Theriva Biologics, Inc. (TOVX) Q3 2014 Earnings Report, Transcript and Summary

Good morning and welcome to the Synthetic Biologics’ Third Quarter 2014 Investor Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [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, Corporate Communications at Synthetics 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 Web site. 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 2 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 and the webcast replay will be archived on our Web site for 30 days. During this call, we’ll 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 a 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 and 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 will go through everything here over the next 10, 15 minutes. We finalized clinical trial plans for our pathogen-specific programs, strengthened our IP initiated manufacturing programs, held a successful IBS Investor Day in New York, reported expanded data on the unique neuroprotective properties of our MS candidate and raise net proceeds of $18.9 million and registered direct offering to support our clinical development programs through key inflection points in 2015. A particular note is that roughly one half of the total capital raised was invested by new institutional investor, Great Point Partners, a strong and highly regarded biotech investment fund, an additional three existing investors participate in the remainder of the round. As capital infusions a clear vote of confidence from our new investor, as well as the investors that increase their existing positions. We appreciate the support from this group and from our ongoing shareholder base. And those of you on the call today who are 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 assuring them a new class of pathogen-specific therapies were serious infections and diseases with a specific focus on protecting the microbiome. We are moving the needle of science beyond that probe into traditional antibiotics, whose broad use over the past 80 years has rendered many antibiotics of little value today, especially against increasingly aggressive pathogen so-called super bugs that daily defied the reference of current medicine. The stage is set where a major change in the medicine can await [ph] the broadly active antibiotics, the therapies that target the specific-pathogens and neutralize them without disrupting the good bacteria we all need to have and the proper balance to survive in good health. Partly [ph] good physicians have recognized the growing limitations of current antibiotics for years. Now the government is acting. Special regulatory path have been established and continue to be established, but new provisions in place for extended market exclusivity to reward successful innovators, such as us. Synthetic Biologics programs aimed at this new national healthcare 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 in the United States and deadly for up to 300,000 infants worldwide every year. In addition to our pathogen-specific programs, our research collaborator is working to wrap up the compilation and review of data from the recently completed investigator initiated 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’ve made a lot of progress from that programs since our last quarterly call. I will begin with our Clostridium difficile program. We remain on track to begin dosing patients in Phase 1a 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 drugs of certain beta-lactam antibiotics. As a noted background here, C. difficile is now listed as the CDC’s top priority pathogen ahead of MRSA [ph] in a hospital setting. 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 and dying from 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 GI tract and indiscriminately wipe out both good and bad bacteria, disrupting the balance of our gut microbiome, allowing from the over growth of this nasty bug Clostridium difficile. C. diff as we say 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. Foreign antibiotics are often ultimately ineffective, leading to 30,000 C. difficile related death in the United States annually. Our drug candidate SYN-004 is designed to neutralize certain beta-lactam antibiotics that are excreted into the GI tract. Infecting 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 demonstrates 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 Phase 1a and 1b testing in the next few weeks in the United States and we intend to report Phase 1 top line data by year-end. We continue to build important infrastructure to support the development of SYN-004. During the quarter, we present the early SYN-004 data at the 54th Annual ICAAC Meeting, in Washington DC and at IDWeek in Philadelphia to support the ability of SYN-004 degrade certain beta-lactam antibiotics. We also strengthened our C. diff patent protection with Notice of Allowance in the U.S. Patent and 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 Foundations 5th Annual Fight C. difficile fund raiser last month in New York. Dr. Joe Sliman, our Senior VP of Clinical and Regulatory was an invited speaker at the C. diff foundations raising C. diff awareness conference in Chicago earlier this month. Let me 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 led by Dr. Mark Pimentel, the GI Motility expert at Cedars-Sinai in Los Angeles, California. Dr. Pimentel, 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. Very helpful to many of us, especially in providing a clear understanding of just how complex is treatment of IBS can be. This message has clearly underscored a very big opportunity available to innovators in this area of large unmet need. Listeners may recall how Dr. Pimentel described that sometimes delicate balance between in a diarrheal form of IBS or D-IBS and have been a constipation form. We have a drug taken for the diarrheal form can cause constipation and conversely have a drug for the constipation form can cause diarrhea. In effect a medicine for either one of those indications and leading to treatment with 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 has think more deeply about this disease that knows beforehand. His first discovery led to the indication for [indiscernible] which appears to have all 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, a constipation predominant form of IBS or C-IBS for which we secured exclusive worldwide rights from Cedars-Sinai last year. In both cases the IBS and C-IBS, Dr. Pimentel didn’t look at treating loose 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 resolves the 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 well Statins. We are reformulating the particular statin to achieve a new absorption profile for a slower, modified release with minimal systemic exposure. Additional worldwide patent filings covering composition of matter claims where 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 pathway for SYN-010, which is typically quicker and less expensive in the regulatory requirements for a new chemical entity. The statin selected for modification by Dr. Pimentel has been used by more than a million patients around the world for more than four 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’ve tremendous confidence in Dr. Pimentel’s expertise, Dr. Pimentel shared with us that studies he has conducted at his clinic as Cedars-Sinai have thus far confirmed the safety of SYN-010 and have demonstrated mechanistic features in regulating that methane and restoring healthy bowel conditions. 