Theriva Biologics, Inc. (TOVX) Q3 2021 Earnings Report, Transcript and Summary

Good afternoon, and welcome to Synthetic Biologics 2021 Third Quarter Investor Conference Call. [Operator Instructions] Please note, this event is being recorded. At this time, I would like to turn the call over to Vincent Perrone, Director, Corporate Communication, at Synthetic Biologics. Vincent?

Thank you, Simona, and good afternoon, everyone. Welcome to Synthetic Biologics' 2021 Third Quarter Investor Conference Call. Today, I'm joined by Steven Shallcross, our Chief Executive and Chief Financial Officer; Dr. Michael Kaleko, Senior Vice President, Research and Development; and Dr. Vince Wacher, Head of Products and Corporate Development. Synthetic Biologics issued a press release this afternoon, which provided operational highlights and reported our financial results for the quarter ending September 30, 2021. The release can be found in the Investor Relations section of our website, syntheticbiologics.com. During our call, 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 prepared remarks. In addition to the phone line, this call is being streamed live via webcast, which will be archived on our website for about 90 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, beliefs, and 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'll now turn the call over to Steve. Steve?

Thank you, Vincent. Good afternoon, everyone, and thank you for joining our 2021 third quarter investor conference call. We continue to make significant progress on our clinical programs, and I could not be more excited by the outlook for our business. Our balance sheet remains stronger than ever with $72 million of cash on hand at the end of the quarter, providing us with substantial runway to support our operations into 2023. Within this time, we expect to execute on a number of key milestones related to our current therapeutic pipeline that we believe will drive significant value for our shareholders. In addition, our strong balance sheet has enabled us to actively evaluate a variety of strategic options, which could include potentially acquiring or licensing new therapies that could complement and further enhance our current pipeline. We look forward to providing updates on our progress. In terms of some of the near-term milestones, first, we anticipate reporting data from the first antibiotic cohort of the SYN-004 Phase Ia/IIb (sic) [ Phase Ib/IIa ] clinical trial during the first quarter of 2022. Second, we look forward to reporting the data readout from our ongoing Phase I multiple-ascending dose clinical trial of SYN-020 during the second quarter of 2022. I'll discuss more about each of these in a moment, but as you can see, we're in the midst of a very exciting period for our company. Turning now to the quarter. First, on SYN-020, we previously announced that patient enrollment, dosing and evaluation was completed in a Phase I open-label, single-ascending dose, or SAD, clinical trial of SYN-020, our proprietary formulation of intestinal alkaline phosphatase or IAP, intended to treat local and systemic diseases stemming from inflammation of the GI tract and disruption of the gut barrier, including radiation neuropathy and Celiac Disease. Analysis of preliminary data from the SAD study demonstrated SYN-020 maintained a favorable safety profile and was well tolerated at all dose levels. During the third quarter, we initiated a Phase I placebo-controlled multiple-ascending dose clinical study of SYN-020. I'm pleased to report that the first cohort of 8 study participants will complete final dosing and PK sampling this week, with dosing of the second cohort of 8 study participants expected to begin shortly thereafter, pending a safety review. Importantly, both Phase I studies are designed to support the development of SYN-020 and multiple potential clinical indications. Turning to SYN-004. Washington University continues to screen and enroll patients for our Phase Ib/IIa clinical trial, allogeneic hematopoietic cell transplant or HCT recipients for the prevention of acute graft-versus-host disease. A data readout for the first of 3 antibiotic cohorts is anticipated during first quarter of 2022. As I've stated before, we believe both SYN-004 and SYN-020 may address very sizable and underserved markets and have the potential to be foundational long-term value drivers for our company and our shareholders. With that backdrop, I'd like to provide a more detailed update on our clinical development activities, beginning with 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. We continue to advance this program in the form of a Phase Ib/IIa clinical trial in allogeneic HCT recipients with our partner, the Washington University School of Medicine, in St. Louis. This study is designed to evaluate the safety, tolerability and pharmacokinetics of SYN-004 in this fragile patient population. Earlier this year, we announced that enrollment in patient dosing had commenced in the first of 3 sequential antibiotic cohorts that will each be administered a different IV beta-lactam antibiotic to treat fever following conditional therapy. In total, 8 participants in each cohort will receive SYN-004, and 4 will receive placebo. At this time, patient screening and enrollment over the first cohort remains ongoing. However, we are experiencing short delays in patient recruitment as a result of demand from competing trials and a lower number of transplant recipient whose underlying disease warrants high intensity conditioning. Despite these delays, which are outside of our control, the trial is progressing, and we look forward to reporting the data readout from the first antibiotic cohort during the first quarter of 2022. Assuming these results are in line with our expectations, and we observed that SYN-004 is not systemically absorbed in this first cohort, we'll consider applying for orphan drug designation and begin preparations for our Phase III program, while we complete the remainder of this clinical trial. Next, I'd like to provide an update on our SYN-020 intestinal alkaline phosphatase or IAP program. We continue to view SYN-020 as a versatile therapeutic that has the potential to treat a number of clinical indications stemming from inflammation of the GI tract and disruption of the gut barrier, including enteropathy, secondary radiation therapy used to treat