Synthetic Biologics, Inc.
Q4 2020 Earnings Call Transcript

Published: 4 Mar 2021

[Operator:]

Good afternoon, and welcome to the Synthetic Biologics' 2020 Year End Investor Conference Call. All participants will be in a 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, Corporate Communication at Synthetic Biologics. Please go ahead.

[Vincent Perrone:]

Thanks, Gary and good afternoon, everyone. Welcome to Synthetic Biologics 2020 year end investor conference call. Today, I'm joined remotely by Steven Shallcross, Chief Executive and Financial Officer; Dr. Michael Kaleko, Senior Vice President Research and Development; and Dr. Vince Wacher, Head of Product and Corporate Development.

[Steve Shallcross:]

Thanks, Vincent. Good afternoon, everyone and thank you for joining our 2020 year end investor conference call. I hope everyone is staying safe and healthy, as we continue to navigate the global health crisis sparked by the COVID-19 pandemic. It was a busy year and the start of the New Year for the SYN team. I'm very excited to be with you this afternoon to share our operational highlights and financial results. I'd like to start our call by saying that, we're more encouraged than ever by the outlook for our business. We've made important progress this year by advancing and demonstrating the significant of our pipeline of GI and microbiome-focused clinical programs and as we look ahead in 2021 and 2022. There are more reasons than ever to be excited about our company's future prospects. Before I give you an update on our two lead clinical programs. I'd like to provide a brief recap of several operational milestones which have unquestionably allowed us to strengthen our balance sheet and position our company for what I believe will be significant long-term growth as well as the delivery of multiple short and long-term clinical milestones.

[Mike Kaleko:]

Thanks Steve. I welcome this opportunity to discuss the SYN-020 program and to outline the anticipated clinical program in our selective indications. We're about to reach an important milestone with the first clinical trial scheduled to begin next month.

[Steve Shallcross:]

Thanks Mike. Our SYN-020 platform technology has a remarkable opportunity to help address a considerable unmet need for innovative new therapies targeting GI disorders stemming from immune and inflammatory responses including celiac disease. Currently, there are no FDA approved therapies to treat celiac disease and disease management predominantly relies on lifestyle modifications and adherence to a strict gluten free diet. Across the six major markets, the total prevalent cases of celiac disease are expected to increase from 5.8 million cases in 2013 to an expected 8.1 million cases in 2023 representing an annual growth of approximately 4%. During the same period prevalent cases in the US are expected to increase from 2.8 million in 2013 to an expected 4.3 million in 2023 representing a significant market opportunity. Non-alcoholic fatty liver disease is also an indication with high unmet need. It is estimated that the worldwide prevalence of non-alcoholic fatty liver disease is anywhere from 6% to 33%. In the US, non-alcoholic fatty liver is highly prevalent with an estimated prevalence of approximately 30% in the general population. Non-alcoholic fatty liver disease is also strongly associated with metabolic syndrome and like celiac disease no approved pharmaceutical therapies are available to treat this illness and disease management is dependent on lifestyle modification. I hope we've conveyed our excitement for this program and its potential to become a platform therapeutic for our company. We believe SYN-020 will play a major role in delivering 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 year ended December 31, 2020. Throughout 2020, we operated very efficiently. We remained focused on prudent cash management and continued to identify areas to further reduce non-essential operating expenses. We ended the year with approximately $6 million in cash and cash equivalents however due to favorable market conditions which triggered the cash exercise of approximately 65% of the warrants associated with our 2018 public financing and the efficient utilization of our at-the-market facility. Our current cash position is approximately $72.6 million. Now I'll turn to the yearend financial results. General and administrative expenses increased to $5 million for the year ended December 31, 2020 from $4.6 million for the year ended December 31, 2019. This increase of 8.7% is due to increased legal cost, related to business development, patent execution, employee contract matters, vacation expense, insurance cost and registration fees. The charge relating to stock-based compensation expense was $300,000 for the year ended December 31, 2020, compared to $300,000 for the year ended December 31, 2019. Research and development expenses decreased to $5.1 million for the year ended December 31, 2020, from $11.1 million for the year ended December 31, 2019. This decrease of 54.1% is primarily due to a reduction in preclinical and manufacturing activity of SYN-020 IAP and the result of the response to the global COVID-19 pandemic by our clinical development partners which led to the postponement of the Phase 1b/2a clinical trial of SYN-004 in allogeneic HCT recipients, the SYN-010 clinical trial and to a lesser extent the discontinuation of the Phase 2b investigator sponsored clinical trial of SYN-010. Research and development expenses also included a charge relating to non-cash stock-based compensation expense of $66,000 for the year ended December 31, 2020 compared to $75,000 for the year ended December 31, 2019. Total other income was $44,000 for the year ended December 31, 2020 compared to other income of $283,000 for the year ended December 31, 2019. Total other income for the year ended December 31, 2020 and 2019 is primarily comprised of interest income from investments. I hope we've conveyed in our remarks the embarking on a transformative and exciting direction that we're taking our company. We believe our newly found financial strength and long-term outlook will allow us to unlock and further showcase the value of our clinical assets and generated long-term and value for our shareholders. Looking ahead, the remainder of 2021 and into 2022 upcoming significant major announcements and potential includes for SYN-040 our program in the development to prevent acute graft-versus-host-disease. We anticipate dosing the first patient in the Phase 1b/2a clinical trial this month and if enrollment proceeds as planned, top line data readout for this first cohort is expected before the end of the year. For SYN-020, our therapeutic intended to treat celiac disease a first Phase 1 Single Ascending Dose is expected to commence next month and topline data readout is expected during Q3 of this year. A second Phase 1 Multiple Ascending Dose study is expected to start in Q3 and a topline data readout from this clinical study is expected during the first quarter of 2022. Following the completion of our Phase 1 studies we're preparing for our Phase II proof of concept clinical studies in celiac patients by also planning for clinical studies to evaluate SYN-020 for use in other potential indications that could also begin as soon as early 2022. We look forward to continuing to update you on our progress in the weeks and months ahead. So I'll now turn the call back over to Vincent.

