Interview With Fabrus President Dr. Vaughn Smider

Jan.14.14 | About: Sevion Therapeutics, (SVON)

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With an already exciting year behind it, Senesco Technologies (SNTI) wrapped up 2013 with a December 30th announcement of its intent to merge with privately-held Fabrus, Incorporated. Although specific terms of the deal have yet to be announced, the PR did note that current shareholders of Senesco and Fabrus would each receive approximately 50% of the combined companies' shares. Although early investor interest was strong due to the announcement (379,070 shares traded the day of the announcement), share price closed up only 10 percent on the day and have traded in a bit of a downtrend since. I believe a more thorough understanding of Fabrus' technology and what it potentially brings to the table will ultimately garner more investor interest in the coming weeks.

With novel technologies to each company's credit, the new entity will have a more diversified portfolio that appears to complement itself very well. Fabrus founder and president, Dr. Vaughn Smider, noted in the announcement

We believe this merger will significantly help speed Fabrus' trajectory as we continue our proprietary antibody discovery activities. The early backing of Pfizer, Opko Health, Inc. (NYSE: OPK), and Dr. Phillip Frost, through a 2010 strategic investment into Fabrus by Opko alongside Frost Gamma Investments Trust, has been instrumental in Fabrus' development to this point. We are enthusiastic about the enhanced growth opportunities that this merger with Senesco represents, especially the development of advanced nanoparticle drugs that can be targeted with our antibody and nanocage systems.

Senesco and Fabrus are both development-stage companies with the former focusing solely on cancer treatment and the latter predominantly targeting cancer with other indications likely to follow. With neither company generating revenue, valuation of each and the combined entity is based on the investment community's opinion. This opinion, like for all development-phase biotechs, is devised by a combination of pipeline progression, targeted indications, management competency, cash levels and cash burn rates.

Complicating this somewhat subjective determination for the new entity is the current privately-held ownership status for Fabrus. Valuation of two publicly-held entities would be easier to ascertain as the Senesco/Fabrus merger gives a combined company with 50% of its valuation still unknown. While Senesco is more of an "open book" due to SEC and shareholder requirements, Fabrus is a bit less transparent and unknown to the retail investment community.

Dr. Vaughn Smider graciously agreed to answer some questions for me in hopes of introducing the company to investors, clarifying what it has accomplished in clinicals so far and where it hopes to go next -- giving investors a bit more information in their valuation determination.

CF: Dr. Smider, I appreciate you taking time out of your busy schedule to answer some questions for investors and congratulate you on what appears to be exciting times ahead for the Senesco/Fabrus entity.

Dr. Smider: Thank you, I'm happy to discuss our science and vision for the future.

CF: The Senesco/Fabrus merger is likely to close in the next couple of months. Could you elaborate a bit on the synergistic technologies involved and how they may complement and supplement each other?

Dr. Smider: Both companies have underlying technology that is being applied to treat cancer. Senesco has a gene therapy based approach targeting the eIF5a factor that controls cell death and survival. Fabrus, on the other hand, has developed a suite of technologies around antibody discovery with a particular emphasis on traditionally difficult membrane proteins. We have also pioneered a "nanocage" system capable of delivering drug payloads, including genes and siRNA. Here is where the overlap lies - in the combined ability to specifically target cancer cells using our antibodies and nanocage systems and Senesco's eIF5a payload system. In addition to this area of synergy, Fabrus has its own pipeline of antibodies, as well as the robust underlying technology to continuously generate novel antibody molecules against therapeutically important targets.

CF: The immunotherapy approach to treating disease has been met with mixed success. Targeted approaches to fighting cancer have been making headlines in recent years with a wide range of technologies implemented. Exactly how does Fabrus discover and subsequently screen targets and thus antibodies; and how is this advantageous over current methodologies?

Dr. Smider: Although immunotherapy as a broad field has met with mixed success, monoclonal antibodies have been highly successful in the last 15 years, with an annual market of $50B that is growing rapidly. Antibodies are now proven as a drug class, with validated developmental and manufacturing infrastructure to support their continued growth in multiple therapeutic areas. Despite this success, certain targets like multipass transmembrane receptors (including GPCRs and ion channels) are enormously important clinically, yet have been relatively refractory to antibody discovery. These proteins are very difficult to purify, and to generate antibodies against. Fabrus is unique in developing the technology to rapidly identify antibodies against these targets directly on the cell surface, without the need for protein purification. This discovery technology, as well as newly discovered antibody scaffolds involving "ultralong" CDR3 regions set us apart from all other players in the antibody space.

CF: What has Fabrus accomplished in clinicals and other research thus far?

Dr. Smider: Our antibodies are currently in preclinical development, but they are quickly transitioning to the development stage. On the research side, we pride ourselves on being highly innovative in driving our science towards important technological and clinical needs. Our work has been peer reviewed and published in the top biomedical journals including Nature Biotechnology (here) and Cell (here).