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 a Pertussis toxin. You would be likely aware of the increased mention of Pertussis in the national media of late due to its rising incidents. Pertussis is a highly contagious disease caused by the bacteria Bordetella Pertussis, symptoms that includes severe coughing and subsequent breathing difficulties. Antibiotic used does not have a major effect on the disease course, while it can eliminate the B. pertussis bacteria from the respiratory tract, it does not neutralize Pertussis toxin. The 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, B. pertussis causes up to 300,000 deaths worldwide each year, primarily among unvaccinated infants. At the ICAAC in September, our Research Collaborator Dr. Jennifer Maynard, The University of Texas in Austin, presented data from in vivo studies and efficacy data from non-human primates have 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 U.S., Orphan Drug Designation for the treatment of Pertussis from the FDA. It has a regulatory benefit and may also extend market exclusivity upon approval. The development of more effective treatments is a high priority for World Health Care Organizations such as the Gates Foundation and Wellcome 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, we felt it’s 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 let’s switch gears to our larger program for multiple sclerosis, Trimesta. In addition, to our pathogen-specific programs, our research collaborators continuing the intense work it takes to analyze patient MRI brain scan from the investigator initiated Phase 2 study of Trimesta in combination with Copaxone in women with relapsing-remitting MS. Relapsing-remitting MS is the most common form 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 here at the ACTRIMS-ECTRIMS Meeting in Boston in September in a presentation by the trials 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. It had multiple productive meetings with the principal players in the MS space including several groups in Frankfurt last week just with additional meeting scheduled during the remainder of this year to report that there is very strong interest from both global and regional pharmaceutical companies. While we are all waiting for the completion of the top line 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 scan themselves evaluate changes in the white matter and grey matter of the brain in response to therapy. Positive white matter changes typically correlate to improvement in the MS patients relapse rate. A regulatory approval of every MS drug on the market today is based on relapse rate improvement. The change’s in grey 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’re interested in valuating the changes in the grey matter related to Trimesta therapy explain the significant benefits seen clinically. Clinicians have demonstrated that an MS patient’s brain atrophies much faster than a health person’s, around five to ten times faster. Which means by age 50 or 60 a significant portion of the grey matter of a MS patient with atrophy leading to considerable disabilities in 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 grey 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 totally new indication for an MS drug. We look forward to updating shareholders on investigators continued analysis as we continue our discussions with potential partners and await the results in the full analysis of the MRI scans due early next year. In the meantime, a separate Phase 2 trial focused exclusively on cognition utilizing Trimesta with a variety of currently marketed MS drugs, including Copaxone, Avonex, Betaseron, Extavia, Rebif, 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 were just distributed over the newswire earlier this morning. The company’s 10Q for the quarter ended September 30, 2014 will be filed at 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 our registered direct offering on October 16, with a select group of institutional investor from net proceeds of approximately $18.9 million. For the three and nine month 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 a 144% are primarily the results 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 month 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 desk to enter the clinical produced top line data in the near-term. We plan to have two additional multi-billion 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 multi-billion dollar opportunity. With our recent financing we have the capital to fund these programs through key clinical milestones next year. The clostridium difficile Phase 1a and 1b trials are on track to initiate this quarter. Top line 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’re 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 ground breaking work in IBS and his expertise in GI Motility provide great confidence in the clinical development of SYN-10 and its potential to significantly improve the lives of those suffering from C-IBS. Keep in mind we’re treating the underlying cause and not just the symptoms of that terrible disease. The mandates have developed an effective treatment for Pertussis, a whooping cough needs no further characterization and to remind you that up to 300,000 kids die from the disease each year. And the incidents as the Pertussis are increasing right here in our homeland. Preclinical testing of our synergistic antibody combination suggest a solution this quick or unmet need is close at hand. We’re hopeful that the U.S., Orphan Drug Designation at SYN-005 received from the FDA can accelerate development and further encourage funding sponsorship by one of the world healthcare organizations we mentioned earlier. Our MS program with Trimesta, we expect top line 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’re currently speaking with. We proceed with a Phase 3 program. Again to our knowledge, no other drug has demonstrated similar neuroprotective and cognitive benefits observed thus far in a Phase 2 trial. The enormous patient benefit not available for many MS drug and we expect it to drive significant value for Synthetic Biologics. At this time, I’ll turn it back over to Kris.

