Theriva Biologics, Inc. (TOVX) Q4 2014 Earnings Report, Transcript and Summary

Good morning, and welcome to Synthetic Biologics Year End 2014 Investor Conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. 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 would now like to turn the call over to Kris Maly, Vice President, Corporate Communications at Synthetic Biologics. Ms. Maly, please go ahead.

Thank you, Keith. Good morning, everyone. Welcome to Synthetic Biologics' Year End 2014 Investor Conference Call. Today I am joined by our CEO, Jeff Riley, and our CFO, Evan Ballantyne. Pre-market this morning, Synthetic Biologics issued a press release reporting its year end 2014 financials and summarizing recent operational highlights. That release can be found on the Investors section of our website. During our call today, Jeff will provide an update on our C. difficile, irritable bowel syndrome with constipation, Pertussis otherwise known as whooping cough and our MS programs. Evan will then provide a brief overview of our financial statements for the year end December 31, 2014, after which the formal portion of the call; we will have 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 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, and 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. Information on this call is provided only as of the date of the 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 would like to turn the call back over to Jeff.

Thanks, Kris, and thank you all for joining us on this morning's call. I would like to apologize in advance, I am getting over the flu, so my voice is a bit gravelly this morning, but let us get into it. 2014 was a very, very productive year for Synthetic Biologics as we created the infrastructure and implemented the clinical strategies. We are building a robust portfolio of pathogen-specific drugs with a special focus on protecting the microbiome. We completed plans to launch two Phase 2 clinical trials this year with top-line results both expected by year end, one program target C. difficile infection and the other targets irritable bowel syndrome with constipation or IBS-C. We are seeking non-dilutive funding for our program for Pertussis or whooping cough to support clinical development and we are in active partnering discussions for our Phase 2 MS candidate Trimesta. We completed a $19 million equity raise last October to support our progress. We established a clinical advisory board, bring together preeminent thought leaders to provide valuable clinical guidance for our C. difficile and IBS-C programs. We were issuing multiple new patents in 2014 for our C. diff program and MS programs and we filed numerous patent applications for all of our programs. Pre-clinical and clinical results for each of Synthetic Biologics' programs were presented last year at almost a dozen different venues all told, including our own IBS Investor Day in New York City last September. Here is where each of our program stand, starting with C. difficile. As you may know, the rise of C. difficile infections especially in healthcare settings continues to get a lot of media attention. A recent study published in the New England Journal of Medicine reports that the mortality rate due to C. difficile has more than doubled in the past eight years and is now approaching 30,000 deaths annually in the United States. The disease is so serious and so prevalent that The Centers of Disease Control or the CDC has labeled it an urgent public health threat. The majority of C. difficile cases are caused by the unintended consequences of antibiotic therapy to the gut microbiome, IV antibiotics excreted to the gut often wipe out the natural GI, microflora allowing the stronger bad bacteria of which C. difficile is among the strongest to take over. This can lead to recurring diarrhea and perforation of the intestinal wall with potentially fatal outcomes. In the past few years, a few powerful antibiotics have come to market for the treatment of C. difficile, but as you might expect their effect is limited since all they do is give doctors more antibiotics to fight a problem caused by antibiotics in the first place. Synthetic Biologics' approach is radically different. Our C. difficile candidate SYN-004, is designed to be what we believe is the first point-of-care preventative therapy to protect the gut microbiome and prevent the onset of C. difficile. Oral SYN-004 will be administered bedside alongside the IV antibiotics. It is intended to stay in the gut to neutralize excreted antibiotics before they have a chance to disrupt the microbiome and cause the conditions that allow the overgrowth of C. difficile. We believe that prevention is smarter than treatment and that preventative therapies such as SYN-004 potentially represents significant cost savings to the U.S. healthcare system. SYN-004 also has a much larger potential market since it’s difficult to predict who among hospitalized patients gets IV beta-lactam antibiotics and who may develop C. difficile it’s conceivable that all or at least a very large percentage would be co-administered SYN-004. We initiated cGMP manufacturing of SYN-004 in the third quarter of last year and we have completed the phase 1a and 1b clinical studies. The top-line pharmacokinetics data from both of our Phase 1 studies is expected to be recorded shortly. The Phase 1a and 1b safety and tolerability data were very positive and clearly support Synthetic Biologics plans for a Phase 2a trial, which we expect to launch this month with top-line results expected to be available in the second quarter of this year. The next step will be a Phase 2b proof-of-concept trial that is planned to launch in the second half of this year with top-line data expected by year end. Synthetic Biologics' IBS-C candidate, which is a new modified release formulation of a widely prescribed statin, is also on track for the initiation of Phase 2 clinical trials by mid-2015. A 505(b)(2) regulatory pathway is anticipated for the development of SYN-10, which may allow a less complex route to the market. The groundbreaking work for this program was performed by Dr. Mark Pimentel and his team at Cedars-Sinai in Los Angeles. Dr. Pimentel has shown that a leading cause of IBS-C is excessive production of methane gas in the gut. The gut slows the digestion of food and causes intestinal blockage. Our drug candidate, SYN-10 is designed to reduce the impact of methane producing organisms and restore normal bowel function, as such is designed to treat the cause of pain, bloating and constipation associated with IBS-C, not just the symptoms. We are currently finalizing the modified release formulation of SYN-10 to provide a more efficacious pharmacokinetic profile intended to diminish or prevent systematic absorption. Synthetic Biologics intends to file investigational new drug application for SYN-10 to support the launch of a Phase 2 trial by the end of June. Top-line results are expected by year-end. Synthetic Biologics' third pathogen-specific program SYN-05 is being developed in collaboration with Intrexon. It combines two novel monoclonal antibodies to target and destroy Pertussis toxin, which is responsible for Pertussis, also known as whooping cough. We are currently in discussions to secure non-dilutive funding from an international non-profit health organization to advance our SYN-005 program. If secured, Synthetic Biologics intends to initiating non-human primate program to explore the prophylactic effects of our antibodies and also intends to launching Phase 1 study for this. Last year, SYN-005 was granted an orphan drug designation by the FDA for the treatment of Pertussis, which may provide a variety of incentives, including seven years of market exclusivity should SYN-005 received FDA approval for the treatment of Pertussis. As previously disclosed, we are in active discussions with partners for Trimesta, our Phase 2 candidate for the treatment of relapsing remitting MS. Last year, at two scientific forums, the lead investigator from UCLA presented data that show Trimesta in combination with Copaxone, not only improve disability scores at 12 months, among the 158 women in the study with MS, but also showed a statistically significant and clinically relevant improvement in cognition. This clearly distinguishes Trimesta from all currently available MS therapies. Additional analysis of MRI scans is underway to support the degree and prevalence of these clinical observations with top-line results anticipated by mid-year. In the meantime, enrollment is continuing in a separate Phase 2 study, specifically designed to evaluate the neuroprotective properties of Trimesta in combination with any other leading MS therapies, including not only Copaxone, but also Gilenya, Tecfidera, Avonex as well as others. Let me take this opportunity to turn the call over to Evan Ballantyne, our Chief Financial Officer for a review of our 2014 year end financials after which we will come back for a brief summary and questions and answers. Evan?

