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Synthetic Biologics, Inc. (NYSEMKT:SYN)

Q2 2014 Results Earnings Conference Call

August 14, 2014, 08:30 AM ET

Executives

Kris Maly – VP of Corporate Communications

Jeff Riley – President and CEO

Evan Ballantyne – CFO

Analysts

Keith Markey - Griffin Securities

Jason Kolbert – Maxim

Operator

Good morning and welcome to Synthetic Biologics Second Quarter 2014 Investor Conference Call and Webcast. All participants will be in listen-only mode. (Operator instructions) After today’s presentation, there will be an opportunity to ask questions. (Operator instructions) Please note this event is being recorded.

At this time, I would like to turn the conference call over to Ms. Kris Maly, Vice President, Corporate Communications at Synthetic Biologics. Ms. Maly, the floor is yours ma'am?

Kris Maly

Thank you, Mike, and good morning, everyone. Welcome to Synthetic Biologics’ second quarter 2014 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 its second quarter 2014 financials and summarizing recent operational highlights. That release can be found on the Investor section of our website.

During our call today, Jeff will begin with an overview of our business objectives and upcoming milestones for our MS program. Evan will then provide a brief overview of our financials for the three and six months ended June 30, 2014. Jeff will then conclude our prepared remarks with an update on our pathogen-specific programs and on the advances we have made toward our upcoming milestones. After the formal portion of the call, we will offer an opportunity for Q&A.

In addition to the phone line today, this call is being streamed live over the internet and the webcast replay will be archived on our website for 30 days. During the 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 terminology 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 in this call is provided only as of the date of the call, and Synthetic Biologics undertakes no obligation to update any forward-looking statements contained on this 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.

Jeff Riley

Thanks Kris and good morning everyone. This has been another strong quarter of accomplishment across our development pipeline. We continue to believe that each of our innovated programs in multiple sclerosis, Clostridium difficile, IBS, constipation and pertussis three of which represent multibillion dollar opportunities for the company.

We are committed to executing on our aggressive R&D strategy of advancing our three unique anti-infective pathogen-specific programs into the clinic over the next nine months as well as driving forward discussions with potential strategic partners for our MS drug Trimesta. As I'll outline in this call, I am very pleased to say that we remain on track to meet our goals and to deliver increased shareholder value to our investors.

Beyond Synthetic Biologics anti-infected pipeline, we are continuing to build significant value by demonstrating the unique dual action effects of anti-inflammatory nerve protective potential of oral Trimesta for the treatment of women with multiple sclerosis.

In addition to the positive results reported last quarter from the investigator initiated phase II study of Trimesta we recently announced that lead investigator Dr. Rhonda Voskuhl of UCLA plans to discuss further findings from this study at the Joint ACTRIMS-ECTRIMS Meeting in September.

Specifically she will focus on the study's key outcome measures for this progressive debilitating disease including relapse rate, disability and cognition. As we've discussed our goal continues to be to enter into a strategic partnership for Trimesta program, we believe that deeper clinical analysis into its effect on patient disability and cognitions presented in a high profile scientific form will allow us to advance our current discussion with potential partners.

We are particularly excited because much of Dr. Voskuhl’s presentation will focus on outcomes potentially mediated by Trimesta’s unique neuroprotective effect namely cognition. The ability of Trimesta either a loaner in combination with other MS drugs to become a leading frontline therapy for women presents a new oral opportunity that has been the potential to be an ideal added therapy to address significant unmet needs for women with MS.

A lot of the additional data Dr. Voskuhl will present results from previous and ongoing analysis of patient MRI brain scans. These analysis will continue over the next few months and as you might imagine, as this new outcome data has become available, we've included a new patent filings in ways that we will believe will not only significantly expand and enhance protected features of this increasingly valuable asset, but also substantially lengthen it's market exclusivity. Two such patents have been filed to date and a third will be ready to file early next month before Rhonda’s presentation.

I’ll remind you that no other MS drug currently in the market has demonstrated significant neuroprotection and the potential for improvement cognitions and treating not only for MS, but also potentially for Alzheimers disease and other neurodegenerative disease characterized by cognitive decline.

To this end Dr. Voskuhl was continuing to enroll women into a separate placebo-controlled phase II focus exclusively on cognition and MS patient, which will examine oral Trimesta in combination with FD approved standard MS treatments to include Copaxone, Avonex, Betaseron, Extavia, Rebif, Gilenya, Aubagio and Tecfidera.