[Vincent Perrone:]

Gary, we'd like to open the phone line to questions. Can you please describe the procedure to ask questions for our listeners?

[Operator:]

our first question is from Jim Molloy with Alliance Global Partners. Please go ahead.

[Jim Molloy:]

Thanks for taking my questions, assuming a lot going on as change from previous calls. As you've been cashing in and it looks like you've an exciting 2021 siding up here. I'd love to go through some of the NAFLD. I think at right at the end you were talking about the Phase for the NALFD and because we're wondering on the Phase 1 you're currently running for celiac is going to separate Phase 1 for that and what's kind of timing on that?

[Steve Shallcross:]

Thanks for the questions, Jim. I'm going to let Mike take that question and walk you through the Phase 1 programs and as you'll see from his discussion. The data that we gather from Phase 1 study will allow us to advance the program in multiple indications for Phase 2. But I'll let Mike walk you through that again.

[Mike Kaleko:]

Okay, thanks. So the initial Phase 1 studies will be a Single Ascending Dose and a Multiple Ascending Dose study. Those should both, Single Ascending Dose study will be completed this year. The Multiple Ascending Dose study will start this year and will be completed early next year. Both of those are in normal healthy volunteers. They're designed to demonstrate safety tolerability and bio distribution. We would like to show the SYN-020 phase in the GI tract which it should and not moving to systemic circulation. Once those safety studies are completed then we go into a Phase 1b/2a study in celiac disease. That's the challenge study and that should start in the middle of next year and that will be followed by a Phase 2b study in celiac patients shortly thereafter. Now as a separate indication there's non-alcoholic fatty liver disease. Okay that will start as a Phase 1b study in patients with mild elevations of liver enzymes and we expect that during that study, where we hope to see the liver enzymes diminish and will also be following other metabolic parameters towards heart validations in those patients. Now those two patient studies celiac and non-alcoholic fatty liver disease are independent. They're both supported by the Phase 1 SAD and MAD studies in normal healthy volunteers. But the patient studies are independent. At the moment we plan to start the celiac study very shortly after the MAD study in normal healthy volunteers is finished and then somewhere along the way. We would move into non-alcoholic fatty liver disease and the timing for that is not yet determined. But it can potentially be run in parallel to celiac. It is not dependent upon celiac. Does that clarify things?

[Jim Molloy:]

That does very much clarify things. Thank you very much. To get a lot of trials around it. So the starting - thank you for laying that out.

[Mike Kaleko:]

Yes, it's pretty cool.

[Jim Molloy:]

What we anticipate for spend for 2021 with these various trials you guys burned through about $10.1 million, $10.2 million in 2020 down from obviously again as you - down from $15.6 million last 2019. Do we get back to 15 levels with the cash on hand and trials ramping up or we stay sort of somewhere between 10.15? Any guidance on that?