certain cancers, and Celiac Disease, both of which have a significant unmet medical need. Importantly, we've overcome the manufacturing hurdles, which have previously hindered the clinical and commercial development of IAP to treat these diseases. SYN-020 is our proprietary recombinant form of bovine IAP produced and show cells and formulated for oral delivery. IAP is an endogenous enzyme expressed in the upper small intestine that plays an important role in maintaining gut health through at least 3 important mechanisms. First, it diminishes GI inflammation by detoxifying inflammatory molecules; second, it acts directly on the intestinal wall to tighten the barrier to diminish leaky gut; and third, it functions to support a healthy gut microbiome. In addition, we believe SYN-020 has the potential to diminish low-grade systemic inflammation, which is believed to exacerbate metabolic syndrome and accelerate the progression of diseases associated with aging. We previously outlined in detail our clinical development strategy for SYN-020, which includes the completion of safety studies before progressing into Phase II proof-of-concept clinical trials in a target indication. Earlier this year, we announced the completion of a Phase I open-label single-ascending dose clinical trial, which evaluated safety, tolerability and biodistribution of SYN-020 in 24 healthy adult volunteers. Analysis of preliminary data from this study demonstrated that SYN-020 was well tolerated at all dose levels, and no adverse events were attributed to study drug. Importantly, no serious adverse events were reported, and as anticipated, SYN-020 was not detected in the systemic circulation. During the third quarter, we initiated a Phase I placebo-controlled multiple-ascending dose clinical study of SYN-020. This clinical study is intended to evaluate the safety, tolerability and biodistribution of SYN-020 upon repeated dosing in up to 32 healthy adult volunteers. The study is divided into 4 sequential cohorts of 8 participants, with 4 doses of SYN-020 given orally, twice daily for 14 days. As I mentioned earlier, I'm pleased to report that the first cohort of 8 study participants will complete final dosing and PK sampling this week. And dosing of the second cohort of 8 study participants is expected to begin in relative short order, pending a safety review. We expect topline data readout from this clinical study during the second quarter of 2022. Assuming successful completion of the Phase I MAD study, we anticipate conducting a placebo-controlled Phase IIa clinical trial as early as the second half of next year in one of our initial target indications. Enteropathy, secondary to radiation therapy used to treat abdominal and pelvic cancers or Celiac Disease. Looking ahead, we are also considering potential Phase II clinical trials of SYN-020 to evaluate its therapeutic utility and additional indications, including nonalcoholic fatty liver disease, diseases stemming from disruption of the gut barrier as well as metabolic and inflammatory disorders associated with aging, the latter of which are supported by our exclusive option license agreement with Massachusetts General Hospital. We are excited about these versatile -- I thought these versatile program and its potential to become a platform therapeutic for our company. We believe SYN-020 will play a major role in driving long-term value to our shareholders while targeting large, underserved markets, including Celiac Disease. With that backdrop, I'll review our financial results for the quarter ended September 30, 2021. Our balance sheet remains very strong, and we are well capitalized to support our operations for the foreseeable future as we reported approximately $72.1 million of cash on hand at the end of the third quarter. Our strengthened financial position and current cash runway provides more than sufficient funding to achieve a number of major milestones, including the completion of ongoing Phase Ib/IIa clinical trial of SYN-004, completion of clinical trials for SYN-020 through proof of concept and other key value drivers for the company. Before reviewing our financials for the quarter, I'd like to mention that, in addition to the 10-Q, we will be filing a registration statement this evening, covering warrants associated with our 2018 public offering of common stock. The registration statement filed this evening will supersede an expiring registration statement and should be viewed simply as a housekeeping matter. Now turning to the third quarter financial results. General and administrative expenses increased by 9% to approximately $1.3 million for the 3 months ended September 30, 2021, from approximately $1.2 million for the 3 months ended September 30, 2020. This increase is primarily due to the higher insurance cost, audit fees and registration fees, offset by lower legal cost and vacation expense. Research and development expenses increased by 116% to approximately $2 million for the 3 months ended September 30, 2021, from approximately $900,000 for the 3 months ended September 30, 2020. This increase is primarily the result of increased clinical trial expenses as we continued dosing patients in the Phase Ib/IIa clinical trial SYN-004 and by higher indirect program costs for the 3 months ended September 30, 2021, including an increase in manufacturing costs for SYN-020. We anticipate research and development expense to increase as our ongoing clinical trials continue to enroll patients. To wrap up, the remainder of 2021 promises to be a very exciting time for Synthetic Biologics. We are very happy with our progress and remain focused on executing on our strategy. As I previously stated, I'm more confident than ever in the outlook for our business and believe we have the financial strength to execute and deliver on our clinical strategy. At the same time, we continue to actively evaluate a variety of potential opportunities that could further expand our clinical development pipeline through licensing, acquisitions or other strategic options, where we believe we can further enhance value for our shareholders. I'm proud of the progress we've made and even more excited about what lies ahead. I'd like to thank our shareholders for their ongoing support, and we look forward to keeping you updated on our progress. Now I'll turn the call back to Vincent to open the call for questions.