We look forward to updating shareholders on Dr. Voskuhl’s continued analysis as we continue to explore to many different avenues for extracting maximum value for this asset to include finding a potential MS strategic partner.

Significant partnership deals take time to put together. I can report to you that we have discussions with essentially all the principal companies involved with MS space; some more intense than others.

Right now the timing of advancing these discussions are ways to more detailed compellation of some of the data I just spoke about. Once we have completed our new round of IP filings in the next few weeks, we will enter into CDAs with several of the interested parties allowing them a full look at the entire Trimesta data package.

Keep in mind that that new set of patents essentially reassess the clock on the IP estate both the clock itself as well as the international community as well, while we believe that radically changes the economics for a potential partnership. Before giving the program by program data of pipeline of world-class pathogens specific drugs, I’ll return the call over the Evan to review our second quarter financial results. Evan?

Evan Ballantyne

Jeff, thanks very much and thank you everybody for attending our call this morning. It's all very exciting news.

Synthetic Biologics second quarter 2014 financials were included the press release, which was distributed over the news wire earlier this morning. The company’s 10-Q for the quarter ended June 30, 2014 will be filled with the SEC later today.

For both the three and six month ended June 30, 2014, our general and administrative expenses were $1.8 million and $1.9 million. Included in these numbers, were non-cash charges related to stock-based compensation, a $645,000 and $899,000 for the three and six months ended June 30, 2014, compared to $298,000 and $652,000 for the same periods in 2013.

Research and development expenses increased to $2.8 million and $5.6 million for the three and six month periods ended June 30, 2014. The increases of 136% and 139% are primarily the result of increased program cost associated with expanded research, development and manufacturing activities within our anti-infective pipeline, including our C. diff, CIBS, and pertussis programs.

Non-cash charges related to stock-based compensation were $210,000 and $318,000 for the three and six months period ended June 30, 2014 compared to $109,000 and $212,000 for the same period since 2013.

I’d like to add that our Phase II MS trial evaluating Synthetic Biologics oral drug candidate, Trimesta, which Dr. Voskuhl from UCLA will further be reporting on disability and cognitive event in September was conducted or was conducted under an investigator-initiated IND and is funded by $8 million in grants received from the National MS Society and the NIH.

These results should allow the company to further pursue strategic partnering opportunities as discussed earlier by Jeff. Cash and cash equivalents as of June 30, 2014, were $7.8 million compared to $14.6 million as of December 31, 2013.

To conclude my part of today’s call we believe that the C. diff and CIBS programs represent multibillion dollar opportunities for Synthetic Biologics.

I would like to turn the call back over to Jeff so he can provide an update of our pathogen-specific anti-infective drugs and biologic programs. Jeff back to you.

Jeff Riley

Thanks Evan. I would like to turn now to updating you on the progress we've made on our pipeline of anti-infective candidates, which represent a second pillar of significant growth potential for Synthetic Biologics.

Keep in mind that we have a multibillion dollar opportunity with our MS drug. We have two additional multibillion opportunities with both the IBS drug and our C. diff drug as well as our potentially orphan drug indications for pertussis. I’ll go through each one of those now.

Each one of the programs are designed to address specifics serious infections and diseases characterized by high medical need, which we believe will translate into immediate significant value upon successful demonstration of efficacy in the clinic.

As an innovator in the field of infectious disease we employ novel approaches and technologies to target specific pathogens such as Clostridium difficile with [acinetobacter] (ph) the methanogens for IBS, pertussis, and acinetobacter.

Our plan is to remain aggressive leveraging the strength and commitment of our academic and corporate collaboration as well as our internal folks. As we advance toward the clinic, I am pleased to showcase our recent successes and focus your attention on the many upcoming milestones over the next few months.

I’ll start with our Clostridium difficile program. The most advanced program SYN-004 is poised to become the first point of care therapy designed to prevent the devastating effects of hospital acquired highly drug resistant C. diff infection, which occurs with the increasing frequency in patients taking IV antibiotics especially the elderly or immune compromised patients.

SYN-004 works by enzymatically neutralizing the antibiotics within the gut thereby maintaining the natural balance of bacterial flora in the gastrointestinal tract or to get microbiome and preventing the opportunistic outgrowth of C. diff.

