Synthetic Biologics Inc. (NYSEMKT:SYN)
Q4 2013 Earnings Conference Call
March 31, 2014 10:00 AM ET
Kris Maly - VP of Corporate Communication
Jeff Riley - CEO
Evan Ballantyne - CFO
Ram Selvaraju - Aegis Capital
Jason Kolbert - Maxim Group
Good morning everyone, and welcome to Synthetic Biologics 2013 Year-end Investor Conference Call. (Operator Instructions) Please note, today’s event is being recorded. At this time, I would like to turn the call over to Kris Maly, Vice President, Corporate Communication at Synthetic Biologics. Kris?
Thanks Jamie, and good morning, everyone. Welcome to Synthetic Biologics 2013 Year-end Investor Conference Call. Today, I'm joined by our CEO, Jeff Riley; and our CFO, Evan Ballantyne.
Pre-market this morning, Synthetic Biologics issued a press release reporting our 2013 year-end highlights surprising recent operational highlights. That release can be found in the Investors section of our website.
On our call today, Jeff will provide an update on the progress of our development and clinical program and on the advances we have made to our upcoming milestone. Evan will then provide a brief overview of our 2013 year-end financials. After the formal portion of the call, we will offer the opportunity for Q&A.
In addition to the phone line, this call is being streamed live over the Internet today, and the webcast replay will be archived on our website for 30 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, beliefs, estimates and similar expressions. These statements are based upon current beliefs and 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 these statements. The information in 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'd like to turn the call over to Jeff.
Thanks, Kris, and good morning, everyone. It's my pleasure to update you today on our efforts at Synthetic Biologics.
It would like to begin with our most potential near-term value driver for the company, our multiple sclerosis program, Trimesta our oral MS candidate, is being evaluated in combination with Teva's Copaxone in a Phase II clinical trial for the treatment of relapsing-remitting MS in women under an investigator-initiated IND. Available MS therapies demonstrate anti-inflammatory and/or immuno-modulatory responses.
Based on Dr. Rhonda Voskuhl's previous research findings, Trimesta may offer both inflammatory and neuroprotective benefits for patients with multiple sclerosis when taken in combination with Teva's Copaxone. The patients in the Phase II clinical trial completed their final 24 months visit during January 2014, and we were pleased to announce earlier this quarter that the lead investigator of the trial Dr. Voskuhl is scheduled to present top line results at the American Academy of Neurology at the 66th annual meeting in Philadelphia next month. Dr. Voskuhl’s abstract titled a combination trial of Estriol Plus Glatiramer Acetate in Relapsing-Remitting Multiple Sclerosis, will be presented as part of the AAN’s emerging science program during two sessions, late next month on April 29 and the 30.
The presentation of these topline results represents an important milestone for the company, and for the potential development of a treatment for MS patients. We look forward to announcing Dr. Voskuhl’s topline results concurrent with her presentation at AAN. More and more, often these days we hear reports in the news about outbreaks of infectious disease that are on the rise worldwide. Super bugs are increasingly more resistant to drugs. Antibiotics simply are not working. In fact, it is likely that antibiotics maybe creating even bigger problems for the patients. Over the past two years, Synthetic Biologics has built a strong pipeline of novel anti-infective biologic in drug candidates, targeting specific pathogens such as Pertussis, C.diff, methanogens and Acinetobacter baumannii.
In the pathogen specific area, I would like to begin with Synthetic Biologics’ program to develop an antibody-based therapy for pertussis, also known as whooping cough, in collaboration with Intrexon Corporation as well as our academic partner of the University of Texas at Austin. This program is progressing on schedule. Despite near universal vaccination, the incidence of pertussis continues to increase in the United States. Newborns are at greatest risk and the infection can lead to permanent consequences and even death. By the time infants present with the characteristic whooping or worse symptoms, antibiotics do little to change the course of the disease. The only available therapy is supportive care.
It is well-established that the pertussis virulence is due to secreted toxins appropriately called pertussis toxins, which mediate multiple damaging effects, most importantly, it paralysis to the immune system and causes the white blood cell count to increase, sometimes to levels where the blood is too thick to go through the lungs. Multiple lines of suggests a neutralizing the pertussis toxin will mitigate the course of the disease, shortened ICU and hospital stays prevent long-term disabilities and diminished mortality. Synthetic Biologics is developing a combination of two anti-bodies designed to inactivate the pertussis toxins. During the past three decades many such exploratory anti-bodies have been generated, we have identified two anti-bodies that standout as uniquely efficacious and we intend to advance these to clinical applications.