Thank you, Steve. Simona, 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 Mr. Jim Molloy with AGP.

I was wondering if you could talk a little bit about the areas of potential acquisitions and potential time. And I know it's hard to talk to know on timing on deals. But if there's any framework you may be able to give. And then what makes the most sense for what areas you might be targeting, please?

So Jim, thanks for the question. Good to hear from you. The only thing I could say at this point is that we have been very, very active in evaluating a number of exciting opportunities. We are in various stages of diligence. These things take time. And outside of that, I just really can't give any specific details on timing. There are always unknowns that come up along the way as you're evaluating ideas. And I can assure you that our team is working very, very hard. I can tell you that over the last year or so, up until today, we've probably evaluated several dozen ideas. And we do have a short list. We are, again, in a process. And as soon as we are ready to talk publicly about it, we'll get that news out.

Understood. Would there be a way to characterize the stage of developments of the products that you're looking to bring in?

What we did is when our team started evaluating opportunities, we sort of set a criteria out there. And one of those criteria is that we were interested in clinical stage assets. So anything Phase I, Phase II, Phase III. So our primary interest is in clinical stage asset, not in preclinical stage assets.

Excellent. And then the 004, looks like a move back from fourth quarter to first quarter next year, just sort of, is it COVID-related or just -- it's just taking a little longer than perhaps, previously, anticipated for the first cohort data?

What we -- yes. Yes. Thanks for the question. Let me hand it off to Vince. He just recently had an update from Wash U this week. So I'll let him handle that.

Thanks, Steven and Jim. The -- it's not COVID-related. The Washington University, when we spoke to them, said that they have -- the number of transplants is not dramatically impacted by COVID. Things have settled down somewhat in that regard, and the processes are in place. What's happened is 2 things. One is the initiation of competing clinical trials, and so there's multiple investigators at a tremendous institution like Washington University, and they're competing for patients. The other is that our patient population is required to have what's known as myeloablative conditioning, which means that's the most intense conditioning regimen. And if patients come in, if they don't need that, then they get referred to a reduced intensity conditioning regimen. And ethically, you must do that. I mean, you're going to hope the best outcome for the patient. We have a bit of a spot in the last few months where we had 3 to 4 patients come in, they've all got diverted to reduced intensity, conditioning and so weren't eligible for our study. So those are the 2 things that are impacting on the enrollment -- have impacted on the enrollment in the last few months. And they are absolutely typical of this area and people that are working in the space with transplant. So having spoken to our principal investigator, he's indicated that we would expect to have enrollment come in ways where we'll get several people in a row that will be eligible into our study, and then there might be a month where there's a patient or 2 that gets diverted or isn't going to get -- have the right conditioning. So that's really down to the underlying disease and the therapeutics modalities that are used to treat them.

Got it. Understood. And obviously, clinical trials are challenging. It can take a little longer sometimes. one quarter is no big deal. Then on the other indications for 020 beyond Celiac, in NAFLD and the others, any thoughts on timing on when it might either start or indicate which of the indications you're going to target?