As a second generational enzyme therapy SYN-004 and a similar profile to its first generation predecessor, we successful demonstrate protection of the gut microbiome in European phase II trials in addition to eliminating antibiotic associated diarrhea. SYN-004 will have activity against a broader spectrum of Beta-lactam antibiotics against predecessor and thus increasing the potential value in the clinic.

We have completed the toxicology study for SYN-004 and after analysis we expect to file our IND and initiate Phase IA and IB clinical trials as planned during the fourth quarter of this year. We expect to report preliminary topline Phase IA and B data by year end 2014 and initiate a Phase II efficacy study early next year.

In parallel, we have taken important strides to building a solid infrastructure to support our SYN-004 clinical program including supply chain and manufacturing, establishing the clinical advice report comprised of industry thought leaders from around the world. We announced last week that we entered into an agreement with Evonik for oral formulation and analytical services in GMP Clinical drug manufacturing for use in the planned clinical trials.

Evonik formulate and capsulate enteric coated SYN-004 for oral deliver use materials generated by our API manufacture, Fujifilm Diosynth in the United Kingdom. We are proud of these partnerships and results we produced and look forward to continuing seeing with execution heading toward total clinical trials.

In late June, we announced the formation of a new Clinical Advisor Board, Chaired by Mark Wilcox M.D. who has been the principal U.K. investigator for several clinical trials for new anti-infective drugs as well as provide clinical advises parts of FDA, EMA submissions. We look forward to fully leveraging his guidance and the collective expertise of our other C. diff members to include Dr. Curtis Donskey, Ciaran Kelly, and Tom Louie.

Our advisor's insight will be invaluable for the company and the shareholders as we pursue a different unique paradigm for treating this devastating disease.

In addition, we've made efforts to further establish our leadership position in the GI microbiome space by establishing a food for collaboration design to deepen our understanding of the harmful impact of Beta-lactam antibiotics on the sensitive microenvironment in the gut.

To this end we entered into an agreement with Interim BioSciences and together we have initiated a 100-patient metagenomic research study utilizing state-of-the-art sequencing technology to create a fingerprint of the damage caused by antibiotics of the gut microbiome.

We anticipate conclusion of this study later this year with the expectation that the results will support our C. diff program, which focuses on protecting and maintaining the gut micro floor from IV antibiotics.

I’ll conclude by reminding you that there are currently no therapies approved to prevent C. diff infections and we look forward to continuing our efforts to develop SYN-004 to address this multibillion dollar market potential.

We look forward to entering into the clinic in the coming months yielding near-term data re-ups, which should help with Synthetic Biologics on the map amongst clinicians and hospital administrators who currently must worry about the added patient morbidity and significant cost associated with high prevalent C. diff infections.

Keep in mind that in the year 2015, the majority of hospital acquired infections will no longer be covered by Medicare or Medicaid. Those will be covered by the hospitals themselves. So again a point of care therapy such as ours will be invaluable to those hospitals.

I would like to turn your attention to our IBS program with Cedars-Sinai. Our second potential pathogen specific blockbuster is for constipation, predominant, irritable bowel syndrome, or CIBS, which is being developed under a worldwide exclusive licensing agreement with Cedars-Sinai Medical Center and represents our second development program to leverage recent discovers relating to the human microbiome.

Of the 40 million IBS patients at the United States, approximately 13.2 million have CIBS making it a significant patient population and need of specially designed therapies that address their specific form of IBS.

Due to our unique approach, our lead candidate SYN-10 it is differentiated from other CIBS drugs because it treats the core problem and not just the symptoms. It is not another antidiuretic. It is intended to reduce the production of methane gas by certain GI microorganisms M. smithii, which are perceived as the underlying cause of bloating pain and constipation associated with CIBS. Again our approach targets the primary issue rather than treating the individual symptoms themselves.

This groundbreaking program is based on the pioneer work of Dr. Mark Pimentel a GI Motility expert at Cedars-Sinai and Chairman of our newly formed clinical advisor broad for CIBS and in laboratory discovered related to the impact of methane producing organisms and conditions such as CIBS. No one understands this program and the space better than Dr. Pimentel and we are fortunate and he has taken an active role in guiding its clinical development.

Synthetic Biologics remains on track to initiate Phase II dose discover and improvement of mechanism, clinical trials, and CIBS during the second half of this year under a corporate IND with topline data expected in mid 2015. We continue to expect a 5/5 B2 pathway for SYN-10, which will significantly accelerate this development pathway.

