Isaac Cohen – Chairman and CEO
Bionovo, Inc. (BNVI) Wall Street Analyst Forum's 20th Annual Institutional Investor Conference Transcript March 25, 2009 9:10 AM ET
Good morning ladies and gentlemen. In our ongoing attempt to adhere to the published schedule, I like to introduce the next company in this morning's program. I also want to mention that we have a cosponsor of this financial analyst conference, FTN [ph] Securities, who – we have had co-sponsors in the past, the New York Stock Exchange, the American Stock Exchange, but we feel that this is a value-added one, because in fact they have scheduled on our behalf. They scheduled a number of one-on-one meetings with some of the presenting companies today.
So we appreciate that effort, and so they will be here with us today, and they will be with us tomorrow. And so we want to thank them for being a cosponsor, but in particular for scheduling a few one-on-one meetings with some institutional investors on our behalf. The next company in this morning's program Bionovo, which is a pharmaceutical company focused on the discovery and development of safe and effective treatment for women’s health and cancer – women's health and cancer markets with significant unmet needs, and billions in potential annual revenue.
The company applies its expertise in the biology of menopause and cancer to design new drugs derived from botanical sources, which have novel mechanisms of action. Based on the results of early and mid-stage clinical trials, Bionovo believes that they have discovered new classes of drug candidates within their rich pipeline with the potential to be leaders in the markets.
Bionovo is headquartered in Emeryville, California, is traded on the NASDAQ Capital Market under the symbol BNVI. Without any further introduction, I like to introduce Isaac Cohen, Chief Executive Officer of the Company, and he is accompanied by Tom Chesterman, Chief Financial Officer. I just remind the management during the Q&A session to just repeat the question, so when the web cast attendees hear their answer to a question from the analysts in the room it is within the context of the questions the web cast attendees heard as well. Thanks.
Thank you for coming here this morning, and more so I have to talk to the microphone. So if I look down, because I'm trying to get to the microphone. So, Bionovo is a biopharmaceutical company that addresses, like was introduced, two very large areas of unmet needs. The one area of women's health, unfortunately there is very little competition because that area has not been addressed for decades because people believed that hormone therapy, the use of the natural hormone, estrogen, is sufficient, safe and effective for every kind of treatment for women’s health.
Unfortunately, since 2002, we know that that is not correct, and we have been trying to discover and develop drugs in this area to actually shift some of the untoward effect of hormone therapy, and leave some of the benefits of hormone therapy, and the way we did it is via understanding of the estrogen receptor mechanism, and we developed drugs that are far more selective and far more specific and also age-related, which we know that the hormone has very different functions at the very different times of a woman's life.
And in that platform, we have many drugs for various indications, with Menerba, our lead drug entering Phase 3, hopefully sometime this year, and I will explain what is going on with that. The second platform, which is cancer, where actually most of our effort is in breast cancer, which is very related to our understanding of the breast cancer biology in relation to female health. What we were trying to do, unlike a lot of companies, is to understand functional differences between normal cells and cancer cells, rather than just differences in expression level of different genes and proteins, which has been the major target for most other companies.
And we have a new drug that is entering Phase 2, which is a glycolysis inhibitor, and I will explain why it is a really relevant and exciting novel mechanism. So the market for our drugs is enormous. There are currently 40 million to 50 million women, and when our drug is going to be marketed, it is going to be in the mid-40 million for both vaginal dryness and menopausal symptoms, and we know that about 75% to 80% of women suffer from menopausal hot flashes, and about 50% suffer from vaginal dryness, and right now with seven black box warnings on estrogen therapy there is still sales of over $1 billion a year.
So imagine if you have drugs that are safer what kind of sales you can have. With cancer, unfortunately we had very few, real significant advances in prolonging life without really compromising quality of life. BZL is an oral drug. So far showed great safety and good early efficacy, and we are excited about moving it into the pipeline. So with the women's health, so what is Menerba? Menerba is an estrogen-receptor beta modulator.
The reason why we are addressing the estrogen-receptor beta, which is a subclass of the estrogen receptor, is because when you simulate the beta, you actually prevent cancer rather than stimulate cancer, if you address the alpha. We are looking for the indication of menopausal hot flashes, which is the second largest indication in women's health in general. The first is contraception.