The two functions through a complementary mechanisms and appear to be highly synergistic in neutralizing the toxins. During the past 12 months we successfully humanized both anti-bodies without any loss of potency for binding and with the ability to inactivate the pertussis toxins. The humanized anti-bodies were evaluated in multiple murine models in which the animals were infected with a virulent pertussis strain isolated from a critically ill new born, the anti-bodies individually and in combination enable the animals to continue to gain weight, a sign of clinical health, diminished the amount of bacteria in the lungs and completely mitigated elevation of the white blood cell count. That is so characteristic of the disease, we’re continuing to pursue murine studies to evaluate dose response and anti-body synergy in our IND enabling studies. To garner additional efficacy data we’re further betting the anti-bodies in a newly described non-human primate model which initiated in the first quarter of 2014.
We’re currently planning a confirmatory follow up study and expect to report top line results during the next quarter. In addition for the pertussis anti-body program manufacturing of anti-bodies for non-clinical development is underway the process to file paths to strengthen our IP position around pertussis anti-bodies has begun and we intend to file an orphan drug application.
Relevant to the topic gating increased awareness in the healthcare community two of the Synthetic Biologics compounds in development, are designed to protect the microbiome. Research findings have led to growing efforts to understand the roles of microbiome for human health and as a disease risk predictor which could lead to the development of novel therapies. When the natural balance of the millions of bacteria in the gut microbiome is disrupted a person’s health can be compromised. We believe we have solutions to these critical problems. Synthetic Biologics is developing SYN-004 to potentially prevent the devastating effects of C. difficile. It is believed to be the first and only therapy to potentially prevent C. diff, the multi-drug resistant bacterium that has surpassed MRSA as the number one hospital acquired infection in the United States. In fact, in 2013, the CDC identified C. diff as an urgent public health threat particularly given it’s resistance to many drugs used to treat other infections.
Designed to be given orally to protect the gut while certain IV beta-lactam antibiotics fight the primary infection. SYN-004 is believed to have a similar profile to its first generation predecessor which in successful Phase II trials demonstrated favorable protection of the gut floor or microbiome during treatment with certain penicillin. In addition to eliminating antibiotic associated diarrhea. It is expected that SYN-004 should have the added ability to act against the broader spectrum of IV beta-lactam antibiotics than its predecessor.
With SYN-004 cGMP manufacturing underway to support pre-clinical and clinical trials, we look forward to announcing the initiation of a 28-day bridging tox study of the company’s clinical candidate late in the second quarter of 2014. We also expect to file an IND and to initiate Phase 1a and Phase 1b clinical trials during the second half of 2014 for our C. diff program. Our continued efforts with this product candidate for a multi-billion dollar potential market move us closer to our goal of developing a prophylactic to protect the microbiome and prevent the devastating effects of C. diff infections for which there is currently no other approved preventative therapy.
In December, Synthetic Biologics entered into a worldwide exclusive license agreement with Cedars-Sinai Medical Center for the rights developed products for the therapeutic and prophylactic treatments for acute and chronic diseases. The company licensed and optioned from Cedars-Sinai a portfolio of 14 issued and 15 pending patents in the United States internationally for various fields of use, including constipated irritable bowel syndrome, obesity and diabetes. An investigational team led by Dr. Mark Pimentel a GI Motility expert at Cedars-Sinai has discovered that these products are intended to target the production of methane gas by certain pathogenic GI microorganisms and are perceived as the underlying cause of gas, pain and constipation associated with constipation IBS as well as diseases such as obesity and type 2 diabetes.
Initially, Synthetic Biologics will focus on the development of an oral treatment to reduce the impact of methane produced in organisms on constipation IBS. We intend to initiate pre-clinical studies in the first half of 2014 and to initiate a Phase II clinical trial during the second half of 2014. To conclude my formal remarks today, we look forward to Dr. Voskuhl’s presentation of top line results from the Phase II trial evaluating Synthetic Biologics oral Estriol candidate Trimesta for relapsing-remitting MS at the AAN conference at the end of April. I also feel very confident that Synthetic Biologics is at the forefront of addressing urgent public health issues amidst reports of infectious disease outbreaks and multi-drug resistant super bugs. So, I would like to reiterate what I said earlier in the call, Synthetic Biologics has built a strong pipeline, strong pipeline of novel anti-infective biologic and drug candidates targeting specific pathogens such as B. pertussis, C. difficile, methanogens and Acinetobacter. And we believe that the company is well positioned to achieve several key clinical milestones this year. We look forward to reporting on these catalysts over the next several quarters and to ultimately drive significant patient and shareholder value.
Now I would like to turn the call over to Evan Ballantyne, our Chief Financial Officer for a brief discussion of the company’s financials.