[Steve Shallcross:]

Yes, I would expect our fixed burn to stay in the $400,000 to $500,000 a month. That might start to increase a little bit more next year. The Phase 1 study that will be conducted starting this next month. The SAD study it's probably around $1 million study. The second one, the MAD study you could probably think about it in terms of $1.5 million. The ongoing trial is about to get underway Wash U. as we previously disclosed that's about $3.6 million trial, about $700,000 has already been spent on that. So that's under $3 million or so that would be spread over the next 12 to 18 months. The Phase 2 programs, we haven't finalized our cost on that yet. So when we have a little bit more clarity on that. We'll share that. Does that help you out?

[Jim Molloy:]

Very helpful. Thank you and then just my last question, you have a couple other programs obviously didn't work out and as the nature of drug development. SYN-010 and sort of the thoughts on C. diff program, what should we anticipate you guys want to do with this compound? Is there something that - any interest from potential partners or these are just pretty much going to be shelved for the future?

[Steve Shallcross:]

So the SYN-010 program, we've discontinued our license with Cedar Sinai, it was a mutual termination. So we're not spending any more money on that program and we've moved on from it. I'd let Vince Wacher, talk about our long-term strategy as it relates to SYN-004 or ribaxamase. And where we're beginning and ultimately how we could get to a broader C. diff indication? Vince, you want to take that?

[Vince Wacher:]

Thanks, Steve. The C. diff compounds and the bone marrow, the allo HCT compound are one and the same. Exactly the same product. We're pursuing the bone marrow indication because it enables us two events. The product more effectively and for in a smaller number patients in smaller clinical trials and ideally, with a greater number of endpoints that we can evaluate to help move that program forward. The mechanism is exactly the same for both indications the bone marrow transplant and the C. diff. and in fact, preventing C. diff is an anticipated outcome in bone marrow transplant patients in addition to reducing aGVHD. So this one of the ways to think about the overall development plan is that we start with the bone marrow transplant patients looking at aGVHD, looking VRE colonization, and also looking at C. difficile and other opportunistic infections that data can be leveraged to move into broader populations stated references to sort organ transplant population. We know that they have issues with opportunistic infections in those immunosuppressed patients so that's an indication where we expanded would be more focused on the opportunistic infections like C. diff. and then ultimately using the data to accumulate as we move through these increasing indications to get back to the broader use in C. diff which as we've explained before required a massive Phase 3 trial that was beyond us at the time and so we're pursuing this more focused approach to get the product forward and generate that data.

[Jim Molloy:]

Thanks and thank you for taking the question.

[Operator:]

Your next question is from Jason McCarthy with Maxim Group. Please go ahead.

[Michael Okunewitch:]

This is Michael Okunewitch on for Jason. Thanks for taking my question and congratulations on the progress. It seems like things like are really moving forward now. I'd like to ask regarding the trial design for SYN-004, if you could give a bit more than that. Like the overall timeline for the study and which antibiotics from the three cohorts. And which of the cohorts is the one you're expecting to readout by year end?

[Steve Shallcross:]

Why don't you go ahead Vince and that take one as well?

[Vince Wacher:]

No problem. So the three cohort study and each cohort uses a different antibiotic and the way that they're staged is to minimize risk to the patients based on the potential effects of SYN-004. So to quickly recap SYN-004 degraded penicillin and cephalosporins in antibiotics that penem antibiotics. So what we want to do is that start with a carbapenem antibiotics in our first cohort and measure the potential for absorption of SYN-040 and what would be considered the cohort of lowest risk, if there was any absorption because our product doesn't degree carbapenem's. even if it got it - now we don't believe, it will, even if antibody to affect the antibiotic because it's a carbapenem. If that cohort proves to give us the results that made if we have a successful completion of that cohort, that's the one that will initially readout and the data we will get from that will be safety and tolerability to add SYN-040 in the target population, will also get a read on whether or not SYN-040 is absorbed into the circulation of patients within impaired vary assumptions. Those are two key questions that the FDA had for the program in general. So with that data in hand, we will be able to proceed to the next cohort which will be to pursuing beta-lactam which is a cohort where the pursuant can be degraded by SYN-004 was present in the circulation but as beta-lactam stops it from doing that. So these patients have a mind, they have a body guide for their antibiotic that would, if our product absorbed would prevent it from degrading. So that's the next risk level. That's again a cohort that would readout subsequent to the first one and give us another set of PK data and other set of antibiotic data and safety data. And the final cohort is born antibiotic and that antibiotic is exposed, it has no, it could be degraded by our product and it is also got nothing to protect it. So it is a product that, that's the final cohort that we would run because that's the one way, if that our drug got into circulation it would be highest risk degrading the antibiotic.