And so in women's health area, this is really the largest area that you can cover. The patients that we have encountered both in the clinic and as well in marketing surveys are really excited about the fact that it is derived from botanical sources. For us the botanical sources are just a source of chemical compound that have not been really researched very well in the history of pharmaceutical companies, but that is an added value because they have historical use, they have historical safety information, and they have been used in different cultures for centuries, and those cultures proved to have far less incidence of breast cancer and uterine cancer, which seems to suggest that that will be the case when Menerba is approved.
The market for that, if you look carefully, the Wyeth drugs, as well as other drugs that have been in this field for decades have had very successful marketing campaigns with the risks associated, and at the peak before the Women's Health Initiative trial was published in 2002, they were selling close to $4 billion, and now after the results were out, there has been a significant drop and they are selling about $1.5 billion a year.
So again imagine, if you have a small market share of that large market, you can exceed $1 billion with just 2% of that market. So the enormity of the potential for this drug entering Phase 3 is quite significant. So, I believe that until this year, Bionovo was really focused on proving its science, proving that the science is sound, that the results are significant, and that that there is a great potential, and I think we finally accomplished this. Pretty much the who and who of the scientific community in this area of nuclear receptors, which is what estrogen receptor is, as well as the clinicians that are involved in menopause, including the President of the North American Menopause Society believe that this is the future.
That Menerba is the most exciting thing that exists both from a basic science point of view, from the point of view that this drug will most likely result in positive effect on hot flashes, and no untoward effect from the point of view of cancer and blood clotting, and we have quite significant amount of information and math to prove that, and I don't think that you will have this level of National Academy of Science people support this science unless they really believe it. So, now we are at the stage where we have to prove to you guys, and the market that it is more than viable from a commercial point of view, financial point of view, and I think that that proof of having the scientific community behind us is going to be significant for you to really realize that Bionovo is on the right track.
So why are they so excited besides the basic science? Like I said estrogen receptor beta is preventative (inaudible) of cancer. So when you address it, you actually reduce the risk for breast cancer and uterine cancer. We also conducted a Phase 2, relatively large, placebo-controlled study with two doses of Menerba and placebo. The endpoints were to look at the change in the frequency of hot flashes and change in the severity of hot flashes. Those are primary endpoints pretty much mandated by the FDA.
There is no discussion about what should be your endpoint. They have a guidance to that which is unlike a lot of different indications, where you are really guessing what will be the proper endpoint. This one is very clear. What we saw in that Phase 2 study is that there is a significant reduction in the number of hot flashes with the higher dose, and there is a trend to improve the severity. We did not reach significance, but the trend practically left a few patients to be on each RMP [ph] showed that it is significant.
The clinical benefit of reducing more than 50% of your hot flashes, mind you, the patients that got into this study had to have 50 or more moderate-to-severe hot flashes. So those patients that had greater than 25 less, 25 hot flashes less, were really significant between the treatment groups and the placebo. So the clinical benefit is visible from the first Phase 2 study, and also those hot flashes that are most severe, those that wake you up at night, which is really what mostly bother women.
During the day you can put your clothes on and off. It is still bothersome, but those that wake you up 5 to 10 times every night were about 70% reduced, and that was statistically significant. The great is that again in this drug type, safety issues of severe nature are visible from a three-month study.
With estrogen, you see about 50% bleeding in those menopausal women as well as 15% endometrial safety issues. We show no difference in bleeding between placebo and the treatment. We showed no cases of endometrial hyperplasia, and the only single side effect was transient loose stools, those are mild loose bowels that appeared in 17 patients for one day. But this was more than the placebo.
The other important factors in this is that generally in studies of this area of menopausal hot flashes there is between 30% to 50% dropout rates in the historical studies. We had 4 patients from the 217 drop out throughout the study, and the tolerability of the drug was very significant 91% who took more than 75% of the medication.
So imagine a quality of life drug that you take daily for a long time has to be tolerable, and has to – women have to want to adhere to it. And most of the time, when you look at side-effects that are reported they do not include those patients that drop out early enough in the study.