CF: I realize you really can't disclose specifics, but do you foresee Fabrus technology progressing to the clinical stages via the new company in the near future? If so, I assume it would likely be an oncology indication?

Dr. Smider: Yes, we have several antibodies targeting different types of cancer. These have shown efficacy in preclinical models and are progressing towards the clinic.

CF: I see from the Fabrus website that the company owns all rights to its intellectual property and drug candidates. With Pfizer (NYSE:PFE) and OPKO Health having equity stakes in Fabrus, I believe a bit of speculative conjecture could be in the company's future in terms of partnerships and licensing as it more fully validates and advances its technology. Additionally, Fabrus already has a collaboration with privately-held Ambrx. Could you please tell us a bit more about that collaboration and highlight any potential upcoming catalysts associated with the agreement?

Dr. Smider: As a currently private company, we have not disclosed details about our collaborations, however we anticipate building both an internal pipeline as well as a portfolio of partnered products in the new entity, both of which will drive the company's development and value.

CF: Dr. Phillip Frost recently made an investment in Senesco, is on OPKO's board of directors, is the Chairman of the Board of Teva Pharmaceuticals (NYSE:TEVA) and is Chairman of the Board of Ladenburg Thalmann & Co., Inc., (NYSEMKT:LTS), an investment banking and securities brokerage firm. He has a storied career with multiple accolades and certainly brings some excitement to the new company. Are you at liberty to speak about his plans or ideas for the company, and do you have any additional comments about him?

Dr. Smider: I am very impressed with Dr. Frost's ability to evaluate basic science and technology and then to make visionary leaps to important clinical applications and products. I believe this stems from his background as a dermatologist and seeing both the needs of the patient as well as the physician, and having the insight into filling those needs with important new medical products. Additionally, Dr. Frost is quick to recognize synergies in technologies, products, and companies. This ability to make connections on both the science and business fronts always makes for an exciting and value-creating environment.

CF: Nanoparticle-based therapeutics in oncology seem to be garnering more headlines over the last couple of years. Could you explain the growth opportunity now evident in the development of advanced nanoparticle drugs that may be targeted with Fabrus' antibody and nanocage systems as a result of this merger?

Dr. Smider: Our nanocage system, termed the "chimerasome", can be used to encapsulate drugs, siRNA, or other "payloads", and then targeted with our antibodies. We are very excited about this system as it not only makes Fabrus a player in the ADC (antibody drug conjugate) space, but it also opens up very unique opportunities including the nucleic acid delivery that could be very synergistic with Senesco's technologies.

CF: Investors can lose interest in a development stage company over time while awaiting clinical trial updates, interim data and regulatory decisions. Could you give us possible updates they and healthcare professionals could anticipate over the next few months?

Dr. Smider: In the very short term we will be focused on the merger. However, in the longer run we intend to build a biotech company with multiple breakthrough products and technologies. The strategy and key catalysts I can't comment on now, but of course I expect more information to emerge after the transaction with Senesco.

CF: Dr. Smider, what excites you most about this merger and the upcoming new company?

Dr. Smider: I get excited about the science and the people I work with. In this case I believe we have that rare mix of cutting edge science and visionary people from both Fabrus and Senesco that all want to make a meaningful impact on patients' lives.

CF: Dr. Smider, I am certainly excited about the possibilities ahead for Senesco/Fabrus and look forward to seeing clinical updates, exciting data and other events unfold for this rapidly emerging company. Thank you once again for your time, and I look forward to speaking with you in the future perhaps as we discuss company developments, hopefully successful clinical trials and perhaps even FDA regulatory decisions.

As of Monday, January 13th Senesco's common shares were trading just above the technical support at $5.35 per share with a market capitalization of about $16.4 million. Updated share structure is dependent on the December 12th $25.2 million stock offering in which the company received $5.4 million immediately with another $18 million coming via warrants. This adds to the $0.8 million cash and equivalents the company had on September 30th per Q1 2014 earnings. Senesco and the Senesco/Fabrus combined entities are development-phase pharmaceuticals with no revenue as noted earlier. As such, the investment is a risky one having risks associated with poor clinical data, regulatory rejection and dilutive financing always possibilities. However, the upside here with positive clinical data, regulatory success and licensing or partnerships could be substantial.

Beyond the scope of this article, investors will be watching Senesco's progression in its lead product candidate, SNS01-T, currently in a dose escalation phase 1b/2a trial. Next data due are for the 0.375 mg/kg dosage safety information, relevant as preclinical data in myeloma and lymphoma at that level demonstrated significant tumor shrinkage according to the December 9th clinical update. Enrollment initiation for this trial was announced on January 9th with data expected in 1H according to the press release.

Interested investors should perform additional research on Senesco via its SEC filings, clinical data and new releases; and on Fabrus via its preclinical data as noted by Dr. Smider above and any other available sources of information. With multiple known and unknown catalysts ahead in 2014, investor interest should continue growing for this emerging and exciting company.

Disclosure: I am long SNTI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.