Thank you, Jeff and thank you everybody for attending our call today. Synthetic Biologics 2013 year-end financials were included in our press release which was distributed over the Newswire earlier this morning. The company’s December 31, 2013 10-K will be filed with the SEC this afternoon. For the year ended December 31, 2013 our general and administrative expenses increased to $5.8 million compared to $5 million for the same period 2012. The increase of 16% is primarily the result of bad debt expenses totaling $763,000 associated with the determination that the note and the interest receivable from the sale of Adeona Clinical Laboratory was uncollectible. Included in these numbers were non-cash charges related to stock-based compensation of $1.3 million for the year ended December 31, 2013, compared to $1.5 million for the same period a year ago in 2012.
Research and development expense decreased to $6.5 million for the year ended December 31, 2013, compared to $12.3 million for the same period in 2012. The decrease of 47% is primarily the result of non-cash charges recorded to reflect the fair value of common stock issued to Intrexon in consideration for the infectious disease exclusive channel collaboration and the fair value of the common stock issued for the acquisition of the C. difficile program assets. The decrease in research and development expense was partially offset by increases in employee and program costs associated with the company's infectious disease programs. Non-cash charges related to stock-based compensation were $375,000 for the year ended December 31, 2013, compared to $400,000 for the same period a year ago in 2012.
I would like to mention that the Phase II MS trial evaluating Synthetic Biologics world drug candidate Trimesta and being conducted under an investigator-initiated IND by Dr. Rhonda Voskuhl of UCLA is being funded by grants awarded to UCLA from the National MS Society and the NIH. Also our pertussis and Acinetobacter monoclonal antibody development programs as well as our newest discovery program for an autoimmune target for a subset of IBS are being funded from a prepaid account established with Intrexon in 2012. The establishment of the 2012 prepaid account has helped the company limit its 2013 cash burn required to fund these programs. In December 2013, Synthetic Biologics successfully completed a firm commitment underwriting public offering of approximately 12.2 million shares of common stock for net proceeds from the offering of approximately $12.2 million. Cash as of December 13 of 2013 was $14.6 million compared to $10 million in the same period a year ago.
As of March 27, 2014, the company’s cash and cash equivalents were approximately $11.3 million. At this time I would like to turn the conference call back to Kris Maly.
Thanks Evan. We would like to open the line to questions now. Jamie would you please describe the procedure to ask questions for our listeners?
And ladies and gentlemen we will now begin the question-and-answer session. (Operator Instructions) And our first question comes from Ram Selvaraju from Aegis Capital. Please go ahead with your question.
Ram Selvaraju - Aegis Capital
Yes, I just had a couple of questions regarding the Trimesta programs, could you clarify whether results were previously released from an earlier 64 patients study looking at the activity of Trimesta. I seem to recall that there was a prior study which should have reported results in advance of the study that Rhonda Voskuhl is presenting? And then secondly, can you comment on the possibility for there to be differential impacts on the clinical course of MS disease from progesterone or progesterone-based derivatives versus estrogen and estrogen-based derivatives?
Hi, Ram. This is Jeff, the CEO. The first question -- the answer to your question with respect to the 64 patient clinical trial, we do have a trial ongoing still and that is specific to cognition. So there were two Phase II trials going on, one was the relapsing-remitting trial which has completed in January. The other one is still enrolling and that is for cognitive dysfunction. That one has not completed enrollment at this time. The prior trial that was announced was a Phase I trial. There was a bit of confusion because this trial has taken a fair amount of time to enroll a little over five years and so people are looking back at we have the enrollment time period back then and sort of where we are today. So the enrollment finished two years ago and then we locked the trial and trial just completed.
The other answer to your question -- the other question I believe is that we will be presenting top line results. Dr. Voskuhl will be presenting top line results next month when we have 30 days, 28 days we’re somewhere in there. Specific to relapsing-remitting we will then do a deeper dive into the dataset over the summertime and she plans on presenting the deeper dive results in the various different patients populations in the 15 different clinical sites, sometime in late September, October I believe this is the current thought process.
(Operator Instructions) Our next question comes from Jason Kolbert from Maxim Group. Please go ahead with your question.
Jason Kolbert - Maxim Group
Hi, Jeff, congratulation on a lot of progress. I just wanted to ask a little bit about the two studies that are going to be presented at AAN and can you help me understand the rationale behind what those two studies are and just the more information you can give me the better in terms of both results and mechanism of the action? Thanks.