So I'll handle that, Jim. We're looking at a number of opportunities. We know we want to hopefully be in a Phase II trial in the second half of next year. We have a shortlist. We've engaged a number of experts in various areas. And I think once we understand what the full clinical program would need to look like for each of the possible indications, we'll make a decision about how we're going to approach the clinic. And obviously, we'll need to understand the cost of what it's going to take to advance these programs. And we'll talk about this. I'm hoping that we'll be able to give an indication to our investors sometime probably the first quarter's, no later than the second quarter of next year and how we plan to advance into a Phase II program. We've given some indication on Celiac and radiation neuropathy already, but fatty liver disease -- nonalcoholic fatty liver disease, we're still evaluating that as well as additional possible inflammatory disorders that we have an opportunity to consider. Is that helpful?

Yes, it is.

The next question comes from Jason McCarthy with Maxim Group.

This is Michael Okunewitch on the line for Jason. So I'd like to look -- as we're moving into that first Ib/IIa readout with meropenem, the one where we're getting the absorption data, what is the DSMC looking for to progress to the second cohort? Is that just the absorption? Or are there any other signals that we'd be looking for that wouldn't have been uncovered by the previous body of data and infection control?

Why don't you go ahead, Vince?

Okay. So the safety is primary. It's the #1 thing that they're looking at. We're seeing things that could be attributed to the drug in this population that might not have been observed in the other populations, understanding that obviously this population is very different than the bone marrow transplant population. So safety is the #1 thing. The absorption, if they -- when they look at that information, if there's any absorption, they'll have to determine whether that could be sufficient to potentially impact the pharmacokinetics and efficacy of the antibiotic in the next cohort. Because as we've talked about before, meropenem is not metabolized. We've actually just recently had some in vitro data that confirms that in plasma that, that absolutely, it doesn't do anything to the meropenem. So the safety primarily and then whether or not the levels of SYN-004 would be sufficient to degrade the next antibiotics. And in the same sort of in vitro experiments that we've done, we've looked at these -- looked at the other antibiotics. And so we have a sense of what levels could have an effect on the antibiotic. And at the moment, the levels that we've observed previously in clinical trials are exceedingly low. And the levels that we would anticipate, if any, in the population, this bone marrow transplant population are so low that there should not be a problem. But that's what we need to -- that's why we're running this first cohort, to evaluate that to make sure that in this patient population with the impaired barrier function, that we still have low absorption that won't affect the efficacy of the systemic antibiotic.

Right. And then so following that readout, which we're expecting in the first quarter, what are you thinking on the timelines for the subsequent 2 cohorts?

So the timelines of the subsequent 2 cohorts are going to be patient-driven just as this cohort is being driven. So we're going to have to evaluate, over the course of the next few months, what we can legitimately expect in terms of the enrollment rates at Washington University for the patients that are coming in. The critical piece of this, obviously, is that the next antibiotic in the study is something that can be metabolized by SYN-004. And so we want to make sure that we are able to get in enough patients, a significant number of patients to make sure that we can actually see an effect, if there is one. So I think it's hard to give an answer because we cannot pin down exactly the enrollment waves that go through on the bone marrow transparent is very much dependent on the patients and the needs. But I would not expect it to go significantly faster than the current cohort. And we would want to use the current cohort, I think, as a baseline for the projected enrollment.

All right. And then I'd just like to ask one more follow-up on this on the Ib/IIa, specifically about what sort of an effect size in those later cohorts where you might get some initial efficacy data, what effect size you would consider sufficient that you would be able to bring this to the FDA and discuss moving straight into a pivotal? Because I know you previously mentioned that as a target.

So we would want to leverage not just the data here, but our previous data in the -- all the patients with the pneumonia and looking at the CDI. And that is really to look at the microbiome outcomes, the safety, above all, and pharmacokinetics. Because to get an effect size on something like aGVHD, obviously, we need significantly more patients than 12 per cohort. So this is going to be -- to guide us, but it's going to be very much, I think, safety PK and to some degree, biomarker-driven and also leveraging our previous experience where we can show that SYN-004 stops the metabolism of antibiotics in the thesis, stops -- preserves the microbiome. Those are the kinds of information that we'd be needing to put together, I think, to take to the FDA to make that argument, because we won't have enough patients in this one to say we absolutely stopped aGVHD. It's not a study that's designed to give a categorical outcome. It's a study that's designed to give us indications on safety and utility moving forward.

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

Thanks again, everyone, for joining us on the call today. We're, as you can see, very excited about the progress we made, and I can assure you there's a lot more excitement to come. We look forward to keeping you updated. Have a great night, and have a great weekend.