As we announced yesterday we plan to host an IBS Investor Day in New York on September 16, where we will provide a more in-depth overview of the planned clinical and regulatory pathway for SYN-10 to reduce the impact of methane producing organisms on CIBS as well as other development details.

We will be joined in New York by Dr. Pimentel who will describe the novel science behind our approach, which should make for informative and highly productive meeting. This event will be accessible via live webcast to be made available on our website.

And before I conclude, I want to point out that we are in the final stages of expanding our CIBS Advisory Board with additional leading researchers in this field recruited with the guidance of Dr. Pimentel. We look forward to engaging them formally and introducing them in time for our Investor Day next month. We feel privileged that they with their commitment to advancing the science underlying important GI diseases, have expressed interest in supporting SYN-10 program as we move closer to the clinic.

I would like to now address our third program on pertussis specifically. So Synthetic Biologics program is developed as an antibody based pathogens specific therapy for pertussis. Also known as whooping cough, which is a potentially deadly disease to newborns and the elderly.

This program is being developed in conjunction with our partners in Trexon Corporation and researchers at the University of Texas in Austin. While antibiotics may be effective, but eliminating the pertussis bacteria from the respiratory track. They do not affect the levels of toxins created by the bacteria and these toxins play a major role in the pathology of the disease.

Multiple lines of evidence suggest that neutralizing pertussis toxins will mitigate the course of the disease, shortened ICU and hospital stays prevent long term disabilities and most importantly prevent death in these infants. There are no existing therapies that target pertussis toxin and in the incidents of pertussis has continued to rise in the United States. An incident sadly augmented by growing anti vaccine movement and the fact that the current vaccine is no longer as effective as it once was.

Tragically by the time the infants present with the characteristic whooping cough or worse symptoms antibiotics can do a little to change the course of the disease and the only available therapy is supportive care. Synthetic Biologics SYN-005 candidate therefore will be well positioned as a high need and non-antibiotic therapy in this space. SYN-005 is designed to target a neutralize the pertussis toxins themselves.

As noted earlier it is being developed in collaboration with Trexon and our academic partner at the University of Texas in Austin. The two humanized monoclonal antibodies are comprised SYN-005 function through complementary and synergistic mechanism to neutralize the pertussis toxins.

Based on highly encouraging preclinical males and non-human primate studies Synthetic Biologics has begun the manufacturing process for SYN-005 and remain on track to file on IND to support a Phase I clinical trial expected to initiate during the first half of 2015. Topline data should be available within 90 days of the study imitation and a Phase II trials intended to follow the second half of next year. In addition last month, we submitted an orphan drug designation request for SYN-005 for the treatment of pertussis.

As we announced a few weeks ago, positive data from two non-humans primate studies were presented recently at the Microbial Toxins and Pathogenicity Conference held by the Gordon Research Conference by our collaborator Dr. Jennifer Mehnert of UT Austin.

In those studies SYN-005 was associated with a favorable decrease in white blood cell count, which was observed as early as two days after treatment with animals achieving nearly normal white blood cell levels within one week. As we announced earlier this week, Dr. Mehnert will also present this work at the upcoming 54th Annual ATA Conference next month.

This growing bonded evidence supports the clinical development of SYN-005 as both a therapeutic and potentially a prophylactic and we are working diligently to advance toward the clinic including finalizing CGMP manufacturing to support our clinical program for SYN-005.

In terms of the market need, Pertussis affects nearly 50 million people worldwide leading to 300,000 deaths each here, primarily in young and vaccinated infants. Given the rising incidents, the need for innovation has never been greater and SYN-005 holds significant promise for altering the course of the disease and reducing morbidity and mortality in these highly patients.

To conclude my formal remarks today we remain focused on successful clinical execution. Each of our pipeline programs has significant key clinical and data milestones on the near term horizon. Again for multiple sclerosis we’re awaiting Dr. Voskuhl’s presentation next month of expanded data from the Phase II trial of Trimesta, which will incorporate significant additional analysis performed on various clinical outcome data as well as important parameters from ongoing MRI brain scans.