Jeff, thanks, and thanks everybody for attending the call this morning. Synthetic Biologics' year-end 2014 financial statements were included in the press release which was issued this morning over the Newswire. The Company's 10-K for the year ended December 31, 2014, will be filed with the SEC later today. Cash at December 31, 2014 was $17.5 million compared to $14.6 million at December 31, 2013. For the year ended December 31, 2014, our general and administrative expenses were $6 million. Included in these numbers were non-cash charges related to stock-based compensation of $1.6 million for the year ended December 31, 2014. Research and development expenses increased to $14.5 million for the year ended December 31, 2014. This increase of 123% is primarily a result of increased program costs. Associated with expanded clinical development, manufacturing and research activities within our pathogen-specific microbiome-focused pipeline, including our C. difficile, IBS-C and Pertussis programs. Non-cash charges related to stock-based compensation within research and development were $803,000 for the year ended December 31, 2014. I would like to turn the call back to Jeff. Jeff?

Thanks, Evan. I would like to add one comments to the numbers discussed if I may. In an effort to make special note of the incredible productivity of our clinical and research investments, especially the past year. To wrap up the formal portion of today's call with events of 2014, Synthetic Biologics has become a later stage drug development company with two candidates on track to start Phase 2 trials this year and one monoclonal antibody candidate demonstrating strong preclinical data that supports preparing for clinical development and we have, what we believe is a rich asset, in our Trimesta MS program, which we expect to partner this year. Each one of Synthetic Biologics candidates which we expect to partner this year. Each one of Synthetic Biologics candidates addresses unmet needs in very large markets. I earlier mentioned the latest statistics on the rise of deaths due to C. difficile infections, many of which are related to antibiotic use. Each year approximately 118 million doses of common IV beta-lactam antibiotics are administered in hospitals across America. Each of those doses represents an opportunity for SYN-004 to prevent the onset of C. difficile infection. The market opportunity for SYN-10 are IBS-C drug that actually treats the cause, again, not the symptoms of the disease is enormous, nearly one-third of IBS patients suffer from constipation form of IBS, which push the current addressable market in the U.S. at just over $13 million patients. If our whooping cough antibody therapy is successful, it could significantly impact the current death rate from Pertussis, which the World Health Organization puts at roughly 300,000 annually worldwide, mostly unvaccinated infants. I am sure many of you know of the prevalence of MS and the magnitude of the market is forecasted to reach 18 billion worldwide by 2019, the cognitive improvement features of Trimesta to make a differentiated product in this very large market, At this time, I will turn it back to Kris.