Thank you, 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] Our first question is from Daryl Weber of Wells Fargo. Please go ahead.

Good morning, gentlemen. So a couple of questions here; with respect to your Phase 1 and Phase 1a and Phase 1b for C. diff; how many patients are you anticipate enrolling? And the top line data you will be reporting by year end, now what would that entail? And will it be for all the patient cohort? Secondly considering your whooping cough program in your recent 8K filing slide presentation you guys stated that you’re looking for a third party funding, in fact you just mentioned briefly on your previous comments. Can you paint the picture of how that would be structured? And last with regard to the Intrexon partnership, there were a number of other disease 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. To answer your first question the Phase 1a and 1b will be between 12 and 20 patients. We’re looking for safety in these, and obviously we’re doing a dose response as well. These are in normal patients and these are very, very quick studies. Really look and see what's happening in 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 into a 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’re looking at from the dose response in efficacy perspective. So, we’re pretty excited about it. Standby for some data that will be coming out here shortly in press releases, and we’re hopeful that our current version of this drug will behave and we have no reason to think otherwise just like the drug a predecessor compound that went through successful Phase 2 trials in Europe. Your second question was on Pertussis. As we are looking at third party funding for this particular source, this isn’t -- Pertussis isn’t 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 is a significant amount of interest from non-governmental organizations and other groups that have an interest in moving this type of product into the developing world, mostly for infant use. The current product would be used as a prophylactic, but we do have evidence that it works as a therapeutic, basically the new born 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 a defect on that child for six months or greater in which case that the infant then can receive a natural vaccine after that point in time. That’s the current thought process as well as developing that for a -- 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 a Gates Foundation, or would there be some sort of economics involved?

It’s usually a grant, but it really depends on which organization. Gates Foundation tends to take a piece of the action, so they may want the international world as their piece of the equation or as we would keep the developed world U.S., Europe, Japan et cetera. It really depends on who you talk to Daryl specifically as to what the deal terms look like which obviously a fair number of grants available as well for that through the NIH and other, and The WHO which we are pursuing and those would just be your classic grant to move a product forward as rapidly as possible. Does that answer your question on Pertussis?

Yes.

Okay. But the last question you had was with respect with Intrexon. We have two ongoing programs with Intrexon, and one that were -- 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, though 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 baumannii. This is a discovery stage product, so that we’re still probably a good two years away from the clinic, and we are making pretty good progress. So we are seeking again a sniper like approach using the Intrexon heat technology to find monoclonal antibodies that target this particular gram-negative bacteria and Acinetobacter in particular is pretty gastro [ph] resistant. I think it’s like 46%, 47% resistant to all existing antibiotics. So there is a high demand for that particular program among the United States Military for a variety of reasons, mostly due to blast wounds. Soldier would get a wound [indiscernible] sand where these bugs would get into the wound. Soldier then gets a nasty infection and as we founded earlier we felt most of the antibiotics don’t work on that. There is a high interest from U.S. 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, it look like we have some good in vitro, in vivo results. We’ll definitely bring that program to the forefront, and it’ll show folks what we’re doing there; very similar to the Pertussis program.

Thank you.

You are welcome.

Thank you. I’d 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 towards 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 is now concluded. Thank you for attending today's presentation. You may now disconnect.