So what you see here is very much everybody that was included in the study really got recorded in the tolerability very, very well; very, very good. So the next step, which we are in discussions with the FDA is to go into a Phase 3 study. The Phase 3 study will include three different doses. We are escalating the doses. We had an incredible margin of safety with our toxicology studies, and we believe that we would like to see a greater efficacy rate with the drug, and again it is the same design, pretty much of the Phase 2 because that is what the FDA mandates, and we are going to look at safety and tolerability, and we're going to look at the severity and the number of hot flashes throughout the study.
The study, because again the number of patients out there is so large, we believe that we can finish the study with data in about a year and a half. So the moment the FDA gives us the green light, we believe that we will be able to get data within a year and a half.
Like I mentioned, the market is very big and we believe that based on marketing research that shows that both patients and physicians believe that this will be first-line therapy for menopausal hot flashes, Menerba’s sales could easily exceed $1 billion like I said, and that is 2% of market share, and could reach easily the high billion, if the drug is really becoming the first-line therapy.
Next drug, which I will do a little faster, is VG101. It is entering the clinic this year as well. It is a topical estrogen receptor beta modulator. It is not the same as MF101, and again the issue there is that with the current therapy, which is estrogen, there is equal risk for getting clotting and uterine cancer when you use estrogens, and with all estrogens, still 40% of the women suffer from continued vaginal dryness and vaginal atrophy.
The main thing with vaginal dryness is that now that we have very good therapies for erectile dysfunction. That same age group does not have treatment – on the female side is really suffering from the fact that men can and they cannot because it is painful. And various studies show that women do not want to engage in sexual activity not because they don't want to or lower libido, it is because it is painful and uncomfortable.
The difference between erectile dysfunction drug and this drug is that this is a quality of life drug, because of the other issues associated with vaginal dryness. There is a significant increase in urinary tract infections and vaginal infection, which then yet needs to be treated with anti-infectives. And once you have restored the vaginal canal, actually the dose dropped precipitously. So again, we believe that we have very large market for another quality of life drug.
We're going to have a dose escalation Phase 1-2, and the idea is that we will unlike a regular Phase 1, we will carry through the three-month study, and we will have efficacy data already with this study.
Cancer, we are entering Phase 2 with this drug. Again, it is an oral cytotoxic agent. The interesting thing about this drug is its mechanism; cancer cells go through a transition in how they manufacture energy for survival and for division. And cancer cells require a lot of energy to actually divide and grow. And the way they do it is by utilizing a process that exists in the cell, but gets to be the primary process, and it is called glycolysis.
While normal cells use what we call oxidative phosphorylation or oxygen for producing the energy that is required for the cell function and survival. This process or this difference between cancer cells and normal cells has been known the 30s, and Otto Warburg received the Nobel for it, and it is called the Warburg effect. And there have been many attempts at trying to inhibit glycolysis because everybody knows that it will selectively kill cancer cells and not normal cells.
So what we know is to date BZL101 is the most effective drug. There are several others that are being tested. The most effective and most-selective drug to date that inhibits glycolysis, and that results in DNA damage and cell death. So it is an oral cytotoxic, it is actually like chemotherapy, but it is oral and so far has shown significant and wonderful safety. So not only will we be able to have a safe drug, an efficacious drug, it will not really damage the quality of life at the end of life, when women are encountering advanced breast cancer.
The other benefit of this drug is that we see that it has a preference for estrogen-receptor negative tumors and HER2 negative tumors. Those are the hardest to treat cancers, and because it is oral and safe, we believe that we can move it to the adjuvant study, meaning after a woman has early breast cancer, and then is being treated for prevention of recurrence, and that market is significant evidence by the market share of the hormone drug.
Again as we now have treatments for the non-hormone side of it, which is 40% of women with breast cancer, we can have huge sales exceeding billions of dollars. So that will be approximately 70,000 patients a year in the US taking it for five years. And since there are already so many patients out there, there are 2 million women living with breast cancer, a lot of them will get on this drug very early on in order to prevent recurrence of breast cancer.
We have a very deep pipeline of two other drugs that are ready for clinic. Again it is just a financial issue whether they will get into the clinic, you know, quicker or slower. Again with novel mechanisms of action, and as an example BN107, a lot of companies are trying to address the mTOR path. This is the rapamycin path, and many RAPA analogs. This one actually is a concomitant or simultaneous inhibitor of both mTOR1 and mTOR2, and that is the first one to actually address that whole pathway. And again it is because of the difference between the cell structure of cancer cells and normal cells, and we are very excited about moving that into the clinic.
