Synthetic Biologics, Inc.
Q3 2021 Earnings Call Transcript

Published: 3 Nov 2021

[Operator:]

Good afternoon, and welcome to Synthetic Biologics’ 2021 Third Quarter Investor Conference Call. All participants will be in listen-only mode. After today's presentation there will be an opportunity to ask questions. Please note, this event is being recorded. At this time, I would like to turn the call over to Vincent Perrone, Director of Corporate Communication at Synthetic Biologics. Vincent?

[Vincent Perrone:]

Thank you, Simona and good afternoon, everyone. Welcome to Synthetic Biologics 2021 third quarter investor conference call. Today, I'm joined remotely 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 ended 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 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 terminologies such as may, should, expects, anticipates, intends, plans, believes, estimates and similar expressions. These statements are based upon current beliefs, expectations and assumptions and are subject to a number of risks and uncertainties, including those set forth in Synthetic Biologics’ filings with the SEC, many of which are difficult to predict. No forward-looking statements can be guaranteed, and actual results may differ materially from such statements. The information on this call is provided only as of the date of this call, and Synthetic Biologics undertakes no obligation to update any forward-looking statements contained on this conference call on account of new information, future events or otherwise, except as required by law. With that, I’ll now turn the call over to Steve. Steve?

[Steven Shallcross:]

Thanks, 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 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 1a/2b clinical trial during the first quarter of 2022. Second, we look forward to reporting the data readout from our ongoing Phase 1 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 our 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 or enteropathy 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 1, placebo controlled multiple ascending dose clinical study of SYN-020. I'm pleased to report that the first cohort of eight study participants will complete final dosing and PK sampling this week with dosing of the second cohort of eight study participants expected to begin shortly thereafter pending a safety review. Importantly, both Phase 1 studies are designed to support the development of SYN-020 in multiple potential clinical indications. Turning to SYN-004, Washington University continues to screen and enroll patients for our Phase 1b/2a clinical trial in allogeneic hematopoietic cell transplant or HCT recipients for the prevention of acute graft-versus-host-disease. Data readout for the first of three antibiotic cohorts is anticipated during the 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 antibiotic 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 1b/2a clinical trial in allogeneic HCT recipient with our partner, the Washington University School of Medicine 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 three sequential antibiotic cohorts that will each be administered a different IV beta-lactam antibiotic to treat fever following conditional therapy. In total, eight participants in each cohort will receive SYN-004 and four will receive placebo. At this time, patient screening and enrollment of 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 recipients 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 observe 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 3 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 personal therapeutic that has the potential to treat a number of clinical indications stemming from inflation of the GI tract and disruption of the gut barrier, including enteropathy secondary to 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 in chose 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 three important mechanisms. First it diminishes GI inflammation by detoxifying inflammatory molecules. Second, it acts directly on the intestinal wall to tighten the gut 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 2 proof-of-concept clinical trials and a target indication. Earlier this year we announced the completion of a Phase 1 open label, single ascending dose clinical trial which evaluated safety, tolerability and biodistribution of SYN-020 in 24 healthy adult volunteers. Analysis of primary 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 is anticipated SYN-020 was not detected in the stomach circulation. During the third quarter we initiated a Phase 1 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 and up to 32 healthy adult volunteers. The study is divided into four sequential cohorts of eight participants with four 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 eight study participants will complete final dosing and PK sampling this week, and dosing of the second cohort of eight study participants is expected to begin in a relative short order pending a safety review. We expect top line data readout from this clinical study during the second quarter of 2022. Assuming successful completion of the Phase 1 MAD study, we anticipate conducting a placebo-controlled Phase 2a 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 2 clinical trials of SYN-020 to evaluate its therapeutic utility in 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 this 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 1b/2a 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 administrative expenses increased by 9% to approximately $1.3 million for the three months ended September 30, 2021 from approximately $1.2 million for the three months ended September 30, 2020. This increase is primarily due to the higher insurance costs, audit fees, and registration fees offset by lower legal costs and vacation expense. Research and development expenses increased by 116% to approximately $2 million for the three months ended September 30, 2021 from approximately $900,000 for the three months ended September 30, 2020. This increase is primarily the result of increased clinical trial expenses as we continued dosing patients in the Phase 1b/2a clinical trial of SYN-004 and by higher indirect program costs for the three 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.

[Vincent Perrone:]

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:]

The first question comes from Mr. Jim Molloy with AGP.

[James Molloy:]

Hi thanks for taking my question. I was wondering if you would talk a little bit about the areas of potential acquisitions and potentials and I know it's hard to talk to no one timing on deals, whether 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?

[Steven Shallcross:]

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.

[James Molloy:]

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

[Steven Shallcross:]

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 1, Phase 2, Phase 3. So our primary interest is in clinical stage asset, not in preclinical stage assets.

[James Molloy:]

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?

[Steven Shallcross:]

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

[Vince Wacher:]

Thanks, Jim. The -- it's not COVID-related. The Washington University, when we spoke to them, said that 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 two 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, that 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 have the best outcome for the patient. We have a bit of a spot in the last few months where we had three to four patients come in that all got diverted to reduced intensity conditioning and so weren't eligible for our study. So those are the two 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 and having spoken to our principal investigator, he has indicated that we would expect to have enrollment come in ways where we'll get several people in a row that will be eligible and to our study, and then there might be a month where there's a patient or two that gets diverted or isn't going to get the -- have the right conditioning. So it's really down to their underlying disease and the therapeutics modalities that are used to treat them.

[James Molloy:]

Got it, understood. And obviously, clinical trials are challenging. It takes 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?

[Steven Shallcross:]

So I'll handle that, Jim. We're looking at a number of opportunities. We know we want to hopefully be in a Phase 2 trial in the second half of next year. We have a short list. 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. 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, no later than the second quarter of next year and how we plan to advance into a Phase 2 program. We've given some indication on celiac and radiation enteropathy 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?

[James Molloy:]

Yes, it is. Thank you very much. Thank you for taking my questions.

[Operator:]

The next question comes from Jason McCarthy with Maxim Group.

[Michael Okunewitch:]

This is Michael Okunewitch on the line for Jason. Thanks so much for taking the questions.

[Steven Shallcross:]

Hey, Mike.

[Michael Okunewitch:]

So I'd like to look as we're moving into that first 1b/2a readout with meropenem, the one where you'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 in infection control?

[Steven Shallcross:]

Why don't you go ahead, Vince?

[Vince Wacher:]

Okay. Hi, Mike. So the safety is primary. It's the number one 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 number one 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 so I see meropenem. 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 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 and 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.

[Michael Okunewitch:]

All right. Thank you. And then, so following that readout, which we're expecting in the first quarter, what are you thinking on the time lines for the subsequent two cohorts?

[Vince Wacher:]

So the time lines of the subsequent two 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 can't pin down exactly the enrollment waves that go through on the bone marrow transparent. It's very much dependent on the patients and their needs. So 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.

[Michael Okunewitch:]

All right, thank you very much. And then I'd just like to ask one more follow-up on this, on the 1b/2a, specifically about what sort of an effect size in those later cohorts where you may 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.

[Vince Wacher:]

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 feces, stops -- preserves the microbiome. Those are the kinds of information that we would 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.

[Michael Okunewitch:]

All right, thank you very much for answering my questions.

[Operator:]

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

[Steven Shallcross:]

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.