Theriva Biologics, Inc. (TOVX) Q1 2015 Earnings Report, Transcript and Summary

Good afternoon, and welcome to Synthetic Biologics First Quarter 2015 Investor Conference call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the call over to Kris Maly, Vice President, Corporate Communications at Synthetic Biologics. Please go ahead.

Thank you, Laura and good afternoon, everyone. Welcome to Synthetic Biologics’ first quarter 2015 results conference call. Today, I’m joined by our CEO, Jeff Riley, after market close today Synthetic Biologics issued a press release reporting its first quarter 2015 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. Jeff will also provide a brief financial summary. After the formal portion of the call; we will offer an opportunity for questions and answers. In addition to the phone line, this call is being streamed live over the internet today and the webcast replay will be archived on our website for 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 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 also 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 back over to Jeff.

Thanks Kris and thanks for everyone joining us this afternoon. We’ve made great progress since the beginning of this year, especially with our programs designed to protect the microbiome. We advanced our C. difficile program into Phase 2 of clinical trials. We remain on target to initiate Phase 2 clinical trials for our IBS constipation program before the end of June and we expect Phase 2 data from both programs focused on protecting the microbiome by year end. We have also expanded our leadership team with the appointment of Steve Shallcross as our Chief Financial Officer beginning June 1st and Maureen Early joining the team in the newly created position of Vice President, Commercial. As we move into the next phase of development, with our microbiome-focused product portfolio, it is crucial that we build an infrastructure to move our programs into and through the clinic, and to support our efforts as we begin to plan for commercial entry, due to the nature of these microbiome programs the time spent in the clinic is likely less than a typically drug development program. I believe Steve’s significant experience will be valuable to achieving our goals. He has operational, financial and international bio-tech industry experience, and an established track record, leading the financial development and strategy for several publically traded biotech companies. He has effectively managed broad operations, cultivated significant relationships with a number of corporate development leaders in biotech and repeatedly structured financing strategies that enable some very successful companies in our industry to achieve their clinical and business goals. Steve will be based out of our Rockville, Maryland offices. Maureen has extensive global and domestic strategic marketing experience in the pharmaceutical industry working on products from pre-launch through post-launch. During her career, she has successfully launched several products, created effective anti-infective marketing programs and developed solutions to optimize brand lifecycles. I look forward to Steve and Maureen’s contributions as we execute our clinical milestones and seek to generate increased returns per shareholders. I also want to thank Evan Ballantyne for his contributions to Synthetic Biologics over the past three years. We appreciate his dedication to ensuring that the financials for the first quarter were successfully completed before he left to pursue other interests. We wish Evan the very best in his future endeavours. I’d now like to spend some time on development of our lead therapeutics that are designed to protect the microbiome while targeting pathogen-specific disseises. These programs include SYN-004, to protect the gut microbiome from beta-lactam IV antibiotics for the prevention of C. difficile infection and antibiotic associated diarrhea or AAD and SYN-010, to reduce the impact of methane producing organisms on IBS constipation. 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 AAD or antibiotic associated diarrhea and perforation of the intestinal wall, with potentially fatal outcomes. Rather than treating C. difficile we have designed SYN-004 to be what we believe is the first point of care preventative therapy to protect the gut microbiome from the effects of certain beta-lactam antibiotics and therefore prevent the onset of C. diff infection and AAD. Our initial product, oral SYN-004 is intended to be administered to a patient with the IV antibiotics. It is intended to target and neutralize antibiotics that are excreted into the gut before they have a chance to disrupt the microbiome and cause the conditions that allow the overgrowth of C. difficile bacteria and the onset of diarrhea. We believe prevention is smarter than treatment and that a preventative therapy such as SYN-004 could potentially represent significant cost savings to U.S. healthcare system as a preventative SYN-004 also has a much larger potential market since it’s difficult to predict who among the 14 million hospitalized patients receiving IV beta-lactam antibiotics as part of most surgical procedures might develop C. diff. It’s conceivable that all or at least a very large percentage would be co-administered SYN-004. 