This comes on top of the initial results, topline results released last April, which far surpass investigators’ expectations. Meeting the pre-specified goal of the study by demonstrating statistically significant decreasing relapse rate after 12 months of Trimesta plus Copaxone, for which the study was statistically powered as well as a clear trend toward a clinical relevant reduction after 24 months of therapy, which was a pre-specified endpoint of the trial.

Trimesta in combination was safe and well tolerated by women in the study. The study also demonstrates statistically significant and clinically relevant improvement in cognitive scores at 12 months of therapy in women, which is of high importance for MS specialists and patients and is believed to be the result of Trimesta’s unique neuroprotective effect.

For C. diff, we expect to file our IND and initiate Phase Ia and Phase Ib clinical trials during the second half of this year with preliminary topline data expected by the year end 2014. A Phase II efficacy POC study is expected to begin the first half of next year.

For constipation predominant IBS, we expect to initiate a Phase II dose discovery improvement mechanism clinical trial during the second half of this year under a corporate IND with topline data expected mid 2015. For Pertussis we expect to initiate a Phase I trial during the first half of 2015 with topline data available with a 90 days of study initiation. A Phase II trial is planned from the second half of next year subject to positive Phase I data.

We believe that our successful efforts in clinical development over the next couple of quarters will drive significant shareholder value. In parallel, we’ve committed to building a strong infrastructure supporter programs both in terms of leveraging the expertise of thought leaders in our relevant fields as well as walking down GMP manufacturing and other considerations required for clinical and commercial success. We look forward to keeping you up to date on our continued progress.

Finally, as I mentioned earlier in this call, Synthetic Biologics and our collaborators at UCLA expect our Trimesta program to advance in the clinic based on the growing body of evidence supporting this unique and innovative treatment opportunity for women with MS. In the new body of intellectual property we are creating to protect those claims.

We look forward to Dr. Voskuhl’s continued readout on the effects of Trimesta on disability and cognition again at the ACTRIMS-ECTRIMS meeting next month to completing our new round of patent filings related to those findings and to update the market on the next steps for this exciting program.

At this time, I will turn the call back to Kris.

Kris Maly

Thank you, Jeff. We would now like to open up the lines to questions. Mike, would you please describe the procedure to ask questions for our listeners?

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Keith Markey with Griffin Securities. Please go ahead.

Keith Markey - Griffin Securities

Good morning, Jeff and good morning, Evan. Just a couple of questions about the Trimesta trial and the data that you’re going to be present -- or Dr. Voskuhl will be presenting. I was wondering will that include any MRI data well updated that might have been collected to assess the effect of the drug's washout.

Jeff Riley

Hi Keith. Good morning. We suspect so. We’ve not looked at the presentation yet. We’re putting slides together. I can tell you that we would not have been able to file the new intellectual property without having taken a deeper dive into the datasets and again we’re hopeful that should be presenting a more detailed picture of that coming up.

Keith Markey - Griffin Securities

Okay. And then I was wondering and do you have a sense as to when that cognition trial might be completed and could you tell us a little bit about the number of patients for instance and how they are assessing concerned, how they’re assessing cognition?

Jeff Riley

The original thought was we would have 64 patients in total and we were about halfway enrolled at this point in time. The enrolment has accelerated significantly over the last few months after Rhonda's presentation back in April. We are in discussions right now. We may end that early given that it appears as many of the endpoints may have been reached already. Again it’s only cognition so we’re really not looking at the relapsing-remitting rates, which typically requires a two-year trial.

Keith Markey - Griffin Securities

Okay. And then I was wondering can you tell us a little about the patterns related to Trimesta that you’re filing.

Jeff Riley

I am sorry. Keith, I didn’t catch it.

Keith Markey - Griffin Securities

I was wondering if you could you tell us a little bit of detail just a general way obviously about the patents that you’re filing on Trimesta?

Jeff Riley

We will be selling those patterns obviously to interested partners under CDA, which is the intent and those partnering discussions start after the last patents filed which will be here -- or should be before September 10.

The patents cover some unusual findings that were observed in the two year trial. It’s atypical to file patents, right, on clinical data unless you see something unusual and we saw enough -- our patent attorneys saw enough things that were to get us together with UCLA. We’re exceptionally excited that we’re able to file these new patents. I can’t really go into more detail than that until the last one.

Keith Markey - Griffin Securities

Yeah I understand. I just wanted to try. Also, one last question, when will you have the data from the interim study? I think that sounds like a very interesting little side study.