[Michael Okunewitch:]

All right, thank you and then I'd actually touch on the M&A side of things. You mentioned that business development is a potential and it wouldn't be surprising given, you a fairly stable cash balance at this point. So what sort of compounds we could be looking for? It seems like you guys have expertise in GI microbiome health as well as GI delivery of drugs. So could you help narrow down which disease areas or which type of drugs you might target?

[Steve Shallcross:]

I think it's best that we kind of hold our cards a little tight at the moment. I could tell you this, we've been evaluating many opportunities and some are little bit further along than others in diligence. And I'll just say, when we're ready to talk about those details will get that out and disseminate it accordingly. But we just prefer to keep our cards close to this point.

[Michael Okunewitch:]

All right. Then I have one more, I'd just like to touch real quick on some of the existing safety data out there for IAP. I mean obviously you don't have anything for SYN-020 quite yet, but IAP has been out there. Patients radiation enteropathy and severe celiac maybe willing to take on some safety risk for some adverse event. But disease like well controlled celiac and which is largely asymptomatic maybe this will in take those risks. So how does the safety look like for IAP in general?

[Steve Shallcross:]

Mike, you want to take that?

[Mike Kaleko:]

The IAP as I said is an endogenous enzyme, it's in your intestines all the time, although we're using a bovine version of it because it's got a higher specific activity. The safety profile for IAP is very good. I admit, it would be even more if use of - I don't think that's necessary at this point. For our SYN-020 we saw virtually now adverse events in canine and mouse studies that were six-week long. They're at doses up to 54 the anticipated clinical dose. Now other companies have developed both bovine and human IAP products. Most notably though, who are intravenous use. In the safety studies again there was pretty much fairly remarkable profile, that really don't want to speak completely for other companies because I'm not privy to their data. But for the most part, the intravenous delivery human IAP in patients at doses that increase the outgoing level, I believe about 500-fold, the background was well tolerated and there's been one oral study, with bovine IAP again very well tolerated that was an also colitis patients. I think that's probably that is, you can consider the safety profile that we anticipate to be quite good. We anticipate a very reasonable risk benefit ratio even for diseases that are not fatal. And I'd finally add that celiac disease yes there are patients who are healthily following on a gluten-free diet. But that's a really unpleasant diet. There are a large percentage of patients who are healthy following on a gluten-free diet and some may have refractory disease. So I don't think we'll have trouble finding or I don't - that you'll trouble finding a patient population to as a home to our SYN-020 and I think you know that among patients with non-alcoholic fatty liver disease maybe 20% of them will go on to get rash, which is associated with fibrosis, cirrhosis and occasionally cellular carcinoma. So again I don't think we'll find difficulty finding a patient population for SYN-020, does that answer your question?

[Michael Okunewitch:]

Yes, great answer. Thank you very much.

[Operator:]

This concludes our question-and-answer session. I would like to turn the conference back over to Steve Shallcross for any closing remarks.

[Steve Shallcross:]

Thanks Gary. Before we end the call, I'd just like to make a few final comments about our company. First, I'm incredibly proud of our talented team who have just worked countless hours to get us where we are at today. The effort takes into to advance our programs just could not have happened without their dedication and persistent drive to help a patient population that just continues to be underserved. Second, we're in the strongest financial position in the company's history and because of this we're now very, very well positioned to not only fund our clinical programs for the next two years. But to deliver on multiple clinical milestones over the next 12 to 24 months, so the value of these programs and that we've under development can be further supported and potentially the value, potentially fully realized by the markets. And we also have this great, great opportunity finally to go out and acquire or license new technologies to further expand our product portfolio and add additional shareholder value. So in closing, I'd like to thank our long-term shareholders for their ongoing support and also just welcome any new shareholders that have discovered us and are equally excited to be a part of our great company. I promise that 2021 will be an exciting year and we look forward to just keeping you informed and updated on our progress. Have a good weekend and we look forward to talking to you next time. Thank you.

[Operator:]

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