So, like I said Bionovo has been really building up its reputation as a very sound scientific company with very sound drugs that are being advanced and that is evidenced by the support, which we have gotten from the scientific community and what we have done with our scientific advisory board throughout the years, and we continue to do it. We don't just use them as name placards. We actually apply for grants with them, academic grants, and we do actual work with them to make sure that there are convinced on their own work, and we have actually provided them the merit of using our compound to advance their science.
And you can see that as an example, Jan-Ake Gustafsson, the guy who discovered the estrogen receptor beta, is very excited about what we do, as well as Bert O'Malley, who just received the National Medal for Science. Board of Directors, these are very professional Board of Directors. We have people from industry, from the financial to the manufacturing, to the regulatory, to the drug discovery and development, and we think that we have now a far more sound and robust potential to get help from our Board of Directors.
We have $13.5 million in the bank. With the current burn we'll be able to survive this onslaught of this year. We will need more cash in order to advance such advanced programs as we have with Menerba and BZL, and the other thing that we'd like to show the public is that we have been very prudent from the beginning at how we spend our money.
With about $40 million of investor's money, we advanced one drug to Phase 3, another drug to Phase 2, and a huge pipeline ready for clinical testing with another one VG101 entering this market. So, I think that Bionovo has been very efficient in its use of dollars as well as in its advancement throughout the clinical development.
The other benefit is that our books are very clean. We have no debt other than a few equipment leases, and we have large number of shares based on our share price right now, and about 10 million warrants. We would like to open it up for questions if you have any.
So the question is what is the company's strategy for the next year? So because of our current cash position, what we're doing is we are advancing as fast as we can everything to get the FDA clearance, so we can come to the investors and say you know, here is the program, it's going to the next stage. You know, will you support it? And, of course, we are in deep discussions about partnering, hoping that we will get non-dilutive forms of cash. But all in all the company is moving as fast as possible scientifically. We shrunk a little bit. We announced this early, as we shrunk a little bit some of what we could shrink from the point of your preserving cash, but yet the science is moving very, very rapidly. So we're positioning to enter Phase 3 with Menerba, enter Phase 2 with BZL, and enter Phase 1-2 with VG101, hopefully getting all of those clearances by Q4 of this year.
Menerba analogs were never used, but the plant that Menerba is derived from were used in traditional Chinese medicine for centuries. They were never used exactly in this way, but when those plants or those botanical extracts were used, they have a long written recorded history of millions of people using it throughout the century.
So what we're saying is that when you try to develop drugs, if you're just going the pure synthetic way, which is what we call rational design, you have no clue what the toxicology will be, and we know that one out of a million compound synthesized really enters Phase 1 testing because of toxicity issue, not because it doesn't hit the target.
It doesn’t hit the target because that is how you discover it. But the efficiency of understanding what could be a toxicological issue is the hardest hurdle because our annual models do not really tell us very much. There is about 90% attrition in that regard. And so, when you use compounds that have a long history, you had the leg up [ph] to actually have a better idea of what might it do in a human, rather than just what might it do in an animal. And so we think that our block is really early efficacy studies, Phase 2 studies, and that is why we are trying to push all of our programs quickly into the Phase 2 because that is really where we will see whether the drug works or not.
So the question is what our plans for financing if we have really one year's worth of cash. We are looking at every option in this strange market. What we're trying to do most is find partners for our drugs, and we are in discussions with several potential partners. The second thing that we are doing is we are applying for a lot of academic type grants, and now that we have shrunk to a small business, we are applying for a lot of small business grants.
So there will be non-dilutive forms of cash and most likely at a certain point depending on where we are at with the development, we think that once we have clear knowledge of when can we start the Phase 3 study, we will most likely come to the market to try to raise some funds. The difficulty is that our stock price is so low that it will be very dilutive. So we are trying to make sure that we are doing the best we can to get non-dilutive forms of resources.
Right, no more questions. I guess I was so clear that there are very few. Thank you very much.
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