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. It is also important to note that SYN-004 is expected to be synergistic with faecal transplants and other gut repopulation techniques. They are not mutually exclusive strategies. We have complete Phase 1a and 1b clinical trials and reported positive top line safety and tolerability data from both studies. This quarter, we reported positive pharmacokinetic results from both the Phase 1a and 1b clinical trials with supportive evidence that there is no active enzyme absorption into the bloodstream. In March, we initiated a Phase 2a clinical trial to evaluate gastrointestinal antibiotic degrading effects and safety of SYN-004 in ileostomy patients, and we expect top line data from this clinical trial to be reported next month. The Phase 2a randomized multicenter open label study is expected to evaluate the ability of two different dose strengths of SYN-004 to degrade residual IV ceftriaxone in the G.I. tract of up to 20 healthy participants with functioning ileostomies without affecting the concentrations of IV ceftriaxone in the bloodstream. The study consists of two treatment phases for all participants. One, the administration of IV ceftriaxone alone, and two the administration of one of two doses of oral SYN-004 and IV ceftriaxone. Time samples will be collected from the participants to measure the ability of SYN-004 to degrade the residual antibiotic. Participants will be enrolled at up to four trial sites located in the United States and Canada. 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 drug Lovastatin. It 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-010 which may allow a less complex route to market. We’re working in collaboration with Dr. Mark Pimentel at Cedars Sinai whose work has demonstrated a leading cause of IBS-C is excessive production of methane gas in the gut by microorganisms called M. smithii. The methane gas reduces G.I. motility and causes intestinal blockage. Current treatment options which more often than not are over-the-counter laxatives, treat the symptoms of constipation, intend to cause an IBS-C patient to swing the other way and have diarrhea. The market opportunity for SYN-010 is very large. Up to a third of IBS patients suffer from the constipation form of IBS, which puts the current addressable market in the U.S. alone at just over 13 million patients. SYN-010 is designed to reduce the impact of methane producing organisms and restore normal bowel function. Therefore it is designed to treat the underlying cause of pain, bloating and constipation associated with IBS-C, not just the symptoms. SYN-010 is also designed to have minimal impact on the microbiome. It is intended to slow the production of methane gas without disturbing the natural balance of the patient’s gut microbiome. We are currently finalizing the modified release formulation for SYN-010 to provide a more efficacious pharmacokinetic profile intended to diminish or prevent systematic absorption. Synthetic Biologics intends to file an IND application for SYN-010 to support the launch of a Phase 2 trial by the end of June and top line results are expected from this trial also by the end of this year. Synthetic Biologics third pathogen specific program, SYN-005 is being developed in collaboration with Intrexon and is based on research and IP license from the University of Texas at Austin. It combines two novel monoclonal antibodies to target and destroy pertussis toxins which is responsible for pertussis or whooping cough. We are continuing our discussions with international non-profit health organizations to secure non-dilutive funding to advance our SYN-005 program. If secured, synthetic Biologics intends to initiate a non-human primate program to explore the prophylactic and therapeutic effects of our antibodies and then move the program rapidly into the clinic. As previously disclosed, we are in active discussions with potential partners for Trimesta, our Phase 2 candidate for the treatment of relapse-remitting MS. Pending the MRI data from UCLA, we intend to further these discussions with potential partners with a goal of accelerating the development of Trimesta as quickly as possible. Last year, at two scientific forums, the lead investigator from UCLA presented data that showed Trimesta in combination with Copaxone not only improved its ability 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 and this clearly distinguishes Trimesta from all currently available MS therapies. Enrolment is continuing in a separate Phase 2 study specifically designed to evaluate the neuroprotective properties of Trimesta in combination with any of the leading MS therapies. Turning to our financial performance, we continue to operate in a highly efficient manner. We utilized $5.5 million of cash during the first quarter and $12 million cash as of March 31st. The two trials will increase cash utilization, as well our expanded team has been brought on board to execute the next phase of development and create shareholder value. In addition, we are also planning our move into new executive offices in Rockville, Maryland on the Johns Hopkins NCI campus. The new space will accommodate our expanded clinical development and research teams which are driving our programs into and through the clinic. Keep in mind, the expanded team now is a total of 18 individuals that are full-time. To wrap up my prepared remarks, Synthetic Biologics has become a leader in the microbiome space with two microbiome protecting pathogen specific candidates on track to report top line Phase 2 clinical data this year. Additionally, our monoclonal antibody candidate to treat whooping cough has demonstrated strong preclinical data, has received orphan drug status and supports preparation for clinical development; and we, what we believe is a rich asset in our Trimesta MS program which we expect to partner as soon as possible. Overall, we are very optimistic about the potential of Synthetic Biologics to address large markets, meet unmet medical needs while generating significant returns for shareholders. At this time, I’d like to turn it back over to Kris.