Jeff Riley

Well it’s really cool actually. We’re hoping in the October’s timeframe. It maybe a little bit after that. The real power of -- we're obviously targeting clostridium difficile and antibiotic associated diarrhea for the drug itself. But in the discussions, we’ve had with the CDC and other folks it’s really a much, much broader marketplace for us, both from an oral perspective oral formulations that we’re working on etcetera plus the fact that you really want to protect that microbiome. That’s the end goal.

There are so many metabolic diseases that they’re finding as well as some CNS disease that are attributed to us taking the antibiotics when we were kids etcetera and really disrupting or destroying a lot of the species within the microbiome that we have in our bodies. So I think this will be one of the first studies where we’re going to have a group and with a 100 patients it’s fairly robust where we will looking at these patient's microbiomes before and after taking antibiotics and I think we’ll probably be able to see a fairly distinctive fingerprint from those studies and they will be able to apply that obviously to our clinical results as they unfold.

Keith Markey - Griffin Securities

All right. I will go back into queue. Thank you.

Jeff Riley

Thanks.

Operator

The next question we have comes from Mark Randal and investor.

Unidentified Analyst

Yes good morning guys and congratulations on the progress made during the quarter.

Jeff Riley

Thanks.

Unidentified Analyst

I guess -- some of the questions have already been covered, but I was wondering if you could speak to your IP protection as it relates to MS with Trimesta that you currently have in place. I know you can’t speak to what you are filing in the future, but if you could discuss -- speak more of that and if you could also quantify the importance of this IP as it relates to any future discussions with regard to partnerships and thanks for taking my call.

Jeff Riley

All right. Thanks Mr. Randal. I mentioned in the discussion earlier and I said that we’re resetting the clock sort of on this particular program and I think that’s an accurate description.

We have in-licenses program from UCLA several years ago, very novel interesting program. Obviously there was not enough capital to fund a full-blown two year study, which is why it was a basely powerful one-year and we hit the ball out of the park for that one year by all measurements.

But we didn’t have enough patience obviously to power this thing for the full two years. That being said, what we saw in there was completely unique and those matters reflected in the patents that we’ve just recently filed. Those patents essentially if issued will be expanding the patent life for this particular drug out another 21 years provisional and then you get your actual patents.

So 2035 is where we’re looking as far as when this is going to expire. So a long period of time. The NPV or the cost of doing the Phase III will definitely be made up in that interim period of time.

Secondly, it also expands it worldwide, so that the intellectual property resets the clock not only on the economics as far as time goes but resets the clock on the economics geographically as well and that’s exceptionally exciting for us as that gives us access to Europe and Japan and some of the bigger markets for this particular drug.

So we don’t -- where I had saw from the business development perspective that the economics were X, when we’re looking at it even given the results that we had, given the fact that we have these new patents that we filed recently. It’s a brand new paradigm as far as what we can and can’t get for this particular drug.

The other interesting side note is if we wanted to present it back on April 30, I think everybody is aware of a bit of the catastrophe that happened for a variety of reasons at that point in time.

The interesting thing was all that -- the neurology experts, the MS companies, the guys that understand this space well basically mobbed us. We were overwhelmed with people wanting to have business development discussions because I understood what they had seen with respect to the neuroprotective effects of this drug and we basically pushed everybody.

We had discussions, we had those talks, but we really needed to get into the data to see if there was anything unique enough to where we could file or non obvious enough where we could file these patents and well and behold we’ve found some things that are incredibly unusual and Rhonda will either present those or elude to those coming up here in September 12 and then hopefully later on this year at some other conferences as well as we dig further and further into the data.

As you can imagine there’s hundreds and hundreds of MRIs that have been taken over that two year period time for these patients that we need to really go through in the fine time to come. So again I think the paradigm has shifted enormously in the last four to six weeks for us. As a company this drug works and again, the study itself was against an active control, an active control, right? This is against Copaxone. It wasn’t against a placebo.

So you’ll see other companies out there with recent Phase II MS results that are moving through with some significant market caps. Those were against placebo. So whether it was clinically relevant or not is a question that’s open ended. We were against an active control and by Gauley we have some really great results. I am sorry that I aggressed there Mr. Randal a little bit but the patents really are going to be crucial as we go forward from a economics perspective from a partnering point of view.

Operator

The next question we have comes from Jason Kolbert with Maxim. Please go ahead, sir.