Hi, Jason. Dr. Rhonda Voskuhl basically applied for two spots at the conference. One is a five-minute spot and we believe that is where she’s going to present the top line results. The other slide is specific to the mechanism of action of Estriol. So she is going to back historically and describe what why Estriol makes a lot of sense given alone or concurrently with existing medications for MS specific to brain lesions et cetera like that like the reduction of brain lesions and reduction in size of those brain lesions. But she is just going to discuss the MOA. I guess that’s the way the conference typically breaks it out as results come in one piece, explanation comes in a second piece and that’s the way that is going be.
Jason Kolbert - Maxim Group
And just transitioning to some of the other programs, can you outline for me what the next steps are going to be in the whopping cost study and just exactly when we can expect that to get underway?
Well, it’s underway today, I mean, we’re in the middle in the IND-enabling study. We are in at the middle of a non-human primate study. We should have that data relatively soon. We’re starting a second non-human primate study in nine days and we’ll be taking the results of all that information releasing that to the public after we have those results. Just a side note though the non-human primate study is not the gating event for us to move forward. We’ve got excellent results in the mouse models and those are models that need to be put into the IND-enabling.
So the next steps are to continue with the non-human primate to further inform us as to dosing what not, continue with the IND-enabling work. We’re going to be ramping up to get the manufacturing of the two antibodies completed. This is together with Intrexon Corporation. And we should look toward on orphan drug application a little bit later this year as well and then jumping obviously into the clinic. This is a unique situation because it is an orphan drug indication, but we also don’t need a ton of patients to get all the way through we think through to registration for this particular trial. We haven’t said exactly how many but it’s well under 100 patients to get to that point.
The endpoints are relatively clear as well. This would be mortality on a primary endpoint and likely white blood cell count or leukocyte count as a secondary or those maybe first but I think that’s essentially what we’re going to be looking at. So we should have more information in, I think I’ve said second quarter of this year on the primate study as well as the next steps going forward, but as you know I’m scaling up antibody takes a bit of time. So we’ll be looking at toward fourth quarter of this year before we have the material ready to rock and roll.
Jason Kolbert - Maxim Group
Okay, so what I hear you saying though that could be actually a rapid transition to commercialization once you start rolling beyond the primate study actually into proof-of-concept studies in people?
That’s correct, Jason. I mean there is no current therapeutic for this indication. 300,000 people died around the world mostly infants, newborns from this disease state, 50 million people catch pertussis around the world that’s a huge issue outside the United States and Europe and Japan. But we’re focused initially on the U.S. market and looking at how can we help these newborn infants that where there is currently no therapy and how can we help the elderly that maybe in an ICU unit or on respiratory therapy these type of folks that if they get this disease it’s very, very deadly to these guys I mean it’s a tough disease to get over. So, we’ll be enrolling likely for pediatric label later this year that’s a forward looking statement because we’ve not really gone through the regulatory pieces yet but we’ll be looking at transitioning straight into a Phase I/II and then obviously into a Phase II/III there afterwards for registration.
Jason Kolbert - Maxim Group
And can you just tough lastly with me on SYN-010 and just exactly what the next events are that we should be paying attention to as we look for that product to develop clinical data?
Thanks. This is an awesome product again we acquired this product from our founder of the company back in December of last year we’re in the process of building up intellectual property around this particular product is oral it is available today in another format has been giving to millions of patients around the world we have a very large safety database around this particular API. The next steps are once we have the IP in place we’ll file an IND later this year and then we’ll be jumping directly into a Phase II study. We have not had a pre-IND meeting with the FDA yet but we’ll probably ask for one this summer. That discussion will determine what that Phase II or even potentially a Phase III trial may look like for this particular drug.
And again as I noted in the earlier statements we’ll be going after specifically irritable bowel syndrome and the constipation form of that versus [indiscernible] obviously has the diarrheal form but both are from the same investigator Dr. Pimentel, Cedars - Sinai has worked on both sides of this particular disease state. The really exciting things which we’re not going to be looking for end points but we will be generating data in it concurrent with Cedars - Sinai is in the Type 2 diabetes area as far as glucose lowering and in the obese area as far as reduction in weight. Both associated with reduction in methane gas in the small intestine which seems to be the primary culprit in each of these three diseases. Does that help?
Jason Kolbert - Maxim Group
Yes, that’s very helpful. Thanks for the rundown.
(Operator Instructions) And at this time, I’m not showing any questions I’d like to turn the conference call back over to Kris Maly for any closing remarks.
Thanks Jimmy and thanks everyone for joining us this morning. We look forward to updating you again next quarter. Have a great day.
Ladies and gentlemen, that does conclude today’s conference call. We do thank you for attending. You may now disconnect your telephone lines.
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