Thank you, Jeff. Before we start the Q&A session, I wanted to remind everyone that Synthetic Biologics C. difficile and IBS-C programs will be featured in poster presentations at the Digestive Disease. Our C. diff program will be highlighted in a poster presentation for the American Society for Microbiology meeting in June and our C. diff program was recently selected for oral presentation at the International Conference on the Evolution and Transfer of Antibiotic Resistance meeting in June. In addition, Synthetic Biologics is continuing its annual tradition and will host a microbiome analyst and investor meeting in New York City on June 3rd, if you’d like to attend, please let me know. Now, Laura, we’d like to open the phone line to questions. Would you please describe the procedure to ask questions for our listeners?

Certainly. [Operator Instructions] Our first question comes from Patrick Lin of Primarius Capital

Hi guys. Congrats on the quarter and the accomplishments thus far. I know you guys have been working hard to get a lot of stuff done, and one quick second here. Can you tell me on your microbiome focussed Phase 2 trials, why being at a such a short timeline as far as the data readout and I may have a quick follow up.

Hi Patrick. How are you doing? It’s essentially the disease state, it’s not necessarily the microbiome itself. So, one of the diseases is IBS-C, the constipation form, you actually can see improvement or not in these patients within four weeks. It’s a fairly quick endpoint in that particular case and then for the C. diff antibiotic associated diarrhea program, that’s also exceptionally quick because you’re just dosing the patient while they’re on that antibiotic and for example, the Phase 2b that we’re going to run’s going to be in patients that have pneumonia, so that, you go to the hospital, you’re diagnosed with pneumonia, you’re going to get an antibiotic, ceftriaxone in this case. That usually lasts anywhere from one to three days. So again, a very quick turnaround time for those particular disease states. I don’t know if all microbiome projects, ours or other folks’ are going to be as quick but, again, it’s highly likely.

Terrific. And, I mean, to me, Synthetic still seems like a very undervalued stock and can you maybe share some light on what you might have planned as far as investor relations effort, either at conferences or internal programs, please?

You bet. We just recently hired an IR group that started a couple of weeks ago and those individuals are beginning to ramp up our meeting with a variety of folks and existing investors as well as new investors or new potential investors. We have a plus revenue papers, these are posters, scientific articles and journals et cetera that are starting, literally as of last Friday. I’m speaking at a Translational Microbiome Conference, the first of its kind up in Boston, this Thursday and we have a bunch of those. So, it think the visibility’s going to become significantly better. Interestingly the pharmas of the world, the big biotechs know who we are. We’ve had lots and lots of discussions with those folks, not from an MS partnering perspective, we’ve had those as well, but just from people basically kicking the tyres to see what we have. That has not yet translated into share price, but I think it’s inevitable that, that should begin happening, in particular when we start releasing Phase 2 data from these two programs.

Great, and one quick follow up. You mentioned this new IR. Can you share maybe some of the track record of the IR firms, if they’ve been involved with any known companies?

I would say, their – probably their biggest success would’ve been with – I don’t know if I can say the name – I guess I can, they were recently acquired by Mallinckrodt a couple of years ago and they basically grew from roughly our size, a little bit smaller, we are about $100 million market cap and they were acquired for several billion dollars by Mallinckrodt. I think they have been through the ringer if you will from going from a company that’s our size with – at the moment poor visibility and able to translate that – the assets that we have into actual shareholder value given the valuations in the marketplace today. There’s a dearth of good solid products available to the big pharma folks and we have two that are – well, we have three that are potential $1 billion plus markets. I think, they have a track record of doing that. We’re executing on [indiscernible] plan and we’ll see what happens.