Jason Kolbert – Maxim

Jeff, did you say by Gauley. Anyway thank you so much for the comprehensive update. Let's switch gears a little bit.

I would like to talk about three areas. I would like to get into it a little bit on what you’re expecting kind of the structure of the R&D day to be so that we can have some understanding of what’s going to happen there.

I want to talk a little bit of Biodefense, which has been in the news so much and understand what the government implications are on the Pertussis program and then I want to talk with you a little bit about the trial design, size and powering and endpoints in order to demonstrate that for as effective at prevention of C. difficile and what the hurdles are associated with prevention?

So maybe you could start just a little bit what the R&D day is and what things we should expect of that event, which sounds very exciting.

Jeff Riley

So the R&D day is specific to IBS constipation, right? That will be the bulk of the discussion there. We’ll have Dr. Pimentel. I believe it’s at the Grand Hyatt of Grand Central Station so mid town area. I don’t know what time it starts, around 9 o’clock. There was a press release that said the specifics of it. It will be a couple hours long. So the idea really is we’ll have all of our patents filed, several have already issued that we end licensed from Cedars Sinai.

We have a couple more that we need to file before this particular one for formulation and what not and then Dr. Pimentel will basically given an overview of this disease and how he thinks that it makes sense to eliminate this disease and he will talk about his approach and the drug that we’re going to be using to file the 505b2 and try and fix this problem and he will go through a ton of antidotal data, so he will be there for Q&A after his presentation and you guys can ask any question you would like.

He just did weeks ago for [Felix] (ph) so he’s kind of…

Jason Kolbert – Maxim

Good and obviously we’re all really excited for the 505b2. So we are understand that this is drug that’s been invaded and out on the market and I assume that he will be in a position to talk a little bit about historical data and maybe what’s been seen kind of in the historical literature.

So I think that not might be very helpful because it will help us tease out proof of concept and risk in terms of the program. Tell me a little bit as we think about, you’ve always been in the news and the role of the government in Biodefense and I am just trying to put Pertussis and whooping cough into perspective on how big is the need and how could those dynamics change. So help me understand how this program evolves?

Jeff Riley

Well from the governmental defense perspective, we really don’t have anything that works against Pertussis at this point in time, but again it’s not normally a deadly disease, right? It is deadly to infants, to newborns and to the elderly and people that are in ICU and CC units and things like that. If you’re or I got it Jason, it’ll be incredibly uncomfortable for other days many times people break ribs because of the coughing, the incessant coughing. But other than that it’s typically not deadly.

Outside of the United States in Europe and Japan, it’s a very deadly disease, so again there’s over 300,000 kids that die annually around the world from this problem. It’s a huge issue there and there’s 50 million people infects. So again our approach is really a twin monoclonal antibody approach. Those antibodies bind to the toxins, there’s separate toxins that this bug creates and when they bind to the toxins they put a red flag in the body terms and clears those toxins and heals the patient usually.

We’ve also found what looks like it will work very well prophylactically so in the non-human primate studies we actually gave this drug to right at the time of infection as well as obviously a few days after being infected when the disease had taken hold and it was equally effective in both of those groups.

So I can see from a governmental perspective. There would have to be WHO involvement, Gates Foundation involvement and things like that where they would buy a substantial amount of this stuff lot -- by authorized format. It would probably be located at key centers around the world and if there’s an outbreak, they can break it out free cost [indiscernible] and get it to folks as quickly as they possibly can.

Jason Kolbert – Maxim

And I am so glad you just said that because clearly WHO is getting involved in Ebola and Ebola is a little bit of a wakeup call for the need around the globe so from a business development point of view how do you approach kind of discussions with other governments in terms of making them aware of this program?

Jeff Riley

Well, the initial thing is we need to show proof of concept in humans, right? It has to be something that makes sense for folks to look at and this program in particular will probably leapfrog our other programs from a speed perspective.

So the Phase I study that we’re anticipating will be fairly short. It will be more than likely in adults. It will done in the United States, probably 20 to 30 adults and we’ll make sure that everything works the way it’s supposed and do some dose escalation work.

However after that, we’ll jumping directly into that pediatric infant population and how will that work will likely be done outside the United States. We probably don’t need more to be honest with you than probably 40 to 60 infants in total to get all the way through the Phase III. We have to show the endpoints for mortality and red and white blood cell count decreases which are very clear measures of this disease state.

