maybe a final question for me. What do you anticipate sort of the cost to get to a go/no-go on celiac? And then I would assume a sort of $10 million, $15 million sort of all-in trial cost to run the thing through?

I can't even begin to answer that right now until we're clear on what a program would look like, and then we actually sit down with the FDA and discuss it. So it's still too soon to tell.

(Operator Instructions) The next question comes from Jason McCarthy of Maxim Group.

This is Michael Okunewitch on the line for Jason. Congratulation on the progress. So I'd like to see while we're on the topic of SYN-020, looks like a pretty exciting opportunity with IAP. And from what we've been watching it with the story, it looks like it could essentially be a pipeline and a fill sort of situation here. And I know cost and manufacturing limitations has previously prevented large-scale development, but I'd like to see if you could talk a bit more on what the actual market opportunity is here? And if you give a bit more specifics on which age-related metabolic and inflammatory conditions could benefit from SYN-020?

Well, since there hasn't been a lot done in terms of clinical trials in humans for this area, a lot of what we have to refer to today is what's been done in animal models. And Dr. Kaleko has been spending a lot of time with Dr. Hodin. So maybe, Mike, if you want to just spend a couple of minutes and talk about the broad platform opportunity. We view this compound as a potential platform type product. First things first though, right? We want to get it through the initial Phase I studies. And then as we hone in on the areas where we have opportunity, then I think we'll be in a position to talk more broadly about specific indications and ultimately how big the product could be in any one of those indications.

But Mike, why don't you go ahead and just a couple of minutes on how we view this and where ultimately the opportunities could take us.

Okay. We initially, as I discussed, chose radiation enterocolitis for those specific 2 cancers, and we believe there's a potential for orphan designation, which could accelerate the pathway to registration. And we feel it's important to move through registration as quickly as possible.

Celiac, as I mentioned, has -- seems remarkably well suited for SYN-020 because it is a disease that is characterized by leaky gut and there are clinical indications that if you could fix leaky gut that it actually could potentially improve the course of the disease and SYN-020 is really good at fixing leaky gut.

Additionally, celiac is aggravated sometimes by small intestinal bacterial overgrowth, and you could imagine that that's inflammatory, SYN-020 has the potential to diminish such inflammation.

So it seems very well suited to celiac and there's a very significant unmet medical need. So those are the 2 gastrointestinal diseases. After that, one would look at broader indications and I think the first one one would think that would be metabolic syndrome, type 2 diabetes. This is down the road a bit, and the regulatory pathway for diabetes is complex. So it's down the road. But certainly, that is a disease of aging for which SYN-020 has had remarkable animal model data.

And there's actually data that suggests that humans with high levels of IAP in their feces are protected from diabetes, even if they're obese. The other age-related disease that people tend to think of is atherosclerosis. We have not looked at that in detail. So it is premature to discuss it. But I can tell you there's similar publications suggesting that the extent to which people develop ischemic heart disease may be inversely correlated with their fecal levels of IAP. So there's some potential promise there. But now you're looking way down the road. So I think those are the 2 diseases of aging that would come after the gastrointestinal.

The next question is I'd like to see if you could provide a bit more color on what to expect from the readout of Phase IIb in IBS-C? What sort of difference from placebo would we need to see to consider it a great result? And then which of the key secondary endpoints do you consider the most important for attracting a partner for the Phase III?

Okay, Mike, thanks for the question. Vince, do you want to take that?

Yes, obviously. So just to clarify what we're expecting this in the near term is a futility analysis until we determine (inaudible) to see if the study should continue and whether it looks like continuation will add to the overall outcome. Downstream, what do you want to see in a product in this space and more particularly from SYN-010? Well, you definitely want to see a defined effect on the complete spontaneous bowel movements, you need an increase over baseline, the FDA endpoint is an increase of at least one per week.

Competitively, you'd like to see an increase of more than one per week. But for the most part, I think if you can increase that by 1 to 2 a week, that's hitting the endpoint that you need to have.

In IBS-C, you need to also get a reduction in abdominal pain. And the endpoint is a 30% reduction in abdominal pain versus baseline for the weeks of 30% the average score. So those are the key efficacy endpoints. In terms of differentiating, we would like to see the products have an effect on some of the things that are most impactful for quality of life, like decreasing bloating. We've discussed before that bloating is the symptom that IBS-C patients complain about the most, and bloating is a key -- it's a secondary endpoint.

We'd like to see bloating be reduced in the study as a way of differentiating the product. And then the key side effect, obviously, is diarrhea. We want to make sure that we don't have a diarrhea outcome, and we'd like to have our benefits and our additional effects on bloating without causing diarrhea, which is one of the dose-limiting -- utility limiting effects of the current therapies.

So would you consider bloating and diarrhea some of the key things that have led to the high rate of dissatisfaction with the current options out there?

Absolutely. Diarrhea -- they've quantified the sort of the quality of life impact of diarrhea and different studies have looked at the satisfaction with current therapies. And obviously, efficacy or lack of efficacy is one of the things. But diarrhea as an outcome is certainly a reason that people stop using current therapies. But it's not just the fact that there is diarrhea, it's the fact that it so variably afflicts the person and it can happen when you least expect it, and that is certainly uncomfortable in terms of the patient's willingness to continue on the medication, the dosing.

Thank you. I would now like to turn the conference back over to Steve Shallcross for closing remarks.

Thank you. And once again, thank you for joining us today. We look forward to keeping you updated on our progress, and we'll talk to you next time.

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