That sounds wonderful, and just to follow up on your earlier comment, you said you have some conferences coming up or are you not announcing them yet? As far as investor conferences.

Yeah, there’s about five or six this year. We just presented at ECCMID, which is a European congress of, I don’t remember what the whole acronym is, but it’s an Infectious Disease Conference in Copenhagen two weeks ago. Our Chief Medical Officer did a Microbiome Conference on Friday, last week, in London and I do one in Boston, coming up and there’s several more this year. As they, I think, Kris, our IR person typically puts out a press release roughly a week in advance of these, give or take.

Great. Thank you, very much and congrats again on your progress.

Thanks Patrick, appreciate it.

The next question comes from Anita Garrick [ph], please go ahead.

Thank you. Good afternoon. I have two questions or two areas. The first is a real quick one, probably just clarification. Is Intrexon collaborating only on Pertussis SYN-005 or on SYN-005 as well?

It’s actually on two programs in total Anita. One is SYN-005, that’s the Pertussis program. We also have an ongoing program for – it’s discovery stage, so we typically don’t show it, but it’s for a – gram negative organism called Acinetobacter baumanii and we’re searching for a very similar strategy to Pertussis, we’re searching with Intrexon, with their platform to find antibodies that bind to the surface of these particular bugs so that we can again have a very pathogen specific way of eliminating these bugs from the system.

Okay, but it’s not…

But not SYN-004, correct.

Okay and second of several questions I have regarding Trimesta, as a long term investor, I’ve heard of the partnership discussions taking many, many years and calls, and I’m wondering if you could explain – obviously you can’t say names, but are you talking about partnership with a big pharma or are you talking about MS societies? Do you think there’s a big difference?

There’s a huge difference. I mean, I can tell you that we started – so I’ve been with the Company three years, what happened prior, I’m not privy to, but I can tell you that our partnership discussions began literally five minutes after the PI from UCLA did her first presentation on April 30th of last year, five minutes. She walked back to the back of the room at the AAN meeting, I was there. We then met up with an individual from a very large biotech who you would know, within the MS space and we started discussions at that time. We then ended up having multiple discussions since then with six different companies and we’re down to three at this stage of the game. None of those are the MS societies. MS societies are separate non-profit entity. The ones that we’re speaking with today run the gamut from what you would consider a large specialty pharma company, but multibillion – very large to a – to the same company we spoke with five minutes after her first presentation on April 30th to a smaller company, even that has significant amount of capital and expertise in the CNS or central nervous system disorders space. I don’t know where we’re going to go with this, because again, we are partnering with the UCLA. So, any deal that we’re doing, we’re under CDAs. We’re talking to these folks, but again, we have to get the full data set done and that’s the MRI data set for them to be able to vet the data set in order for them to, we move to the next stage, which is discussions. Now, we have had verbal discussions around – I wouldn’t call them term sheet discussions, but verbal discussions around economics, but we haven’t been to the point where we put pen to paper yet and –

Okay, well obviously that’s an important distinction for long term shareholders. If you’re talking biotech, if you’re talking big pharma, that’s going to be more meaningful for the share price, certainly without intending to suspect than the MS societies through a shareholders perspective. The other question related to Trimesta is, in addition, we’ve been hearing about the MRI result coming out by the second half of the year, Q2, what have you. Is there any more clarification you can give on, A, when those results will be disseminated and where can we expect a joint conference with SYN and UCLA? Can we expect just a press release? What should we be expecting?

I don’t have any visibility on that Anita. I mean, again the MRI data is in the hands of UCLA at this time, and they’re continually – they’re crunching, they’re working their way through all of that information. It’s not a simple thing. It requires several radiologists and a lot of work on a per patient per scan basis and all that has to be put into a database obviously. So, they’re working through it. Last we heard – we have filed intellectual property around the findings to date, we talked about that back in September, October of last year, but they’re working through it, and again, as soon as they get that, we’ll have access to it and we’ll be able to then have those discussions from a third part perspective with the potential partners.