So I would guess at some time in the middle of next year, once we get into those Phase II, III studies and apply for compassionate use and apply for a variety of the gain act related things as well we would then probably have those -- begin having those discussions with the NGOs and the governmental groups.

The discussions would be cost obviously. We may actually go through Sanofi or GSK or one of the other big players in the vaccine spaces as they already this system setup with these governmental groups to help fund getting these products out into a broader population that can’t necessarily afford the price of the drug itself.

Jason Kolbert – Maxim

And thanks and as we focus now kind of on the Western world on the prices that's occurring in hospitals, help me understand what you think the design and kind of the numbers might be and I realize its early days, you have run, chase one proof of concept and safety data. But when I look at what kind of data it might take to show a prevention study, are you thinking that it’ll be a 200 or 300 person Phase II clinical trial with -- give me some idea in terms of what you guys are talking about, in terms of the size and scope of the program for SYN-004 and C. difficile?

Jeff Riley

Okay, so the SYN-004, the Phase Ia and the Phase Ib, with the current soft processes later this year, it’s the Phase Ib likes to running ileostomy patients. That’s why it’s a Phase Ib, so we’ll looking at these patients on antibiotics. We’ll be able to look directly at various time points in the drugs delivery to see if it’s actually breaking down the antibiotic delays it’s supposed to and obviously the French study will dovetail beautifully with that data as well.

So that’s the current soft for the Ia and IB. The Phase II, to be honest, we’ve not fleshed it out entirely yet. It will likely be around 300 patients. We’re debating whether we try and make that pivotal or something just a proof of concept type of job study and the current side again is to look at patients that had pneumonia and only take patients that are getting pneumonia with a specific antibiotic and that will be if you will the targeted the patient population that we’ll be looking at in dosing our drug with and there's fairly well known infection rates based upon on certain antibiotics as well as certain disease states.

So we’ll be looking at likely that population and then will change. But that’s what the Clinical Advisory Board recommended here a month or two ago.

Jason Kolbert – Maxim

Well, a lot of catalyst coming up in 2015. Thanks so much for taking the time to provide the updates of this morning.

Jeff Riley

Yeah, no worries Jason. Just a side note the goal really is to start that Phase II trial somewhere in Q1 of next year after we get the data back from the Ib and Ia and that trial will probably last around six months, give or take.

So though the IBS study Phase II results will probably be middle of next year, June, July, August timeframe is what we’re shooting for, we’ll also have the Phase II data coming out of the C. diff program somewhere in that timeframe and we’re shooting to have or to be into the Phase II and Phase III. Well, Phase II study for the pertussis program about the same time and again the endpoints for the Pertussis are very clear pegged. It’s very similar to a cancer drug where we’re more basically saving lives and measuring that, so the -- it's pretty binary at that stage.

Jason Kolbert – Maxim

Thanks Jeff. Appreciate it.

Operator

Well at this time, we’re showing no further questions. We’ll go and conclude our question-and-answer session. I will now like to turn the conference back over to Mr. Jeff Riley for any closing remarks. Sir?

Jeff Riley

Thanks Mike. As we conclude the call today, I would like reiterate the fundamentals of Synthetic Biologics business continue to strengthen as our programs advance in the clinical development. Importantly, we remain on schedule to hit all of the milestones we’ve discussed today for pathogen-specific anti-infective programs and continue to report encouraging data and engage in productive partnering discussions with Trimesta for MS.

Just as a specimen, I would like to thank all of the folks that have been with us for -- that are long-term investors. It’s taken us roughly 2.5 years to build this pipeline. I think for now we’re now be going to really some interesting things coming out and one of my mentors R.J. Kirk basically told me at the beginning just build intrinsic value and data will drive the value thereafter and that’s we’ve done and I am very excited over the next 6 to 12 months to be able to show that data and move these programs forward for these nasty diseases.

Again thank you everybody and we look forward to seeing you guys at the IBS Investor Day in mid September.

Operator

And we thank you Sir and to rest of the management team for your time today. The conference call is now concluded. Again we thank you all for attending today’s presentation. At this time, you may disconnect your lines. Thank you and have a great day everyone.

Jeff Riley

Thank you.

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Source: Synthetic Biologics' (SYN) CEO Jeff Riley on Q2 2014 Results - Earnings Call Transcript

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