Thank you, Jeff. Before we start our Q&A session, I wanted to remind everyone of Synthetic Biologics upcoming host of presentations and scientific meetings. Our Pertussis program will be highlighted at the ECCMID meeting in April and our C. difficile and IBS-C program fully featured at the Digestive Disease Week meeting in May. Synthetic Biologics was invited and will participate in the following events over the next few months, a C. difficile radio interview segment, BIO Legislative Fly-In, and two microbiome-specific conferences. In addition, Synthetic Biologics is continuing its annual tradition and will host a Microbiome Investor Day in New York City on June 3rd. We look forward to all the events we have slated on the horizon. Now, Keith, we would like to open the phone lines to questions. Would you please describe the procedures to ask questions for our listeners?

Yes. Thank you. We will now begin the question and answer session. [Operator Instructions] First question comes from Keith Markey with Griffin Securities.

Good morning and thank you for taking my question. I actually have a fairly broad one for you this morning. I was just wondering if you might elaborate a little bit on your commercialization plans for the C. difficile, the constipation IBS and Pertussis products in the United States and abroad.

Good morning, Keith. Thanks for the question. Well, let us start with easier one, so for the Pertussis project again as we noted we are working together at the moment with international-based non-profit firm that is looking at the ex-USA, ex-European markets to try and get that drug into the hands of these World Health Organization and groups like that, for infants primarily in these developing countries. That would be their specific distribution network. Our distribution would be specific to the U.S. and Europe and we probably would be looking at stockpiling through governmental organizations, the product in various hospitals for use in the event of outbreak or something of that nature, so that is a fairly straightforward low-cost distribution for Pertussis. For IBS-C, this is again a relatively straightforward distribution. We are in the process of interviewing a variety of folks that will come on board as commercial guys or gals, who will be looking at this market. We are gearing up this year to get ready for a potential launch here in a little bit under two years for this drug. This will be a typical GI-specific distribution methodology, pricing would probably specialty pharma style pricing. We have not looked at that yet, but that is our goal with that particular product as it is a repurposed statin and the goal would be penetration market-wise more so than pricing high-end. Last but not least, in the C. difficile program, that particular program is a bit more complicated, but again it is our flagship program to some extent and it will likely be the largest program over time. On our staff today, we have guy named Lew Barrett, who used to run Wyeth's entire anti-infective franchise as well as Pfizer's, after Pfizer took over Wyeth. He is looking at how we are going to distribute this product. What does it look like and we are hiring folks again in that particular area to flesh that out more. There is one slide in our current presentation that we’ve been presenting for the last 18 months or so that really looks at the overall markets and kind of what it would look like if we price this drug at roughly $100 a day, while the patient is in the hospital and maybe one or two days after they go home, depending on the half-life of the antibiotic. That is a bit more complicated. It would probably be a hospital-based sale, not a huge sales force similar to the GI sales force I would guess and fairly straightforward once you get into that distribution chain. MS, as you guys know, we are looking to partner that program, get that off the balance sheet, but also to utilize other folks that may be have a better view of how to distribute that product. That is a much broader central nervous system disorder type of sales force and one that we probably will not be building ourselves.

Right, so for instance, if I take a look at just the C. difficile product, you would probably want to provide the marketing support for that at least here in the United States and would you consider out licensing it or partnering it off for foreign territories?

Possibly. I mean, it is all about price, right? It depends on what the deal would look like. Our intention today is to take the IBS-C program and then C. diff program forward on our own. There is high interest for the IBS program from a couple of Japanese companies. That is a prevalent issue over in Japan and not a geography that we probably want it to distribute directly into, but the rest of the world is fairly straightforward. Again, it depends on the price. I mean, if we have a good partner, obviously, we would rather use them.

Right. Great. Thank you.

Thank you. [Operator Instructions] The next question from [Scott Cobrun] [ph], a private investor.