Okay, so just –

I’m sorry. I can’t give more clarity than that, because I don’t have any more clarity than – they’re doing – they’re working as quickly as they can.

Okay, but you have consistently – you have said 2Q end of June?

We’re not in June yet, Anita. I mean, we’re –

Okay, no, no. I just want to know if we’re still on that timeframe.

We’re still on that timeframe. Correct.

Okay, and as far as how it would be announced, we don’t know that.

We don’t know that.

Okay, and then, not to belabour the point, but this is really important for us shareholders. When you say you’re in partnership discussion, can you just give a little idea of what steps would be next? Let’s say you get the MRI data. I assume whoever these companies are, they’ve read all through the other data that you have from the studies, what would be the steps?

Well the next step would be a term sheet, right, where basically the lawyers step in and generate what’s called a term sheet, and this is with any deal, not just this one. The term sheet iterates, goes back and forth between the entities a few times. If the terms are great off the bat then life is good, if the terms are – I used to do this for Pfizer and we always tended to be pretty aggressive as far as our offers. We tended –

We know that about you Jeff. That’s why we’re so excited.

We tended to lowball people. Other companies like J&J I think is a great example, where they tend to give a very fair price upfront. So, it really depends on that price as to how many times you iterate and how far apart you are on what you think the value of the drug is or the project is. After that, it’s pretty much done. You know, I mean, the hardest part frankly is going through the CDAs creating the relationship, knowing the individuals, making sure that the drug fits their portfolio of what they’re looking for either synergistically or a brand new drug, maybe they’re going into a CNS space, and I have spoken with some folks out there. I mean, the deals could be anything from where we just throw the product over the wall and you get a bucket of cash, that’s one way to do it and it’s out of our hands to some extent. All the way to something a little more intimate where it may be a 50-50 style deal, and I don’t – we’ve talked about all those, several groups, but I can’t tell you where it’s going to end up until we actually get a piece of paper in hand saying we’re willing to pay you this and then it’s a discussion at that stage of the game, but that’s all incumbent on the MRI data to a large extent, because you’re right, the relapse or remitting data is out there right. I mean, they’ve looked at it. That’s fairly straightforward. We know the study was probably underpowered. We know it had a good result for year one, not as great a result for year two, but that’s a powering problem, not necessarily a drug specific problem. So, the MRI data will differentiate this drug, we think, significantly from the other existing therapies and I don’t know if you follow the space very much but Tecfidera has been getting hit pretty hard recently, because patients are realising that PML or brain infections are – sometimes happen and would you rather take a drug where you sometimes get a brain infection, or would you just rather take a drug that’s mother-nature based initially and is relatively safe and that would be [indiscernible] in this case. Does that answer your question, Anita?

[Operator Instructions] I’m showing no further questions. I would like to turn the conference back over to Jeff Riley, for closing remarks.

Well thanks, Laura, and thank you everybody and thanks for the great questions. Again, I think a lot of you folks have my e-mail and cell phone number and you definitely can reach Kris through the corporate number on our website. If you have questions, ask. I mean, that’s the only way we can communicate. Once again, thanks for joining us today. Everyday SYN moves closer to the goal of offering differentiated products to large markets with clear unmet needs and we’re excited about the progress we’re making. We look forward to reporting our continued progress especially reporting the top line results of our Phase 2 studies for both C. diff and IBS-C later this year. We are positioned to create value for our shareholders at multiple points this year. We are positioned to create value for our shareholders at multiple points to include monetizing the MS asset, hopefully moving both the IBS and the C. diff drug forward and hopefully finding external financing for the Pertussis drug as well as our discovery project with Intrexon which is Acinetobacter, we hope and feel that we’ll be able to find an antibody that will be pathogen specific, again and we’ll be able to revolutionize the way we treat some infectious diseases. With that, I’d like to say thanks to everyone.

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