Hi. Good morning, Jeff, and thank for taking my call. I have a question regarding SYN-004, and a two part question relative to Trimesta. Could you expand upon comments made at ROTH, pertaining to a possible Phase 2b in SYN-004 as possibly becoming a pivotal trial and what has led you to that conclusion? Also, what are your thoughts on the Trimesta Phase 3, primary endpoints being an improvement in RRMS at one year versus two years and do you foresee the trial as a Trimesta-Copaxone combo versus some of the other drugs on the market or do you envision Trimesta as a standalone? Third, could a partnership deal with Trimesta offset the need to raise capital? Thank you.

Okay. Those were some broad questions. Let’s start with the SYN-004 question. No, let us start with Trimesta that's the easier one. Trimesta, again, it really depends on the partnering, Scott. It depends on who we partner with and really what the pathway forward is for those Phase 3s. Some of the folks are looking at it as a cognition-specific drug to use in combination with their existing franchises. Other folks are looking at it as a standalone drug. For example, if they want to get into the MS space. Each of those pathways forward is different and each would either require multiple other active controls potentially or a single control in some cases if they are going alone, so it really depends on the particular partner. I have said that multiple times I do not know what the upfront is going to look like for this drug. Obviously, we can do one of two things. We can take a larger upfront and remove the potential dilution downstream or we could do a 50-50 or some type of deal like that where we maintain rights in a much larger economic benefit downstream. It really depends on the deal structures themselves and it really depends on sort of where our share price is at any given moment to be honest, because you really need to look at what is the maximum value long-term while we are building this company for shareholders and that is the quest, that’s the goal, I do not have visibility on that. I can tell you we are in deep discussions with a variety of folks and we are still, as I just mentioned earlier, shooting to have a deal done by the end of June, end of second quarter and we hope that that deal will be the maximum deal possible for shareholders at this point in time. For the SYN-004, the comments I made at ROTH were whether or not we could take the Phase 2b study that we are getting ready to run and potentially use that as a pivotal and the question really becomes what the results looks like midstream in this particular study, from an adaptive trial design perspective. Keep in mind that the drug itself, from what we know at this point, is incredibly benign, right? This is an oral protein and enzyme. It’s non systemically absorbed. There is a few peptide that break - it gets broken down just like any other protein, it does not get in the bloodstream, it does not get in the systemic exposure as far as we know at this stage from what we have looked at, so it is a very, very safe drug. We can take the whole safety component out of the equation with respect to what is going to happen downstream. Cancer drugs are the drugs we do not really know to some extent what that safety or off-target activity is going to be. With respect to efficacy, again, we know our drug is incredibly effective because we are not going against receptor. We are not turning a biological switch on or off. All we are doing is we are breaking down a particular beta-lactam with our beta-lactamase, very straightforward, very simple, so we are removing two of the biggest obstacles to a lot of drugs safety and efficacy right after that. What we are really looking at is efficacy from a dosing perspective in these patients and making sure we deliver enough of this product at the right point in the gut and that is what the Phase 2a study is about that we are starting to hear in a few weeks, where were looking at dosing ileostomy patients. These are people without colons and really being able to test real-time what is happening in these patients when we given the antibiotic, plus and minus our drug. We do not know if the drug works at that stage of the game. Then Phase 2bs, obviously, we will go in that great detail on that on June 3rd when both, Dr. Pimentel and Dr. Wilcox from the U.K. come over and talk about the overall microbiome, but they also will be going into the specifics of each of our clinical studies along with our Medical Officer Dr. Joe Sliman on June 3rd, again, in New York City. I hope that answers your question. I mean, we are going to take an interim peek, where you can see what is happening with the SYN-004. If the results are looking good and we have something that may be significant to the public health, we will have that discussion with the FDA and they will provide guidance at that time.

Make sense. Very good. Thank you, Jeff.

Thanks, Scott.

Thank you. That's all the time we have for questions today. At this time, I will like to turn the conference back over to Jeff Riley for any closing remarks.

Thanks, Keith. Once again, everybody thanks for joining us today. Everyday Synthetic Biologics moves closer to the goal of offering differentiated products to large markets with clear unmet needs and we are very excited about the progress we are making. My sincere thanks go out to shareholders for your continued support, our truly dedicated team of inspired employees and to our third-party vendors whose exceptional skills have and will continue to play an important role in our success. We look forward to reporting our continued progress, and this year reporting the top-line results of Synthetic Biologics two Phase 2 trials in C. diff and IBS-C. Thanks, again, everyone and have a great day.

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